[House Report 115-52]
[From the U.S. Government Publishing Office]


115th Congress     }                                          {   Report
                         HOUSE OF REPRESENTATIVES                 
1st Session        }                                          {  115-52
_______________________________________________________________________

                                     

 
                          AMERICAN HEALTH CARE

                              ACT OF 2017

                               __________

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET

                        HOUSE OF REPRESENTATIVES

                              to accompany

                               H.R. 1628

                             together with

                             MINORITY VIEWS
                             
                             

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





 March 20 2017.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed
              
              
              
              
                             _________ 

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                        COMMITTEE ON THE BUDGET

                    DIANE BLACK, Tennessee, Chairman
TODD ROKITA, Indiana, Vice Chairman  JOHN A. YARMUTH, Kentucky,
MARIO DIAZ-BALART, Florida             Ranking Minority Member
TOM COLE, Oklahoma                   BARBARA LEE, California
TOM McCLINTOCK, California           MICHELLE LUJAN GRISHAM, New Mexico
ROB WOODALL, Georgia                 SETH MOULTON, Massachusetts
MARK SANFORD, South Carolina         HAKEEM S. JEFFRIES, New York
STEVE WOMACK, Arkansas               BRIAN HIGGINS, New York
DAVE BRAT, Virginia                  SUZAN K. DelBENE, Washington
GLENN GROTHMAN, Wisconsin            DEBBIE WASSERMAN SCHULTZ, Florida
GARY J. PALMER, Alabama              BRENDAN F. BOYLE, Pennsylvania
BRUCE WESTERMAN, Arkansas            RO KHANNA, California
JAMES B. RENACCI, Ohio               PRAMILA JAYAPAL, Washington,
BILL JOHNSON, Ohio                     Vice Ranking Minority Member
JASON SMITH, Missouri                SALUD CARBAJAL, California
JASON LEWIS, Minnesota               SHEILA JACKSON LEE, Texas
JACK BERGMAN, Michigan               JANICE D. SCHAKOWSKY, Illinois
JOHN J. FASO, New York
LLOYD SMUCKER, Pennsylvania
MATT GAETZ, Florida
JODEY C. ARRINGTON, Texas
A. DREW FERGUSON IV, Georgia

                           Professional Staff

                     Richard E. May, Staff Director
                  Ellen Balis, Minority Staff Director
                  
                            C O N T E N T S

                                                                   Page
Introduction by the Committee on the Budget......................     1
Title I--Energy and Commerce:
    Transmittal Letter (Chairman Walden).........................    13
    Committee print begins and includes:
        Committee votes..........................................    18
        CBO estimate.............................................    39
        Section-by-Section Analysis..............................    73
        Ramseyer.................................................    78
        Minority Views...........................................   323
    Legislative Text.............................................   337
Title II--Ways and Means:
        Transmittal Letter (Chairman Brady)......................   363
    Subtitle A--Repeal and Replace of Health-Related Tax Policy:
        I. Summary and Background................................   367
        II. Explanation of Provisions............................   370
        III. Votes of the Committee..............................   406
        IV. Budget Effects of the Provisions.....................   412
            JCT Table............................................   413
            CBO Estimate.........................................   415
        V. Other Matters to be Discussed Under the Rules of the 
          House..................................................   415
        VI. Changes in Existing Law Made by the Budget 
          Reconciliation Legislative Recommendations, As 
          Transmitted............................................   420
        VII. Dissenting Views....................................   421
        Legislative Text.........................................   431
    Subtitle B--Repeal of Certain Consumer Taxes:
        I. Summary and Background................................   454
        II. Explanation of Provisions............................   455
        III. Votes of the Committee..............................   458
        IV. Budget Effects of the Provisions.....................   459
            CBO Estimate.........................................   461
        V. Other Matters to be Discussed Under the Rules of the 
          House..................................................   461
        VI. Changes in Existing Law Made by the Budget 
          Reconciliation Legislative Recommendations, As 
          Transmitted............................................   463
        VII. Dissenting Views....................................   464
        Legislative Text.........................................   469
    Subtitle C--Repeal of Tanning Tax:
        I. Summary and Background................................   472
        II. Explanation of Provision.............................   473
        III. Votes of the Committee..............................   474
        IV. Budget Effects of the Provisions.....................   475
            CBO Estimate.........................................   475
        V. Other Matters to be Discussed Under the Rules of the 
          House..................................................   476
        VI. Changes in Existing Law Made by the Budget 
          Reconciliation Legislative Recommendations, As 
          Transmitted............................................   477
        VII. Dissenting Views....................................   478
        Legislative Text.........................................   483
    Subtitle D--Remuneration from Certain Insurers:
        I. Summary and Background................................   486
        II. Explanation of Provision.............................   487
        III. Votes of the Committee..............................   489
        IV. Budget Effects of the Provision......................   496
            CBO Estimate.........................................   497
        V. Other Matters to be Discussed Under the Rules of the 
          House..................................................   497
        VI. Changes in Existing Law Made by the Budget 
          Reconciliation Legislative Recommendations, As 
          Transmitted............................................   498
        VII. Dissenting Views....................................   499
        Legislative Text.........................................   511
    Subtitle E--Repeal of Net Investment Income Tax:
        I. Summary and Background................................   514
        II. Explanation of Provision.............................   515
        III. Votes of the Committee..............................   517
        IV. Budget Effects of the Provision......................   518
            CBO Estimate.........................................   519
        V. Other Matters to be Discussed Under the Rules of the 
          House..................................................   553
        VI. Changes in Existing Law Made by the Budget 
          Reconciliation Legislative Recommendations, As 
          Transmitted............................................   555
        VII. Dissenting Views....................................   731
        Legislative Text.........................................   735
    Amendments Considered by the Committee on Ways and Means.....   737
Committee on the Budget:
    Votes of the Committee on the Budget.........................   745
    Other House Report Requirements..............................   759
    Views of Committee Members...................................   761
American Health Care Act of 2017 (legislative text)..............   767



                                                                       
115th Congress  }                                              {   Report
                        HOUSE OF REPRESENTATIVES
 1st Session    }                                              {   115-52

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


                    AMERICAN HEALTH CARE ACT OF 2017

                                _______
                                

 March 20, 2017.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mrs. Black, from the Committee on the Budget, submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 1628]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Budget, to whom reconciliation 
recommendations were submitted pursuant to title II of S. Con. 
Res. 3, the concurrent resolution on the budget for fiscal year 
2017, having considered the same, report favorably thereon 
without amendment and recommend that the bill do pass.


                          INTRODUCTION BY THE
                        COMMITTEE ON THE BUDGET

                              ----------                              

    What is often called President Obama's ``signature'' 
achievement is now well known to be a defining failure. The 
Affordable Care Act [ACA]\1\ has led to higher insurance 
premiums and deductibles; has limited consumers' choices of 
doctors and health plans; has deprived millions of the coverage 
they had; and has imposed taxes aimed at compelling people to 
purchase health coverage they do not want. Insurance markets 
are collapsing, and total national health care spending is 
projected to more than double during the next three decades. 
All these outcomes and more are precisely contrary to what the 
law's authors promised.
---------------------------------------------------------------------------
    \1\The legislation commonly called the Affordable Care Act consists 
of the two related measures enacted in March 2010 that constituted the 
health care legislation: 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).
---------------------------------------------------------------------------
    For these and numerous other reasons, the ACA, or 
Obamacare, must be repealed. Yet a return to the status quo 
ante is not acceptable either. Repealing Obamacare merely 
begins the process of establishing truly patient-centered 
health care in America--and aspects of both are contained in 
this legislation, the ``American Health Care Act''. This 
measure is just one component of a broader effort to transform 
the Nation's troubled health care network. It will be 
supplemented by other elements, described below.

                    The Essential Folly of Obamacare

    To fully appreciate the character of this transformation, 
it is critical to look deeper than Obamacare's many evident 
failures and understand why it failed. Without this 
recognition, there can be no real change; policymakers will 
simply fall back into the seductive but false beliefs that 
spawned Obamacare in the first place.
    Health care comprises a vast network of doctors and nurses, 
technicians, medical device manufacturers, pharmaceutical 
makers, hospitals and in-home services, educational 
institutions, financial arrangements, and, above all, 
patients--along with numerous others. It is a complex, 
sophisticated, and dynamic set of interactions that consumes 
more than $3 trillion of the Nation's resources and represents 
about one-fifth of the economy.\2\ It is a sector in which the 
participants themselves--not experts, academics, or 
bureaucrats--are clearly best suited to establishing effective 
and efficient means of delivering this uniquely valued service.
---------------------------------------------------------------------------
    \2\Centers for Medicare and Medicaid Services, National Health 
Expenditures 2015 Highlights: https://www.cms.gov/Research-Statistics-
Data-and-Systems/Statistics-Trends-and-Reports/
NationalHealthExpendData/Downloads/highlights.pdf.
---------------------------------------------------------------------------
    Nevertheless, for decades, Federal policymakers have 
relentlessly sought to systematize health care and impose a 
government-controlled model onto the medical sector. The folly 
of this approach is easy to see. When the Federal Government 
sets the standards of health care, or determines the required 
contents of health coverage--and it cannot do one without the 
other--this practice necessarily limits the options available 
to consumers, suffocates innovation, and drives up costs. Such 
an approach must assume that a population of 323 million--
living in a wide range of geographical and climatic settings, 
and possessing diverse cultural backgrounds and values--all 
require roughly the same set of health care services. States or 
regions that want something different must queue up for waivers 
from Washington that may or may not be granted; indeed, 18 
States have waivers pending with the Federal Government. 
Because many people will not voluntarily purchase a product 
that fails to meet their needs, exceeds their economic 
resources, or violates their moral principles, the government 
must coerce them to do so.
    The central government approach to health care necessarily 
leads to a byzantine system of reimbursements that ultimately 
dictates the kinds of treatments patients receive. Because 
private insurance companies often follow the politically 
determined rates, the result is homogenized services even for 
patients in the private health-care sector. In addition, the 
government is slow in updating its payment regime to account 
for the most recent advances in health care technology or 
delivery, which delays the progress of innovation in patient 
care. Government price-fixing has become so entrenched that 
many cannot imagine letting private plans determine payment 
rates through competition.
    Obamacare sprang from the faulty premise that health care 
delivery and financing could be centrally managed from 
Washington. The results were entirely predictable, and today 
are all too clear. They prove that a nationalized approach to 
health care in America simply cannot work.
    For instance, the ACA established a system of four tiers of 
insurance coverage--described as bronze, silver, gold, and 
platinum--that forces insurers to construct their plans 
according to the demands of Washington, not the marketplace. 
These tiers mandate the actuarial value of benefits insurers 
must cover rather than letting insurers design plans for a 
broader variety of patient needs--thus sharply restricting the 
available choices.
    The resulting limited options are so unsatisfying that 
enrollments under Obamacare are about half of what was 
projected when the law was enacted, and millions have chosen to 
pay its individual ``mandate'' tax penalty rather than buy 
coverage they did not want. Approximately 6.5 million taxpayers 
paid the penalty for the 2015 plan year. Average payments were 
$470, and added up to a total of $3.0 billion. Another 12.7 
million individuals applied for an exemption from the tax 
penalty.\3\ Thus, 19.2 million individuals have chosen to go 
without coverage despite the government's ``mandate.'' This 
upends the fatal conceit of Obamacare's redistributionist 
financial arrangement: ``The young subsidize the old, singles 
subsidize families, men subsidize women, those who go to the 
doctor only when sick subsidize those who consume lots of 
elective or preventive care.''\4\ The cost-shifting scheme has 
not worked; consequently, Obamacare is facing a financial death 
spiral.
---------------------------------------------------------------------------
    \3\Internal Revenue Service Commissioner John A. Koskinen updated 
members of Congress regarding 2016 tax filings related to Affordable 
Care Act provisions, 9 January 2017: https://www.irs.gov/pub/newsroom/
commissionerletteracafilingseason.pdf.
    \4\Holman W. Jenkins Jr., ``Obamacare 2.0,'' The Wall Street 
Journal, 8 March 2017.

                FIGURE 1
    
    

    To the extent Obamacare may have expanded health coverage, 
it has not enhanced access to affordable health care. Due to 
higher premiums and deductibles, many who have obtained ACA 
coverage cannot use it because their out-of-pocket medical 
expenses are too high. Recent reports showed that 50 percent of 
Obamacare customers were cutting back on care to help manage 
their health costs. This compares to 33 percent among the 
general insured population.\5\ In other words, enrollees cannot 
afford their Affordable Care Act coverage. ``[F]or routine 
illness or injury, having Obamacare is the equivalent of being 
uninsured * * *.''\6\
---------------------------------------------------------------------------
    \5\GfK, ``To Reduce Health Costs, 50% of ACA Exchange Customers Are 
Cutting Back on Care--GfK Study,'' 27 October 2016: http://www.gfk.com/
en-us/insights/press-release/to-reduce-health-costs-50-of-aca-exchange-
customers-are-cutting-back-on-care-gfk-study/.
    \6\Jenkins, op. cit.
---------------------------------------------------------------------------
    The ACA's many broken promises are not mere accidents or 
unexpected glitches in an ambitious new government program. 
They are the inevitable and predictable results of Obamacare's 
attempt to extend the reach of the central government ever 
deeper into Americans' health care. It has failed because it 
was destined to fail.

                  Toward Patient-Centered Health Care

    The Republican pledge to ``repeal and replace'' the ACA has 
served as a shorthand to describe something deeper--a 
fundamental transformation of health care policy toward a 
better strategy for true reform. The phrase reflects a more 
essential and profound change in how Americans should think 
about health care. It grows from a different concept more 
deeply rooted in the American tradition of freedom and personal 
choice, coupled with the cost-saving innovations that creative 
markets produce. As Senator Alexander of Tennessee has said: 
``[W]e will build better systems providing Americans with more 
choices of insurance that costs less. Note I say systems, not 
one system * * *. We don't want to replace a failed Obamacare 
Federal system with another failed Federal system. So, we will 
build better systems providing Americans with more choices of 
insurance that costs less. We will do this by moving more 
health care decisions out of Washington and into the hands of 
States and patients * * *.''\7\
---------------------------------------------------------------------------
    \7\Senator A. Lamar Alexander Jr., floor speech in the United 
States Senate, 10 January 2017.

                FIGURE 2
    
    

    To put this another way: ``In a nation of over 323 million 
people, each with different needs and circumstances, it makes 
no sense for one federal agency to dictate the contents of 
every American's health insurance plan.''\8\
---------------------------------------------------------------------------
    \8\The Speaker's Health Care Reform Task Force, A Better Way: Our 
Vision for a Confident America--Health Care, 22 June 2016, p. 12.
---------------------------------------------------------------------------
    Four principles guide the formulation of Republicans' 
approach to health care:

      Lower costs;

      Provide more choices;

      Put patients in control;

      Ensure universal access to health care.

    Provisions developed by the authorizing committees 
(detailed further in the committee submissions) follow this 
guidance. They repeal some of the most paternalistic components 
of Obamacare, such as the individual and employer ``mandate'' 
tax penalties. They expand access and affordability by 
providing for portable, monthly tax credits not tied to a job 
or a Washington-mandated program. The credit is based on age 
and family size, so it evolves with the health care needs of 
the individual over time, and phases out as income rises. 
Further, the credit will be available for individuals with no 
other form of insurance to take with them from job to job, to 
take home, to start a business, or to raise a family. Lower 
costs, resulting from increased competition and choice, will 
provide greater access to care for everyday Americans.
    The reforms will make more options available for 
individuals and families, who will be free to choose the health 
plan that best meets their needs. Protections and access to 
care for individuals with pre-existing conditions will 
continue. Further, by increasing the amount of money that can 
be placed in health savings accounts, coupled with other 
reforms, the policies will allow individuals and families to 
save and spend their health care dollars the way they want.
    These provisions will be implemented in a way that ensures 
a stable transition, one that does not disrupt people's current 
coverage, or the insurance market.
    A key component of this strategy involves the restoration 
of federalism in health care--giving States more flexibility to 
handle health care arrangements for their distinctive 
populations. There is ample evidence that States are capable of 
doing so. A prime example is Massachusetts, a leader in health 
care market reform for more than a decade. Yet even 
Massachusetts, not a conservative State, seeks greater autonomy 
in determining factors such as a State-specific actuarial value 
calculator and a State-specific risk adjustment system.\9\ The 
State also prefers greater administrative control over rules 
and regulations to address compliance more directly than the 
Federal Government can. ``States have been in the business of 
regulating health insurance for decades. They should be 
empowered to make the right tradeoffs between consumer 
protections and individual choice, not regulators in 
Washington.''\10\
---------------------------------------------------------------------------
    \9\``Read the letter Governor Baker sent to Congress,'' The Boston 
Globe, 12 January 2017: https://www.bostonglobe.com/metro/2017/01/12/
read-letter-governor-baker-sent-congress/h9m7B1HrkewyRjxNiNgJnK/
story.html.
    \10\A Better Way op. cit., p. 12.
---------------------------------------------------------------------------
    Some touted the Massachusetts approach as a model for 
national health care reform. It is not. It is a good model for 
Massachusetts. Other States have different kinds of populations 
and, hence, different approaches to health care; what works for 
a family farmer in Iowa might not work for a metropolitan New 
Yorker employed by a large financial firm--or vice versa.
    The Healthy Indiana Plan provided the State's residents who 
did not qualify for Medicaid with access to health benefits 
such as physician services, prescription drugs, inpatient and 
outpatient hospital care, and disease management, all without 
additional funding. In Utah, health insurers are exchanging 
data and analytics between coverage and care providers. This 
approach enables doctors and hospitals to improve the quality 
of care while simultaneously tracking its costs. Physician 
groups participating in the program reduced hospital 
readmission rates by 28 percent relative to the rates of non-
participating doctors. Completion of key cancer screenings for 
women improved by more than 10 percent, and participating 
providers reported average member satisfaction scores of 87 
percent.\11\
---------------------------------------------------------------------------
    \11\Utah Business, ``Regence, Utah Physician Groups Report Positive 
Results from New Care Management Model,'' Press Release, 20 February 
2017: https://www.utahbusiness.com/regence-utah-physicians-group-
report-positive-results-for-care-management-model/.
---------------------------------------------------------------------------
    In another example of State initiatives, before the ACA, 34 
States had high-risk pools for their vulnerable populations. 
Among the most successful was Minnesota's, which enrolled about 
30,000 State residents. The program mainly provided 
comprehensive major medical coverage for people with pre-
existing conditions.\12\ In neighboring Wisconsin, officials 
had to modify their high-risk pool several times, but by 2012 
the plan covered a record 21,770 enrollees and offered a 
variety of coverage options from low-deductible, high-premium 
to high-deductible, low-premium.\13\ Utah and Washington State 
also had their own high-risk pools. All these were supplanted 
by the costly, Washington-centered control of Obamacare. Under 
the ``American Health Care Act'', States will have the 
opportunity to assist high-risk individuals or fund innovation 
programs to care for their unique patient populations.
---------------------------------------------------------------------------
    \12\Courtney Burke and Lynn Blewett, ``All High-Risk Pools Are Not 
Equal: Examining The Minnesota Model,'' Health Affairs Blog, 19 March 
2010: http://healthaffairs.org/blog/2010/03/19/all-high-risk-pools-are-
not-equal-examining-the-minnesota-model/.
    \13\Steven Walters, ``Walters: Wisconsin insurance plan may enter 
health-care debate,'' The Janesville Gazette, 16 January 2017: http://
www.gazettextra.com/20170116/walters--wisconsin--insurance--plan--may--
enter--health--care--debate
---------------------------------------------------------------------------
    Greater State flexibility also will come through 
modernizing Medicaid for the 21st Century. Significant reforms 
will ensure the program is available for the populations it was 
intended to serve: children, pregnant women, the aged, and the 
disabled. A reformed payment structure will give States greater 
flexibility and control to meet their varied needs.
    A recent account in The Wall Street Journal illustrated how 
some of the Nation's governors, not waiting for Washington, 
already have begun seeking cost-saving reforms to their 
respective Medicaid programs. ``Maine, for example, may limit 
most people on Medicaid to five years of benefits. Kentucky 
could require many recipients to work. Wisconsin wants to drug-
test enrollees.''\14\ These modifications do not, however, 
``provide a window into how an overhaul of Medicaid at the 
national level by Congress could reshape the program for low-
income Americans across the country,'' as the article 
suggests.\15\ To the contrary, they demonstrate how greater 
State flexibility can lead to faster and better-tailored reform 
of Medicaid--and of health care generally. Under current law, 
these States had to appeal to a domineering Federal bureaucracy 
to receive permission, in the form of Medicaid waivers, to 
pursue these reforms. The process is lengthy, slowing reform, 
and sometimes the waivers are never granted. The Federal 
Government has denied State requests to waive certain Medicaid 
benefits; has denied most attempts to impose cost-sharing in 
amounts greater than those allowed under Federal law; and never 
approved Pennsylvania's attempt to include a work requirement 
for all able-bodied adults, 21 to 64 years old, as a condition 
of eligibility.\16\
---------------------------------------------------------------------------
    \14\``States Push to Revise Medicaid Programs,'' The Wall Street 
Journal, 24 February 2017.
    \15\Ibid.
    \16\Centers for Medicare and Medicaid Services, letter from 
Administrator Marilyn Tavenner to Pennsylvania Department of Public 
Welfare Secretary Mackereth regarding Healthy Pennsylvania Section 1115 
demonstration, 28 April 2014: https://www.medicaid.gov/Medicaid-CHIP-
Program-Information/By-Topics/Waivers/1115/downloads/pa/Healthy-
Pennsylvania-Private-Coverage-Option-Demonstration/pa-healthy-ca.pdf.
---------------------------------------------------------------------------
    That is fundamentally what the Republican approach to 
health care aims to overturn. It rejects the tired and 
discredited notion that Washington knows best, that health care 
delivery and financing can be centrally planned and 
systematized.
    All of this, however, is just the beginning of what might 
be possible by breaking out of the government-centered model 
for health care. Talk of medical innovation often provokes 
thoughts of new technologies or pharmaceutical products. Yet 
innovation can occur in health care delivery as well, and many 
concepts--such as skilled nursing facilities and outpatient 
surgery--started small, in the private sector, and eventually 
became mainstream.
    The path toward true health care reform begins with this 
legislation. The ``American Health Care Act'' sheds the notion 
that health care can or should be managed by regulation and 
mandate, by academics and Washington bureacrats. It plants the 
seed for a new vision of health care, one rooted where it 
should be--in the decisions and choices of patients and their 
doctors. Patient-centered health care is the true reform for 
the 21st Century.

            Advancing Patient-Centered Care on Three Fronts

    The provisions of this legislation are being pursued 
through the process of budget ``reconciliation.'' It is a 
powerful instrument for policy reform, provided for under 
Section 310 of the Congressional Budget and Impoundment Control 
Act of 1974 [Budget Act]. A principal advantage of 
reconciliation is that it cannot be filibustered in the Senate. 
On the other hand, a reconciliation bill in the Senate is 
limited to budget-related matters; its provisions must affect 
spending or revenue. Consequently, many of the onerous mandates 
and regulations of the Affordable Care Act will have to be 
addressed through subsequent legislation or administrative 
action. The current measure represents one of three fronts for 
advancing patient-centered health care reform.
    A second front will be administrative action. The Obamacare 
legislation contains 1,442 instances in which it grants the 
Department of Health and Human Services [HHS] broad discretion 
in determining Federal health care policy. Apart from 
subjecting individuals' medical care to the dictates of 
government bureaucrats, this constitutes a dangerous expansion 
of the administrative state.
    President Trump has already started rolling back regulation 
with his Executive Order 13765, which includes the following 
provisions:

      It allows the Secretary of HHS, and the heads of 
all other executive departments and agencies ``to waive, defer, 
grant exemptions from, or delay the implementation'' of 
provisions or requirements of Obamacare that would fiscally 
burden any State or impose a cost, fee, tax, penalty, or 
regulatory burden on individuals, families, health care 
providers, health insurers, patients, recipients of health care 
services, purchasers of health insurance, or makers of medical 
devices, products, or medications.

      It allows the HHS Secretary and other agency 
heads to provide greater flexibility to States and cooperate 
with them in implementing health care programs.

      It authorizes agency heads to promote an open 
market in interstate commerce for offering health care services 
or health insurance, ``with the goal of achieving and 
preserving maximum options for patients and consumers.''

    Another element of this second front will be the HHS 
Secretary's exercise of his own authority to modify or rescind 
previous administrative provisions under the Affordable Care 
Act. On 15 February 2017, Secretary Price took the first step 
by issuing new proposed regulations to stabilize individual and 
small group markets damaged by Obamacare. Specifically, these 
regulations reduce the number of special enrollment periods; 
require 100-percent enrollment verification with documentation 
for special enrollment periods; and shorten the open enrollment 
period deadline from 31 January to 15 December, encouraging 
full-year coverage.

    The third front will be additional legislative provisions 
that cannot be included in reconciliation. These might include 
selling insurance across State lines, or implementing the tort 
reform provisions of H.R. 1215, the ``Protecting Access to Care 
Act of 2017''. Other options could include allowing small 
businesses to pool their employees together to purchase 
association health plans, and eliminating the Independent 
Payment Advisory Board, a group of unelected bureaucrats 
authorized under the ACA to recommend cuts in Medicare provider 
payments if the program's spending exceeds certain targets.

                Setting the Stage for Entitlement Reform

    Another benefit of this legislation is that it can start 
the long-needed effort toward reforming the government's 
unsustainable entitlement programs. Federal entitlements, many 
of them launched or expanded in President Johnson's Great 
Society, are failing many of the people they were intended to 
serve. Income assistance programs often trap their 
beneficiaries in a lifetime of dependency. Medical programs 
such as Medicaid subject enrollees to second-rate care--if they 
can get care at all. Programs such as the ACA actually 
discourage work and self-sufficiency.
    These are the recognizable moral failings of these 
programs. Equally immoral is how the uncontrolled costs of 
these programs are loading future generations with debt.
    The latest projections show entitlements will constitute 
the only growth in spending as a share of the economy over the 
next 10 years and beyond. By 2028, entitlement spending plus 
net interest is expected to consume all Federal revenue, 
meaning all other government activities--such as national 
defense, education, infrastructure, and research, and myriad 
others--will have to be financed on borrowed money. Ten years 
later, by 2038, the situation will worsen, as a mere handful of 
programs--Social Security and health care entitlement 
spending--plus net interest are expected to consume all Federal 
revenue; at that point, all discretionary spending and all 
other direct spending will be debt-financed. These trends 
result not from temporary surges in spending or economic 
downturns, but from permanent government spending programs. 
This is an entrenched, structural excess of spending over 
revenues.
    This spending is driving the government's mounting deficits 
and debt. The most recent long-term estimates from the 
Congressional Budget Office [CBO] project Federal debt held by 
the public--which stands at roughly 75 percent of GDP today--
will surge to 110 percent of GDP in the next 20 years, and will 
exceed 141 percent of GDP by 2046.\17\ That figure is well 
beyond the 60-percent ratio adopted in the European Union's 
Maastricht Treaty, the maximum level most economists consider 
sustainable.
---------------------------------------------------------------------------
    \17\Congressional Budget Office, The 2016 Long-Term Budget Outlook, 
July 2016.
---------------------------------------------------------------------------
    CBO notes it is impossible to predict how long the Nation 
could sustain such growth in Federal debt, but at some point 
investors would begin to doubt the government's willingness or 
ability to pay its debt obligations. This would require the 
government to pay much higher interest costs to borrow money, 
resulting in significant negative consequences for the economy 
and the Federal budget. This growing and unsustainable debt 
would restrict policymakers' ability to use tax and spending 
policies to respond to unexpected challenges, such as economic 
downturns, financial crises, or national security emergencies, 
and would pose substantial risks to the Nation.
    Clearly, entitlement reform is indispensable for taking 
control of the Federal Government's fiscal condition. It begins 
with the ``American Health Care Act''.

                    Cost Estimate of the Legislation

    The three-front strategy for health care reform has 
significant implications with regard to the cost estimate of 
this legislation. The analysis by CBO and the Joint Committee 
on Taxation [JCT], released on 13 March 2017, reflects only the 
provisions of this measure; it does not account for further 
planned actions that cannot be included in a reconciliation 
bill. For instance, it cannot show how deregulatory initiatives 
by the Executive Branch would allow insurers to develop a 
greater variety of coverage options, some at lower costs, and 
compete for a broader range of customers. Nor can it evaluate 
the effects of interstate purchasing--should such a policy be 
enacted--which might also enhance competition and lead to more 
choices of policies. This is because the two agencies can only 
estimate the legislation at hand.
    With those considerations in mind, the CBO/JCT estimate of 
the ``American Health Care Act'' offers important projections 
of the potential effects of the legislation.

    Reduced Spending and Lower Deficits. The bill as reported 
by the Budget Committee would reduce projected spending by $1.2 
trillion over the period of 2017 through 2026, mainly due to 
reforms to the Medicaid Program and the elimination of the 
ACA's insurance subsidies for non-group coverage. The measure 
also would return $883 billion to taxpayers by eliminating some 
of Obamacare's burdensome tax hikes. The net effect is a 
reduction in projected deficits of $336.6 billion.\18\
---------------------------------------------------------------------------
    \18\Congressional Budget Office Cost Estimate for the ``American 
Health Care Act'', 13 March 2017: https: / / www.cbo.gov / sites / 
default / files / 115th-congress-2017-2018 / costestimate / 
americanhealthcareact_0.pdf.

    Stability of the Insurance Market. Confirming Republican 
expectations, the analysis projects stability in the nogroup 
health insurance market. ``[K]ey factors bringing about market 
stability include subsidies to purchase insurance, which would 
maintain sufficient demand for insurance by people with low 
health care expenditures, and grants to states from the Patient 
and State Stability Fund, which would reduce the costs to 
insurers of people with high health care expenditures.'' 
Although the new tax credits would be structured differently 
from current subsidies, the analysis notes, the other changes 
would ``lower average premiums enough to attract a sufficient 
number of relatively healthy people to stabilize the 
market.''\19\
---------------------------------------------------------------------------
    \19\Ibid.

                FIGURE 3
    
    

    Lower Insurance Premiums. The estimate projects a near-term 
(through 2019) bump during transition, but by 2026 average 
health insurance premiums would be about 10 percent less than 
under current law. This is partly because premium rates would 
be determined more by actual risk and market effects rather 
than by government dictate. The Patient and State Stability 
Fund would help as well. CBO and JCT also expect a younger mix 
of enrollees under the legislation.\20\ In this area, though, 
the estimate is unable to account for other potential actions 
that cannot be included here--such as deregulation and other 
potential changes in law outside the reconciliation process--
which would likely contribute to even lower premiums.
---------------------------------------------------------------------------
    \20\Ibid.

    Effects on Insurance Coverage. This is where context is 
especially important. CBO and JCT estimate a significant 
decline in insurance coverage resulting from the legislation, 
relative to current law.\21\ The agencies, however, have tended 
to overestimate the extent to which the individual ``mandate'' 
tax encourages a significant boost in insurance purchases. As 
noted earlier, nearly 20 million people have chosen to remain 
without coverage by either paying the tax or seeking an 
exemption from it. Further, CBO counts only ``comprehensive 
major medical policies,'' while excluding health savings 
accounts and plans bought with portable tax credits that give 
patients choices as opposed to Washington-defined coverage. In 
addition, the limited breadth of the cost estimate--analyzing 
in isolation only one of three fronts in the overall health 
care strategy--limits a full understanding of the health care 
plan. It cannot project how many more people would buy coverage 
if there were a greater variety of affordable options as a 
result of forthcoming legislative or administrative actions. 
Hence the full effects on insurance coverage cannot be 
evaluated until the other components are in place.
---------------------------------------------------------------------------
    \21\Ibid.

    No Macroeconomic Feedback Analysis. House rules require a 
macroeconomic feedback analysis of major legislation to the 
extent practicable.\22\ For the ``American Health Care Act'', 
such an evaluation would reflect how the measure's tax 
reductions and shrinking deficits might boost economic 
performance, thereby potentially yielding tax revenues higher 
than estimated. CBO said, however, that ``because of the very 
short time available to prepare this cost estimate, quantifying 
and incorporating these macroeconomic effects have not been 
practicable.''\23\
---------------------------------------------------------------------------
    \22\Clause 8 of Rule XIII of H.Res. 5, the ``Rules of the House of 
Representatives'' for the 115th Congress.
    \23\Congressional Budget Office Cost Estimate for the ``American 
Health Care Act'', 13 March 2017.
---------------------------------------------------------------------------

          The Budget Committee's Role in Obamacare Legislation

    The major steps in the reconciliation process, as provided 
for under Section 310 of the Budget Act, and how they apply in 
this instance, are the following:

    The Budget Resolution. Reconciliation can be triggered only 
by the adoption of a budget resolution. Therefore, the fiscal 
year 2017 budget resolution, passed in January, carried 
reconciliation instructions for the Committees on Energy and 
Commerce and Ways and Means, which have jurisdiction over major 
health care and tax policies. The directives were written to 
give the committees maximum flexibility in writing their 
legislative provisions.

    Authorizing Committees. The two authorizing committees 
marked up legislative provisions pursuant to their instructions 
and transmitted them to the Committee on the Budget. Detailed 
descriptions of the provisions are presented in the committees' 
submissions.

    The Budget Committee. Having received the submissions, the 
Committee on the Budget, as provided for under Section 310 of 
the Budget Act, has bound the provisions together, without 
substantive change, into a single measure--a reconciliation 
bill--and conducted a markup. The Committee then reported the 
measure to the House for floor consideration.

    Following House passage, the bill will be sent to the 
Senate, which will consider the measure under that Chamber's 
reconciliation process.

                          House of Representatives,
                          Committee on Energy and Commerce,
                                    Washington, DC, March 13, 2017.
Hon. Diane Black,
Chairman, Committee on the Budget,
House of Representatives, Washington, DC.
    Dear Chairman Black: Pursuant to section 2002 of S. Con. 
Res. 3, the Fiscal Year 2017 Concurrent Resolution on the 
Budget, as well as section 310 of the Congressional Budget and 
Impoundment Control Act of 1974, 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.
            Sincerely,
                                               Greg Walden,
                                                          Chairman.

  Committee Print: Budget Reconciliation Legislative Recommendations 
Relating to Repeal and Replace of the Patient Protection and Affordable 
                 Care Act; Title I--Energy and Commerce

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................    16
Background and Need for Legislation..............................    16
Committee Action.................................................    18
Committee Votes..................................................    18
Oversight Findings and Recommendations...........................    38
New Budget Authority, Entitlement Authority, and Tax Expenditures    38
Congressional Budget Office Estimate.............................    38
Federal Mandates Statement.......................................    73
Statement of General Performance Goals and Objectives............    73
Duplication of Federal Programs..................................    73
Committee Cost Estimate..........................................    73
Earmark, Limited Tax Benefits, and Limited Tariff Benefits.......    73
Disclosure of Directed Rule Makings..............................    73
Advisory Committee Statement.....................................    73
Applicability to Legislative Branch..............................    73
Section-by-Section Analysis of the Legislation...................    73
Changes in Existing Law Made by the Bill, as Reported............    79
Minority, Additional, or Dissenting Views........................   324
                          Purpose and Summary

    The Patient Protection and Affordable Care Act (PPACA) has 
failed to live up to the promise of lowering health care costs 
for individuals and families. The purpose of the Committee on 
Energy and Commerce's budget reconciliation legislative 
recommendations is to advance the repeal and replacement of 
this failed law.

                  Background and Need for Legislation

    The PPACA has led to a deterioration of the health 
insurance market where most individuals and families have 
limited choices. Patients have seen premium increases paired 
with high cost sharing. Nearly one-third of counties have only 
one insurer offering an exchange plan. The average increase in 
premiums this year on the healthcare.gov exchange is 25 percent 
according to data from the Department of Health and Human 
Services. As a result, 19.2 million taxpayers have chosen to 
pay the individual mandate penalty or claim an exemption from 
the mandate.
    The PPACA has also dramatically overburdened the Medicaid 
program. Medicaid is a critical safety net for some of our 
nation's most vulnerable patients, as the program provides 
health care for children, pregnant mothers, elderly 
individuals, blind individuals, and individuals with 
disabilities. Created in 1965 to finance health care coverage 
to serve low-income Americans, Medicaid is now the world's 
largest health insurance program. Medicaid currently covers 
approximately 72 million Americans--more than Medicare--and up 
to 98 million may be covered at any one point in a given 
year.\1\
---------------------------------------------------------------------------
    \1\See the Congressional Budget Office's Medicaid baseline, 
available online here: https://www.cbo.gov/sites/default/files/
recurringdata/51301-2016-03-medicaid.pdf.
---------------------------------------------------------------------------
    Medicaid is jointly funded by Federal and State 
governments. According to the Congressional Budget Office, 
Federal Medicaid outlays are expected to increase dramatically 
over the coming decade, from $368 billion in 2016 to $650 
billion in 2027.\2\ According to National Health Expenditure 
projections, total Medicaid outlays will climb to approximately 
$1 trillion each year by the end of a decade.\3\
---------------------------------------------------------------------------
    \2\See the Congressional Budget Office's Medicaid baseline, 
available online here: https://www.cbo.gov/sites/default/files/
recurringdata/51301-2016-03-medicaid.pdf.
    \3\See the Centers for Medicare & Medicaid Service National Health 
Expenditures Data, available online here: https://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/
NationalHealthExpendData/NationalHealthAccountsProjected.html.
---------------------------------------------------------------------------
    Today, Medicaid is one of the fastest growing spending 
items for States, and accounted for more than 28 percent of 
State spending in fiscal year 2015, according to the National 
Association of State Budget Officers.\4\ This portion of State 
budgets devoted to Medicaid has grown over time, and has 
accelerated in recent years. Notably, irrespective of whether 
or not a State chose to expand Medicaid under PPACA, all States 
are experiencing greater Medicaid program outlays due to the 
effects of the individual mandate and penalties. A recent 
estimate by the Congressional Budget Office (CBO) attributed 
$281 billion in Federal Medicaid outlays over a decade to the 
effect of the individual mandate tax penalty in PPACA, because 
the mandate has effectively forced many individuals who were 
previously eligible (but not previously enrolled) to enroll in 
Medicaid.\5\
---------------------------------------------------------------------------
    \4\See the National Association of State Budget Officers, State 
Expenditure Report, available online here: https://
higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-
0fca152d64c2/UploadedImages/SER%20Archive/
State%20Expenditure%20Report%20(Fiscal%202014-2016)%20-%20S.pdf.
    \5\See the Congressional Budget Office's Budget Option, Repeal the 
Individual Health Insurance Mandate, available online here: https://
www.cbo.gov/budget-options/2016/52232.
---------------------------------------------------------------------------
    As these numbers suggest, the Medicaid safety net is under 
strain and unfortunately is not serving patients as well as it 
should. Many State Medicaid programs suffer from significant 
waste, fraud, and abuse, due to failures in State and Federal 
oversight. In fact, the Government Accountability Office (GAO) 
has designated Medicaid as a high-risk program since 2003 due 
to their concerns about conducting proper oversight of the 
program.\6\ Medicaid's incentives often lead States to offer 
more benefits but cut payments to health care providers, which 
means low-income patients have less and less access to quality 
care. The result is nationally, only a portion of primary 
health care providers accept Medicaid beneficiaries--often with 
even fewer specialists accepting such patients.\7\ On its 
current path, the Medicaid program is on unsustainable 
financial footing. This is not merely a fiscal issue, but an 
issue that jeopardizes the ability of the Federal and State 
government to take care of the most vulnerable who actually 
rely on the program.
---------------------------------------------------------------------------
    \6\See the Government Accountability Office's, 2017 High Risk 
Report, available online here: http://www.gao.gov/assets/690/
682765.pdf.
    \7\See Avik Roy's Testimony before the Energy & Commerce Health 
Subcommittee, available online here: http://docs.house.gov/meetings/IF/
IF14/20170201/105498/HHRG-115-IF14-Wstate-RoyA-20170201.pdf pages 4 and 
5.
---------------------------------------------------------------------------
    Unfortunately, PPACA has made this dynamic of not being 
able to care for the most vulnerable worse. Under PPACA, States 
may expand Medicaid eligibility to people under the age of 65 
with income up to 138 percent of the Federal poverty level 
(FPL). The law provided enhanced Federal funding for coverage 
of this new expansion population, in the form of a higher 
Federal Medical Assistance Percentage (FMAP). Specifically, the 
Federal government covered 100 percent of the costs for the 
expansion population through 2016--a 100 percent FMAP. In 2017, 
the FMAP for this population is 95 percent, and the FMAP 
gradually diminishes to 90 percent by 2020. Thus, under PPACA, 
the Federal government covers a higher percentage of the cost 
of care for able-bodied adults above poverty compared to the 
disabled, elderly, or children below poverty. In some cases, 
this may create an incentive for States that face budgetary 
pressures to use policy tools to reduce benefits, services, or 
eligibility for the traditional, vulnerable Medicaid 
populations served by their programs. According to the most 
recent estimate from the Congressional Budget Office, the 
provisions of PPACA will cost Federal taxpayers nearly $1 
trillion over the next decade.
    For Medicaid to be strengthened and sustained as a vital 
safety net to provide needed care for our nation's most 
vulnerable patients for coming decades, Congress and the 
Centers for Medicare and Medicaid Services (CMS) will be forced 
to make changes to the program. As GAO has noted, ``the effects 
of unprecedented changes recently made to the Medicaid program 
will continue to emerge in the coming years and are likely to 
exacerbate the challenges and shortcomings that already exist 
in federal oversight and management of the program.''\8\
---------------------------------------------------------------------------
    \8\See the Government Accountability Office's, 2017 High Risk 
Report, available online here: http://www.gao.gov/assets/690/
682765.pdf.
---------------------------------------------------------------------------

                            Committee Action

    The Committee on Energy and Commerce has convened 31 
oversight hearings on the Affordable Care Act through the 
Subcommittees on Health, the Subcommittee on Oversight and 
Investigations, and the Full Committee. One-hundred and seven 
witnesses testified before the Committee, included 38 
Administration officials. These hearings focused on a variety 
of provisions within the law and their implementation. Topics 
discussed at these hearings include the Cost-Sharing reduction 
program, the Basic Health Program, the mismanagement of 
healthcare.gov and information technology systems by HHS and 
its component agencies, state-based exchanges, the Consumer 
Operated and Oriented Plan, premium increases resulting from 
provisions of the law, and the ACA Medicaid expansion.
    On March 8, 2017, the full Committee on Energy and Commerce 
met in open markup session and ordered the Committee Print, as 
amended, favorably reported to the House by a record vote of 31 
yeas and 23 nays.

                            Committee Votes

    Clause 3(b) of rule XIII requires the Committee to list the 
record votes on the motion to report legislation and amendments 
thereto. The following reflects the record votes taken during 
the Committee consideration:


                 Oversight Findings and Recommendations

    Pursuant to clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII, has not held hearings on the Committee Print: Budget 
Reconciliation Legislative Recommendations Relating to Repeal 
and Replace of the Patient Protection and Affordable Care Act; 
Title I--Energy and Commerce.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    Pursuant to clause 3(c)(2) of rule XIII, the Committee 
finds that the Committee Print would result in no new or 
increased budget authority, entitlement authority, or tax 
expenditures or revenues.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII, the following is 
the cost estimate provided by the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 
1974:

                      CONGRESSIONAL BUDGET OFFICE
                             COST ESTIMATE

                              ----------                              

                                                    March 13, 2017.

                        American Health Care Act

 Budget Reconciliation Recommendations of the House Committees on Ways 
            and Means and Energy and Commerce, March 9, 2017

                                SUMMARY

    The Concurrent Resolution on the Budget for Fiscal Year 
2017 directed the House Committees on Ways and Means and Energy 
and Commerce to develop legislation to reduce the deficit. The 
Congressional Budget Office and the staff of the Joint 
Committee on Taxation (JCT) have produced an estimate of the 
budgetary effects of the American Health Care Act, which 
combines the pieces of legislation approved by the two 
committees pursuant to that resolution. In consultation with 
the budget committees, CBO used its March 2016 baseline with 
adjustments for subsequently enacted legislation, which 
underlies the resolution, as the benchmark to measure the cost 
of the legislation.

                     Effects on the Federal Budget

    CBO and JCT estimate that enacting the legislation would 
reduce federal deficits by $337 billion over the 2017-2026 
period. That total consists of $323 billion in on-budget 
savings and $13 billion in off-budget savings. Outlays would be 
reduced by $1.2 trillion over the period, and revenues would be 
reduced by $0.9 trillion.
    The largest savings would come from reductions in outlays 
for Medicaid and from the elimination of the Affordable Care 
Act's (ACA's) subsidies for nongroup health insurance. The 
largest costs would come from repealing many of the changes the 
ACA made to the Internal Revenue Code--including an increase in 
the Hospital Insurance payroll tax rate for high-income 
taxpayers, a surtax on those taxpayers' net investment income, 
and annual fees imposed on health insurers--and from the 
establishment of a new tax credit for health insurance.
    Pay-as-you-go procedures apply because enacting the 
legislation would affect direct spending and revenues. CBO and 
JCT estimate that enacting the legislation would not increase 
net direct spending or on-budget deficits by more than $5 
billion in any of the four consecutive 10-year periods 
beginning in 2027.

                  Effects on Health Insurance Coverage

    To estimate the budgetary effects, CBO and JCT projected 
how the legislation would change the number of people who 
obtain federally subsidized health insurance through Medicaid, 
the nongroup market, and the employment-based market, as well 
as many other factors.
    CBO and JCT estimate that, in 2018, 14 million more people 
would be uninsured under the legislation than under current 
law. Most of that increase would stem from repealing the 
penalties associated with the individual mandate. Some of those 
people would choose not to have insurance because they chose to 
be covered by insurance under current law only to avoid paying 
the penalties, and some people would forgo insurance in 
response to higher premiums.
    Later, following additional changes to subsidies for 
insurance purchased in the nongroup market and to the Medicaid 
program, the increase in the number of uninsured people 
relative to the number under current law would rise to 21 
million in 2020 and then to 24 million in 2026. The reductions 
in insurance coverage between 2018 and 2026 would stem in large 
part from changes in Medicaid enrollment--because some states 
would discontinue their expansion of eligibility, some states 
that would have expanded eligibility in the future would choose 
not to do so, and per-enrollee spending in the program would be 
capped. In 2026, an estimated 52 million people would be 
uninsured, compared with 28 million who would lack insurance 
that year under current law.

                Stability of the Health Insurance Market

    Decisions about offering and purchasing health insurance 
depend on the stability of the health insurance market--that 
is, on having insurers participating in most areas of the 
country and on the likelihood of premiums' not rising in an 
unsustainable spiral. The market for insurance purchased 
individually (that is, nongroup coverage) would be unstable, 
for example, if the people who wanted to buy coverage at any 
offered price would have average health care expenditures so 
high that offering the insurance would be unprofitable. In CBO 
and JCT's assessment, however, the nongroup market would 
probably be stable in most areas under either current law or 
the legislation.
    Under current law, most subsidized enrollees purchasing 
health insurance coverage in the nongroup market are largely 
insulated from increases in premiums because their out-of-
pocket payments for premiums are based on a percentage of their 
income; the government pays the difference. The subsidies to 
purchase coverage combined with the penalties paid by uninsured 
people stemming from the individual mandate are anticipated to 
cause sufficient demand for insurance by people with low health 
care expenditures for the market to be stable.
    Under the legislation, in the agencies' view, key factors 
bringing about market stability include subsidies to purchase 
insurance, which would maintain sufficient demand for insurance 
by people with low health care expenditures, and grants to 
states from the Patient and State Stability Fund, which would 
reduce the costs to insurers of people with high health care 
expenditures. Even though the new tax credits would be 
structured differently from the current subsidies and would 
generally be less generous for those receiving subsidies under 
current law, the other changes would, in the agencies' view, 
lower average premiums enough to attract a sufficient number of 
relatively healthy people to stabilize the market.

                          Effects on Premiums

    The legislation would tend to increase average premiums in 
the nongroup market prior to 2020 and lower average premiums 
thereafter, relative to projections under current law. In 2018 
and 2019, according to CBO and JCT's estimates, average 
premiums for single policyholders in the nongroup market would 
be 15 percent to 20 percent higher than under current law, 
mainly because the individual mandate penalties would be 
eliminated, inducing fewer comparatively healthy people to sign 
up.
    Starting in 2020, the increase in average premiums from 
repealing the individual mandate penalties would be more than 
offset by the combination of several factors that would 
decrease those premiums: grants to states from the Patient and 
State Stability Fund (which CBO and JCT expect to largely be 
used by states to limit the costs to insurers of enrollees with 
very high claims); the elimination of the requirement for 
insurers to offer plans covering certain percentages of the 
cost of covered benefits; and a younger mix of enrollees. By 
2026, average premiums for single policyholders in the nongroup 
market under the legislation would be roughly 10 percent lower 
than under current law, CBO and JCT estimate.
    Although average premiums would increase prior to 2020 and 
decrease starting in 2020, CBO and JCT estimate that changes in 
premiums relative to those under current law would differ 
significantly for people of different ages because of a change 
in age-rating rules. Under the legislation, insurers would be 
allowed to generally charge five times more for older enrollees 
than younger ones rather than three times more as under current 
law, substantially reducing premiums for young adults and 
substantially raising premiums for older people.

                 Uncertainty Surrounding the Estimates

    The ways in which federal agencies, states, insurers, 
employers, individuals, doctors, hospitals, and other affected 
parties would respond to the changes made by the legislation 
are all difficult to predict, so the estimates in this report 
are uncertain. But CBO and JCT have endeavored to develop 
estimates that are in the middle of the distribution of 
potential outcomes.

                         Macroeconomic Effects

    Because of the magnitude of its budgetary effects, this 
legislation is ``major legislation,'' as defined in the rules 
of the House of Representatives.\1\ Hence, it triggers the 
requirement that the cost estimate, to the greatest extent 
practicable, include the budgetary impact of its macroeconomic 
effects. However, because of the very short time available to 
prepare this cost estimate, quantifying and incorporating those 
macroeconomic effects have not been practicable.
---------------------------------------------------------------------------
    \1\Cl. 8 of Rule XIII of the Rules of the House of Representatives, 
H.R. Res. 5, 115th Congress (2017).
---------------------------------------------------------------------------

             Intergovernmental and Private-Sector Mandates

    JCT and CBO have reviewed the provisions of the legislation 
and determined that they would impose no intergovernmental 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    JCT and CBO have determined that the legislation would 
impose private-sector mandates as defined in UMRA. On the basis 
of information from JCT, CBO estimates the aggregate cost of 
the mandates would exceed the annual threshold established in 
UMRA for private-sector mandates ($156 million in 2017, 
adjusted annually for inflation).

                  MAJOR PROVISIONS OF THE LEGISLATION

    Budgetary effects related to health insurance coverage 
would stem primarily from the following provisions:

     LEliminating penalties associated with the 
requirements that most people obtain health insurance coverage 
and that large employers offer their employees coverage that 
meets specified standards.

     LReducing the federal matching rate for adults 
made eligible for Medicaid by the ACA to equal the rate for 
other enrollees in the state, beginning in 2020.

     LCapping the growth in per-enrollee payments for 
most Medicaid beneficiaries to no more than the medical care 
component of the consumer price index starting in 2020.

     LRepealing current-law subsidies for health 
insurance coverage obtained through the nongroup market--which 
include refundable tax credits for premium assistance and 
subsidies to reduce cost-sharing payments--as well as the Basic 
Health Program, beginning in 2020.

     LCreating a new refundable tax credit for health 
insurance coverage purchased through the nongroup market 
beginning in 2020.

     LAppropriating funding for grants to states 
through the Patient and State Stability Fund beginning in 2018.

     LRelaxing the current-law requirement that 
prevents insurers from charging older people premiums that are 
more than three times larger than the premiums charged to 
younger people in the nongroup and small-group markets. Unless 
a state sets a different limit, the legislation would allow 
insurers to charge older people five times more than younger 
ones, beginning in 2018.

     LRemoving the requirement, beginning in 2020, that 
insurers who offer plans in the nongroup and small-group 
markets generally must offer plans that cover at least 60 
percent of the cost of covered benefits.

     LRequiring insurers to apply a 30 percent 
surcharge on premiums for people who enroll in insurance in the 
nongroup or small-group markets if they have been uninsured for 
more than 63 days within the past year.

    Other parts of the legislation would repeal or delay many 
of the changes the ACA made to the Internal Revenue Code that 
were not directly related to the law's insurance coverage 
provisions. Those with the largest budgetary effects include:

     LRepealing the surtax on certain high-income 
taxpayers' net investment income;

     LRepealing the increase in the Hospital Insurance 
payroll tax rate for certain high-income taxpayers;

     LRepealing the annual fee on health insurance 
providers; and

     LDelaying when the excise tax imposed on some 
health insurance plans with high premiums would go into effect.

    In addition, the legislation would make several changes to 
other health-related programs that would have smaller budgetary 
effects.

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    CBO and JCT estimate that, on net, enacting the legislation 
would decrease federal deficits by $337 billion over the 2017-
2026 period (see Table 1). That change would result from a $1.2 
trillion decrease in direct spending, partially offset by an 
$883 billion reduction in revenues.

                           BASIS OF ESTIMATE

    For this estimate, CBO and JCT assume that the legislation 
will be enacted by May 2017. Costs and savings are measured 
relative to CBO's March 2016 baseline projections, with 
adjustments for legislation that was enacted after that 
baseline was produced.
    The largest budgetary effects would stem from provisions in 
the recommendations from both committees that would affect 
insurance coverage. Those provisions, taken together, would 
reduce projected deficits by $935 billion over the 2017-2026 
period. Other provisions would increase deficits by $599 
billion, mostly by reducing tax revenues. All told, deficits 
would be reduced by $337 billion over that period, CBO and JCT 
estimate. (See Table 2 for the estimated budgetary effects of 
each major provision.)

       Budgetary Effects of Health Insurance Coverage Provisions

    The $935 billion in estimated deficit reduction over the 
2017-2026 period that would stem from the insurance coverage 
provisions includes the following amounts (shown in Table 3):

     LA reduction of $880 billion in federal outlays 
for Medicaid;

     LSavings of $673 billion, mostly stemming from the 
elimination of the ACA's subsidies for nongroup health 
insurance--which include refundable tax credits for premium 
assistance and subsidies to reduce cost-sharing payments--in 
2020;

     LSavings of $70 billion mostly associated with 
shifts in the mix of taxable and nontaxable compensation 
resulting from net decreases in the number of people estimated 
to enroll in employment-based health insurance coverage; and

     LSavings of $6 billion from the repeal of a tax 
credit for certain small employers that provide health 
insurance to their employees.

    Those decreases would be partially offset by:

     LA cost of $361 billion for the new tax credit for 
health insurance established by the legislation in 2020;

     LA reduction in revenues of $210 billion from 
eliminating the penalties paid by uninsured people and 
employers;

     LAn increase in spending of $80 billion for the 
new Patient and State Stability Fund grant program; and

     LA net increase in spending of $43 billion under 
the Medicare program stemming from changes in payments to 
hospitals that serve a disproportionate share of low-income 
patients.

    Methodology. The legislation would change the pricing of 
nongroup insurance and the eligibility for and the amount of 
subsidies to purchase that insurance. It would also lead to 
changes in Medicaid eligibility and per capita spending. The 
legislation's effects on health insurance coverage would depend 
in part on how responsive individuals are to changes in the 
prices, after subsidies, they would have to pay for nongroup 
insurance; on changes in their eligibility for public coverage; 
and on their underlying desire for such insurance. Effects on 
coverage would also stem from how responsive firms are to 
changes in those post subsidy prices and in the attractiveness 
of other aspects of nongroup alternatives to employment-based 
insurance.
    To capture those complex interactions, CBO uses a 
microsimulation model to estimate how rates of coverage and 
sources of insurance would change as a result of alterations in 
eligibility and subsidies for--and thus the net cost of--
various insurance options. Based on survey data, that model 
incorporates a wide range of information about a representative 
sample of individuals and families, including their income, 
employment, health status, and health insurance coverage. The 
model also incorporates information from the research 
literature about the responsiveness of individuals and 
employers to price changes and the responsiveness of 
individuals to changes in eligibility for public coverage. CBO 
regularly updates the model so that it incorporates information 
from the most recent administrative data on insurance coverage 
and premiums. CBO and JCT use that model--in combination with 
models of tax revenues, models of Medicaid spending and actions 
by states, projections of trends in early retirees' health 
insurance coverage, and other available information--to inform 
their estimates of the numbers of people with certain types of 
coverage and the associated federal budgetary costs.\2\
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    \2\For additional information, see Congressional Budget Office, 
``Methods for Analyzing Health Insurance Coverage'' (accessed March 13, 
2017), www.cbo.gov/topics/health-care/methods-analyzing-health-
insurance-coverage.

    Effects of Repealing Mandate Penalties. Eliminating the 
penalties associated with two requirements, while keeping the 
requirements themselves in place, would affect insurance 
coverage in various ways. Those two requirements are that most 
people obtain health insurance coverage (also called the 
individual mandate) and that large employers offer their 
employees health insurance coverage that meets specified 
standards (also called the employer mandate). Eliminating their 
associated penalties would reduce federal revenues starting in 
2017, but CBO and JCT estimate that doing so would also 
substantially reduce the number of people with health insurance 
coverage and, accordingly, would reduce the costs incurred by 
the federal government in subsidizing some health insurance 
coverage. The estimated savings stemming from fewer people 
enrolling in Medicaid, in health insurance obtained through the 
nongroup market, and in employment-based health insurance 
coverage would exceed the estimated loss of revenues from 
eliminating mandate penalties.
    CBO and JCT estimate that repealing the individual mandate 
penalties would also result in higher health insurance premiums 
in the nongroup market after 2017.\3\ Insurers would still be 
required to provide coverage to any applicant, would not be 
able to vary premiums to reflect enrollees' health status or to 
limit coverage of preexisting medical conditions, and would be 
limited in how premiums could vary by age. Those features are 
most attractive to applicants with relatively high expected 
costs for health care, so CBO and JCT expect that repealing the 
individual mandate penalties would tend to reduce insurance 
coverage less among older and less healthy people than among 
younger and healthier people. Thus, the agencies estimate that 
repealing those penalties, taken by itself, would increase 
premiums. Nevertheless, CBO and JCT anticipate that a 
significant number of relatively healthy people would still 
purchase insurance in the nongroup market because of the 
availability of government subsidies.
---------------------------------------------------------------------------
    \3\CBO and JCT expect that insurers would not be able to change 
their 2017 premiums because those premiums have already been set.

    Major Changes to Medicaid. CBO estimates that several major 
provisions affecting Medicaid would decrease direct spending by 
$880 billion over the 2017-2026 period. That reduction would 
stem primarily from lower enrollment throughout the period, 
culminating in 14 million fewer Medicaid enrollees by 2026, a 
reduction of about 17 percent relative to the number under 
current law. Some of that decline would be among people who are 
currently eligible for Medicaid benefits, and some would be 
among people who CBO projects would be made eligible as a 
result of state actions in the future under current law (that 
is, from additional states adopting the optional expansion of 
eligibility authorized by the ACA). Some decline in spending 
and enrollment would begin immediately, but most of the changes 
would begin in 2020, when the legislation would terminate the 
enhanced federal matching rate for new enrollees under the 
ACA's expansion of Medicaid and would place a per capita-based 
cap on the federal government's payments to states for medical 
assistance provided through Medicaid. By 2026, Medicaid 
spending would be about 25 percent less than what CBO projects 
---------------------------------------------------------------------------
under current law.

    Changes Before 2020. Under current law, the penalties 
associated with the individual mandate apply to some Medicaid-
eligible adults and children. (For example, the penalties apply 
to single individuals with income above about 90 percent of the 
federal poverty guidelines, also known as the federal poverty 
level, or FPL). CBO estimates that, without those penalties, 
fewer people would enroll in Medicaid, including some who are 
not subject to the penalties but might think they are. Some 
people might be uncertain about what circumstances trigger the 
penalty and others might be uncertain about their annual 
income. The estimated lower enrollment would result in less 
spending for the program. Those effects on enrollment and 
spending would continue throughout the 2017-2026 period.

    Termination of Enhanced Federal Matching Funds for New 
Enrollees From Expanding Eligibility for Medicaid. Under 
current law, states are permitted, but not required, to expand 
eligibility for Medicaid to adults under 65 whose income is 
equal to or less than 138 percent of the FPL (referred to here 
as ``newly eligible''). The federal government pays a larger 
share of the medical costs for those people than it pays for 
those who were previously eligible. Beginning in 2020, the 
legislation would reduce the federal matching rate for newly 
eligible adults from 90 percent of medical costs to the rate 
for other enrollees in the state. (The federal matching rate 
for other enrollees ranges from 50 percent to 75 percent, 
depending on the state, with an average of about 57 percent.) 
The lower federal matching rate would apply only to those newly 
enrolled after December 31, 2019.
    The 31 states and the District of Columbia that have 
already expanded Medicaid to the newly eligible cover roughly 
half of that population nationwide. CBO projects that under 
current law, additional states will expand their Medicaid 
programs and that, by 2026, roughly 80 percent of newly 
eligible people will reside in states that have done so. Under 
the legislation, largely because states would pay for a greater 
share of enrollees' costs, CBO expects that no additional 
states would expand eligibility, thereby reducing both 
enrollment in and spending for Medicaid. According to CBO's 
estimates, that effect would be modest in the near term, but by 
2026, on an average annual basis, 5 million fewer people would 
be enrolled in Medicaid than would have been enrolled under 
current law (see Figure 1).
    CBO also anticipates some states that have already expanded 
their Medicaid programs would no longer offer that coverage, 
reducing the share of the newly eligible population residing in 
a state with expanded eligibility to about 30 percent in 2026. 
That estimate reflects different possible outcomes without any 
explicit prediction about which states would make which 
choices. In considering the possible outcomes, CBO took into 
account several factors: the extent of optional coverage 
provided to the newly eligible population and other groups 
before the ACA's enactment (as a measure of a state's 
willingness to provide coverage above statutory minimums), 
states' ability to bear costs under the legislation, and 
potential methods to mitigate those costs (such as changes to 
benefit packages and payment rates). Some states might also 
begin to take action prior to 2020 in anticipation of future 
changes that would result from the legislation to avoid abrupt 
changes to eligibility and other program features. How 
individual states would ultimately respond is highly uncertain.
    Because the lower federal matching rate would apply only to 
those newly enrolled after December 31, 2019 (or who experience 
a break in eligibility after that date), CBO estimates that 
reductions in spending for the newly eligible would increase 
over several years, as ``grandfathered'' enrollees would cycle 
off the program and be replaced by new enrollees. On the basis 
of historical data (and taking into account the increased 
frequency of eligibility redeterminations required by the 
legislation), CBO projects that fewer than one-third of those 
enrolled as of December 31, 2019, would have maintained 
continuous eligibility two years later. Under the legislation, 
the higher federal matching rate would apply for fewer than 5 
percent of newly eligible enrollees by the end of 2024, CBO 
estimates.

    Per Capita-Based Cap on Medicaid Payments for Medical 
Assistance. Under current law, the federal government and state 
governments share in the financing and administration of 
Medicaid. In general, states pay health care providers for 
services to enrollees, and the federal government reimburses 
states for a percentage of their expenditures. All federal 
reimbursement for medical services is open-ended, meaning that 
if a state spends more because enrollment increases or costs 
per enrollee rise, additional federal payments are 
automatically generated.
    Under the legislation, beginning in 2020, the federal 
government would establish a limit on the amount of 
reimbursement it provides to states. That limit would be set by 
calculating the average per-enrollee cost of medical services 
for most enrollees who received full Medicaid benefits in 2016 
for each state. The Secretary of Health and Human Services 
would then inflate the average per-enrollee costs for each 
state by the growth in the consumer price index for medical 
care services (CPI-M). The final limit on federal reimbursement 
for each state for 2020 and after would be the average cost per 
enrollee for five specified groups of enrollees (the elderly, 
disabled people, children, newly eligible adults, and all other 
adults), reflecting growth in the CPI-M from 2016 multiplied by 
the number of enrollees in each category in that year. If a 
state spent more than the limit on federal reimbursement, the 
federal government would provide no additional funding to match 
that spending.
    The limit on federal reimbursement would reduce outlays 
because (after the changes to the Medicaid expansion population 
have been accounted for) Medicaid spending would grow on a per-
enrollee basis at a faster rate than the CPI-M, according to 
CBO's projections: at an average annual rate of 4.4 percent for 
Medicaid and 3.7 percent for the CPI-M over the 2017-2026 
period. With less federal reimbursement for Medicaid, states 
would need to decide whether to commit more of their own 
resources to finance the program at current-law levels or 
whether to reduce spending by cutting payments to health care 
providers and health plans, eliminating optional services, 
restricting eligibility for enrollment, or (to the extent 
feasible) arriving at more efficient methods for delivering 
services. CBO anticipates that states would adopt a mix of 
those approaches, which would result in additional savings to 
the federal government. (Other provisions affecting Medicaid 
are discussed below.)

    Changes to Subsidies and Market Rules for Nongroup Health 
Insurance Before 2020. Under the legislation, existing 
subsidies for health insurance coverage purchased in the 
nongroup market would largely remain in effect until 2020--but 
the premium tax credits would differ by the age of the 
individual in 2019. Aside from the changes in enrollment and 
premiums as a result of eliminating the individual mandate 
penalties (mentioned earlier), the other changes discussed in 
this section would have small effects on coverage and federal 
subsidies in the nongroup market.

    Nongroup Market Subsidies. Subsidies under current law fall 
into two categories: subsidies to cover a portion of 
participants' health insurance premiums (which take the form of 
refundable tax credits) and subsidies to reduce their cost-
sharing amounts (out-of-pocket payments required under 
insurance policies). The first category of subsidies, also 
called premium tax credits, is generally available to people 
with income between 100 percent and 400 percent of the FPL, 
with certain exceptions. The second category, also called cost-
sharing subsidies, is available to those who are eligible for 
premium tax credits, generally have a household income between 
100 percent and 250 percent of the FPL, and enroll in an 
eligible plan.
    Under current law, those subsidies can be obtained only by 
purchasing nongroup coverage through a health insurance 
marketplace. Under the legislation, premium tax credits--but 
not cost-sharing subsidies--would also be available for most 
plans purchased in the nongroup market outside of marketplaces 
beginning in 2018. However, the tax credits for those plans 
could not be advanced and could only be claimed on a person's 
tax return. CBO and JCT estimate that roughly 2 million people 
who are expected to enroll in plans purchased in the nongroup 
market outside of marketplaces in 2018 and 2019 under current 
law would newly receive premium tax credits for that coverage 
under the legislation.
    The premium tax credits would differ by the age of the 
individual for one year in 2019, while cost-sharing subsidies 
would remain unchanged prior to 2020. For those with household 
income exceeding 150 percent of the FPL, the legislation would 
generally reduce the percentage of income that younger people 
had to pay toward their premiums and increase that percentage 
for older people.\4\ CBO and JCT expect that roughly 1 million 
more people would enroll in coverage obtained through the 
nongroup market as a result of the change in the structure of 
premium tax credits. That increase would be the net result of 
higher enrollment among younger people and lower enrollment 
among older people.
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    \4\For families, the age of the oldest taxpayer would be used to 
determine the age-adjusted percentage of income that must be paid 
toward the premiums. As under current law, the premium tax credits 
would cover the amount by which the reference premium--that is, the 
premium for the second-lowest-cost ``silver'' plan that covers the 
eligible people in the household in the area in which they reside--
exceeds that percentage of income. A silver plan covers about 70 
percent of the costs of covered benefits.

    Patient and State Stability Fund Grants. Beginning in 2018 
and ending after 2026, the federal government would make a 
total of $100 billion in allotments to states that they could 
use for a variety of purposes, including reducing premiums for 
insurance in the nongroup market. CBO and JCT estimate that 
federal outlays for grants from the Patient and State Stability 
Fund would total $80 billion over the 2018-2026 period.
    By the agencies' estimates, the grants would reduce 
premiums for insurance in the nongroup market in many states. 
CBO and JCT expect that states would use those grants mostly to 
reimburse insurers for some of the costs of enrollees with 
claims above a threshold. For states that did not develop plans 
to spend the funds, the federal government would make payments 
to insurers in the individual market who have enrollees with 
relatively high claims. Before 2020, CBO expects, the Secretary 
of Health and Human Services would make payments to insurers on 
the behalf of most states because most would not have enough 
time to set up their own programs before insurers had to set 
premiums for 2018. As a result, CBO estimates that most states 
would rely on the federal default program for one or more years 
until they had more time to establish their own programs.

    Continuous Coverage Provisions. Insurers would be required 
to impose a penalty on people who enrolled in insurance in the 
nongroup or small-group markets if they had been uninsured for 
more than 63 days within the past year. When they purchased 
insurance in the nongroup or small-group market, they would be 
subject to a surcharge equal to 30 percent of their monthly 
premium for up to 12 months. The requirement would apply to 
people enrolling during a special enrollment period in 2018 
and, beginning in 2019, to people enrolling at any time during 
the year.
    CBO and JCT expect that increasing the future price of 
insurance through the surcharge for people who do not have 
continuous coverage would increase the number of people with 
insurance in 2018 and reduce that number in 2019 and later 
years. By the agencies' estimates, roughly 1 million people 
would be induced to purchase insurance in 2018 to avoid 
possibly having to pay the surcharge in the future. In most 
years after 2018, however, roughly 2 million fewer people would 
purchase insurance because they would either have to pay the 
surcharge or provide documentation about previous health 
insurance coverage. The people deterred from purchasing 
coverage would tend to be healthier than those who would not be 
deterred and would be willing to pay the surcharge.

    Age Rating Rules. Beginning in 2018, the legislation would 
expand the limits on how much insurers in the nongroup and 
small-group markets can vary premiums on the basis of age. 
However, CBO and JCT expect that the provision could not be 
implemented until 2019 because there would be insufficient time 
for the federal government, states, and insurers to incorporate 
the changes and then set premiums for 2018. Under current law, 
a 64-year-old can generally be charged premiums that cost up to 
three times as much as those offered to a 21-year-old. Under 
the legislation, that allowable difference would shift to five 
times as much unless a state chose otherwise. That change would 
tend to reduce premiums for younger people and increase 
premiums for older people.
    However, CBO and JCT estimate that the structure of the 
premium tax credits before 2020 would limit how changes in age 
rating rules affected the number of people who would enroll in 
health insurance coverage in the nongroup market. People 
eligible for subsidies in the nongroup market are now largely 
insulated from changes in premiums: A person receiving a 
premium tax credit pays a certain percentage of his or her 
income toward the reference premium, and the tax credit covers 
the difference between the premium and that percentage of 
income. Consequently, despite the changes in premiums for 
younger and older people, the person's out-of-pocket payments 
would not be affected much. Therefore, CBO and JCT estimate 
that the increase in the number of people enrolled in coverage 
through the nongroup market as a result of changes in age 
rating rules would be less than 500,000 in 2019 and would be 
the net result of higher enrollment among younger people and 
lower enrollment among older people. The small increase would 
mostly stem from net changes in enrollment among people who had 
income high enough to be ineligible for subsidies and who would 
face substantial changes in out-of-pocket payments for 
premiums.

    Changes to Subsidies and Market Rules for Nongroup Health 
Insurance Beginning in 2020. Beginning in 2020, the current 
premium tax credits and cost-sharing subsidies would both be 
repealed. That same year, the legislation would create new 
refundable tax credits for insurance purchased in the nongroup 
market. In addition to making the market changes discussed thus 
far (eliminating mandate penalties, providing grants to states 
to help stabilize the nongroup market, establishing a 
requirement for continuous coverage, and changing the age 
rating rules), the legislation would relax the current 
requirements about the share of benefits that must be covered 
by a health insurance plan.
    Many rules governing the nongroup market would remain in 
effect as under current law. For example, insurers would be 
required to accept all applicants during specified open-
enrollment periods, could not vary people's premiums on the 
basis of their health, and could not restrict coverage of 
enrollees' preexisting health conditions. Insurers would also 
still be required to cover specified categories of health care 
services, and the amount of costs for covered services that 
enrollees have to pay out of pocket would remain limited to a 
specified threshold. Prohibitions on annual and lifetime 
maximum benefits would still apply. Also, the risk adjustment 
program--which transfers funds from plans that attract a 
relatively small proportion of high-risk enrollees (people with 
serious chronic conditions, for example) to plans that attract 
a relatively large proportion of such people--would remain in 
place.
    Because the new tax credits are designed primarily to be 
paid in advance on behalf of enrollees to insurers, procedures 
would need to be in place to enable the Internal Revenue 
Service and the Department of Health and Human Services to 
verify that the credits were being paid to eligible insurers 
who were offering qualified insurance as defined under federal 
and state law on behalf of eligible enrollees. CBO and JCT's 
estimates reflect an assumption that adequate resources would 
be made available through future appropriations to those 
executive branch agencies to ensure that such systems were put 
in place in a timely manner. To the extent that they were not, 
enrollment and compliance could be negatively affected.

    Changes to Actuarial Value Requirements. Actuarial value is 
the percentage of total costs for covered benefits that the 
plan pays when covering a standard population. Under current 
law, most plans in the nongroup and small-group markets must 
have an actuarial value that is in one of four tiers: about 60 
percent, 70 percent, 80 percent, or 90 percent. Beginning in 
2020, the legislation would repeal those requirements, 
potentially allowing plans to have an actuarial value below 60 
percent. However, plans would still be required to cover 10 
categories of health benefits that are defined as ``essential'' 
under current law, and the total annual out-of-pocket costs for 
an enrollee would remain capped. In CBO and JCT's estimation, 
complying with those two requirements would significantly limit 
the ability of insurers to design plans with an actuarial value 
much below 60 percent.
    Nevertheless, CBO and JCT estimate that repealing the 
actuarial value requirements would lower the actuarial value of 
plans in the nongroup market on average. The requirement that 
insurers offer both a plan with an actuarial value of 70 
percent and one with an actuarial value of 80 percent in order 
to participate in the marketplace would no longer apply under 
the legislation. As a result, an insurer could choose to sell 
only plans with lower actuarial values. Many insurers would 
find that option attractive because they could offer a plan 
priced closer to the amount of the premium tax credit so that a 
younger person would have low out-of-pocket costs for premiums 
and would be more likely to enroll. Insurers might be less 
likely to offer plans with high actuarial values out of a fear 
of attracting a greater proportion of less healthy enrollees to 
those plans, although the availability of the Patient and State 
Stability Fund grants in most states would reduce that risk. 
The continuation of the risk adjustment program could also help 
limit insurers' costs from high-risk enrollees.
    Because of plans' lower average actuarial values, CBO and 
JCT expect that individuals' cost-sharing payments, including 
deductibles, in the nongroup market would tend to be higher 
than those anticipated under current law. In addition, cost-
sharing subsidies would be repealed in 2020, significantly 
increasing out-of-pocket costs for nongroup insurance for many 
lower-income enrollees. The higher costs would make the plans 
less attractive than those available under current law to many 
potential enrollees, especially people who are eligible for the 
largest subsidies under current law.

    Changes in the Ways the Nongroup Market Would Function. 
Under the legislation, some of the ways that the nongroup 
market functions would change for consumers. The current 
actuarial value requirements help people compare different 
insurance plans, because all plans in a tier cover the same 
share of costs, on average. CBO and JCT expect that, under the 
legislation, plans would be harder to compare, making shopping 
for a plan on the basis of price more difficult.
    Another feature of the nongroup market under current law is 
that there is one central website through the state or federal 
marketplace where people can shop for all the plans in their 
area that are eligible for subsidies. Under the legislation, 
insurers participating in the nongroup market would no longer 
have to offer plans through the marketplaces in order for 
people to receive subsidies toward those plans; therefore, CBO 
and JCT estimate that fewer would do so. With more plans that 
are eligible for subsidies offered directly from insurers or 
directly through agents and brokers and not through the 
marketplaces' central websites, shopping for and comparing 
plans could be harder, depending on insurers' decisions about 
how to market their plans.

    Changes in Nongroup Market Subsidies. With the repeal in 
2020 of the current premium tax credits and the cost-sharing 
subsidies, different refundable tax credits for insurance 
purchased in the nongroup market would become available.\5\ The 
new tax credits would vary on the basis of age by a factor of 2 
to 1: Someone age 60 or older would be eligible for a tax 
credit of $4,000, while someone younger than age 30 would be 
eligible for a tax credit of $2,000. People would generally be 
eligible for the full amount of the tax credit if their 
adjusted gross income was below $75,000 for a single tax filer 
and below $150,000 for joint filers and if they were not 
eligible for certain other types of insurance coverage.\6\ The 
credits would phase out for people with income above those 
thresholds. The tax credits would be refundable if the size of 
the credit exceeded a person's tax liability. They could also 
be advanced to insurers on a monthly basis throughout the year 
on behalf of an enrollee. Finally, tax credits could be used 
for most health insurance plans purchased through a marketplace 
or directly from an insurer.
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    \5\People would also be able to use the new tax credits toward 
unsubsidized of continuation coverage under the Consolidated Omnibus 
Budget Reconciliation Act of 1985 (COBRA).
    \6\The tax credits and the income thresholds would both be indexed 
each year by the consumer price index for all urban consumers plus 1 
percentage point.
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    Under current law, the size of the premium tax credit 
depends on household income and the reference premium in an 
enrollee's rating area. The enrollee pays a certain percentage 
of his or her income toward the reference premium, and the size 
of the subsidy varies by geography and age for a given income 
level. In that way, the enrollee is insulated from variations 
in premiums by geography and is also largely insulated from 
increases in the reference premium. An enrollee would pay the 
difference between the reference premium and the premium for 
the plan he or she chose, providing some incentive to choose 
lower-priced insurance. Beginning in 2020, under the 
legislation, the size of a premium tax credit would vary with 
age, rather than with income (except for people with income in 
the phase-out range) or the amount of the premium. The enrollee 
would be responsible for any premium above the credit amount. 
That structure would provide greater incentives for enrollees 
to choose lower-priced insurance and would mean that people 
living in high-cost areas would be responsible for a larger 
share of the premium.
    Under the legislation, some people would be eligible for 
smaller subsidies than those under current law, and others 
would be eligible for larger ones. As a result, by CBO and 
JCT's estimates, the composition of the population purchasing 
health insurance in the nongroup market under the legislation 
would differ significantly from that under current law, 
particularly by income and age.
    For many lower-income people, the new tax credits under the 
legislation would tend to be smaller than the premium tax 
credits under current law.\7\ In an illustrative example, CBO 
and JCT estimate that a 21-year-old with income at 175 percent 
of the FPL in 2026 would be eligible for a premium tax credit 
of about $3,400 under current law; the tax credit would fall to 
about $2,450 under the legislation (see Table 4). In addition, 
because cost-sharing subsidies would be eliminated under the 
legislation, lower-income people's share of medical services 
paid in the form of deductibles and other cost sharing would 
increase. As a result, CBO and JCT estimate, fewer lower-income 
people would obtain coverage through the nongroup market under 
the legislation than under current law.
---------------------------------------------------------------------------
    \7\People with income below 100 percent of the FPL who are 
ineligible for Medicaid and meet other eligibility criteria would 
become newly eligible for a premium tax credit under the legislation.
---------------------------------------------------------------------------
    Conversely, the tax credits under the legislation would 
tend to be larger than current-law premium tax credits for many 
people with higher income--particularly for those with income 
above 400 percent of the FPL but below the income cap for a 
full credit, which is set by the legislation at $75,000 for a 
single tax filer and $150,000 for joint filers in 2020. For 
example, CBO and JCT estimate that a 21-year-old with income at 
450 percent of the FPL in 2026 would be ineligible for a credit 
under current law but newly eligible for a tax credit of about 
$2,450 under the legislation. Lower out-of-pocket payments 
toward premiums would tend to increase enrollment in the 
nongroup market among higher-income people.
    Enacting the legislation would also result in significant 
changes in the size of subsidies in the nongroup market 
according to people's age. For example, CBO and JCT estimate 
that a 21-year-old, 40-year-old, and 64-year-old with income at 
175 percent of the FPL in 2026 would all pay roughly $1,700 
toward their reference premium under current law, even though 
the reference premium for a 64-year-old is three times larger 
than that for a 21-year-old in most states. Under the 
legislation, premiums for older people could be five times 
larger than those for younger people in many states, but the 
size of the tax credits for older people would only be twice 
the size of the credits for younger people. Because of that 
difference in how much the tax credits would cover, CBO and JCT 
estimate that, under the legislation, a larger share of 
enrollees in the nongroup market would be younger people and a 
smaller share would be older people.
    According to CBO and JCT's estimates, total federal 
subsidies for nongroup health insurance would be significantly 
smaller under the legislation than under current law for two 
reasons. First, by the agencies' projections, fewer people, on 
net, would obtain coverage in the nongroup health insurance 
market under the legislation. Second, the average subsidy per 
subsidized enrollee under the legislation would be 
significantly lower than the average subsidy under current law. 
In 2020, CBO and JCT estimate, the average subsidy under the 
legislation would be about 60 percent of the average subsidy 
under current law. In addition, the average subsidy would grow 
more slowly under the legislation than under current law. That 
difference results from the fact that subsidies under current 
law tend to grow with insurance premiums, whereas subsidies 
under the legislation would grow more slowly, with the consumer 
price index for all urban consumers plus 1 percentage point. By 
2026, CBO and JCT estimate that the average subsidy under the 
legislation would be about 50 percent of the average subsidy 
under current law.

    Patient and State Stability Fund Grants. As a condition of 
the grants, beginning in 2020, states would be required to 
provide matching funds, which would generally increase from 7 
percent of the federal funds provided in 2020 to 50 percent of 
the federal funds provided in 2026. The agencies expect that 
the grants' effects on premiums after 2020 would be limited by 
the share of states that took action and decided to pay the 
required matching funds in order to receive federal money and 
by the extent to which states chose to use the money for 
purposes that did not directly help to lower premiums in the 
nongroup market. Nevertheless, CBO and JCT estimate that the 
grants would exert substantial downward pressure on premiums in 
the nongroup market in 2020 and later years and would help 
encourage participation in the market by insurers.

    Effects of Changes in the Nongroup Market on Employers' 
Decisions to Offer Coverage. CBO and JCT estimate that, over 
time, fewer employers would offer health insurance because the 
legislation would change their incentives to do so. First, the 
mandate penalties would be eliminated. Second, the tax credits 
under the legislation, for which people would be ineligible if 
they had any offer of employment-based insurance, would be 
available to people with a broader range of incomes than the 
current tax credits are. That change could make nongroup 
coverage more attractive to a larger share of employees. 
Consequently, in CBO and JCT's estimation, some employers would 
choose not to offer coverage and instead increase other forms 
of compensation in the belief that nongroup insurance was a 
close substitute for employment-based coverage for their 
employees.
    However, two factors would partially offset employers' 
incentives not to offer insurance. First, the average subsidy 
for those who are eligible would be smaller under the 
legislation than under current law and would grow more slowly 
than health care costs over time. Second, CBO and JCT 
anticipate, nongroup insurance under the legislation would be 
less attractive to many people with employment-based coverage 
than under current law because nongroup insurance under the 
legislation would cover a smaller share of enrollees' expenses, 
on average, and because shopping for and comparing plans would 
probably be more difficult. In general, CBO and JCT expect that 
businesses that decided not to offer insurance coverage under 
the legislation would have, on average, younger and higher-
income workforces than businesses that choose not to offer 
insurance under current law.
    CBO and JCT expect that employers would adapt slowly to the 
legislation. Some employers would probably delay making 
decisions because of uncertainty about the viability of and 
regulations for the nongroup market and about implementation of 
the new law.

    Market Stability. CBO and JCT anticipate that, under the 
legislation, the combination of subsidies to purchase nongroup 
insurance and rules regulating the market would result in a 
relatively stable nongroup market. That is, most areas of the 
country would have insurers participating in the nongroup 
market, and the market would not be subject to an unsustainable 
spiral of rising premiums. First and most important, a 
substantial number of relatively healthy (mostly young) people 
would continue to purchase insurance in the nongroup market 
because of the availability of government subsidies. Second, 
grants from the Patient and State Stability Fund would help 
stabilize premiums and reduce potential losses to insurers from 
enrollees with very large claims. Finally, in CBO and JCT's 
judgment, the risk adjustment program would help protect 
insurers from losses arising from high-risk enrollees. The 
agencies expect that all of those factors would encourage 
insurers to continue to participate in the nongroup market.
    However, significant changes in nongroup subsidies and 
market rules would occur each year for the first three years 
following enactment, which might cause uncertainty for insurers 
in setting premiums. As a result of the elimination of the 
individual mandate penalties, CBO and JCT project that nongroup 
enrollment in 2018 would be smaller than that in 2017 and that 
the average health status of enrollees would worsen. A small 
share of that decline in enrollment would be offset by the 
onetime effect of the continuous coverage provisions, which 
would somewhat increase enrollment in the nongroup market in 
2018 as people anticipated potential surcharges in 2019. Grants 
from the Patient and State Stability Fund would begin to take 
effect in 2018 to help mitigate losses and encourage 
participation by insurers.
    The mix of enrollees in 2019 would differ from that in 
2018, because the change to age-rating rules would allow older 
adults to be charged five times as much as younger adults in 
many states. In addition, there would be a one-year change to 
the premium tax credits, which CBO and JCT expect would 
somewhat increase enrollment among younger adults and decrease 
enrollment among older adults. Although the combined effect of 
those two changes would reduce the average age and improve the 
average health of enrollees in the nongroup market, it might be 
difficult for insurers to set premiums for 2019 using their 
prior experience in the market.
    In 2020, CBO estimates, grants to states from the Patient 
and State Stability Fund, once fully implemented, would 
significantly reduce premiums in the nongroup market and 
encourage participation by insurers. The grants would help to 
reduce the risk to insurers of offering nongroup insurance. As 
a result, CBO expects that those grants would contribute 
substantially to the stability of the nongroup market.
    That effect would occur despite the fact that more major 
changes taking effect in that year would make it difficult for 
insurers to predict the mix of enrollees on the basis of their 
recent experience. The new age-based tax credits would be 
introduced in 2020 and actuarial value requirements would be 
eliminated. In response, insurers would have the flexibility to 
sell different types of plans than they do under current law. 
The nongroup market is expected to be smaller in 2020 than in 
2019 but then is expected to grow somewhat over the 2020-2026 
period.

    Other Budgetary Effects of Health Insurance Coverage 
Provisions. Because the insurance coverage provisions of the 
legislation would increase the number of uninsured people and 
decrease the number of people with Medicaid coverage relative 
to the numbers under current law, CBO estimates that Medicare 
spending would increase by $43 billion over the 2018-2026 
period.
    Medicare makes additional ``disproportionate share 
hospital'' payments to facilities that serve a higher 
percentage of uninsured patients. Those payments have two 
components: an increase to the payment rate for each inpatient 
case and a lump-sum allocation of a pool of funds based on each 
qualifying hospital's share of the days of care provided to 
beneficiaries of Supplemental Security Income and Medicaid.
    Under the legislation, the decreased enrollment in Medicaid 
would slightly reduce the amounts paid to hospitals, CBO 
estimates. However, the increase in the number of uninsured 
people would substantially boost the amounts distributed on a 
lump-sum basis.

                Net Effects on Health Insurance Coverage

    CBO and JCT expect that under the legislation, the number 
of people without health insurance coverage would increase but 
that the increase would be limited initially, because insurers 
have already set their premiums for the current year and many 
people have already made their enrollment decisions for the 
year. However, in 2017, the elimination of the individual 
mandate penalties would result in about 4 million additional 
people becoming uninsured (see Table 5).
    In 2018, by CBO and JCT's estimates, about 14 million more 
people would be uninsured, relative to the number under current 
law. That increase would consist of about 6 million fewer 
people with coverage obtained in the nongroup market, roughly 5 
million fewer people with coverage under Medicaid, and about 2 
million fewer people with employment-based coverage. In 2019, 
the number of uninsured would grow to 16 million people because 
of further reductions in Medicaid and nongroup coverage. Most 
of the reductions in coverage in 2018 and 2019 would stem from 
repealing the penalties associated with the individual mandate. 
Some of those people would choose not to have insurance because 
they choose to be covered by insurance under current law only 
to avoid paying the penalties. And some people would forgo 
insurance in response to higher premiums. CBO and JCT estimate 
that, in total, 41 million people under age 65 would be 
uninsured in 2018 and 43 million people under age 65 would be 
uninsured in 2019.
    In 2020, according to CBO and JCT's estimates, as a result 
of the insurance coverage provisions of the legislation, 21 
million more nonelderly people in the United States would be 
without health insurance than under current law. By 2026, that 
number would total 24 million, CBO and JCT estimate. 
Specifically:

     LRoughly 9 million fewer people would enroll in 
Medicaid in 2020; that figure would rise to 14 million in 2026, 
as states that expanded eligibility for Medicaid discontinued 
doing so, as states projected to expand Medicaid in the future 
chose not to do so, and as the cap on per-enrollee spending 
took effect.

     LRoughly 9 million fewer people, on net, would 
obtain coverage through the nongroup market in 2020; that 
number would fall to 2 million in 2026. The reduction in 
enrollment in the nongroup market would shrink over the 2020-
2026 period because people would gain experience with the new 
structure of the tax credits and some employers would respond 
to those tax credits by declining to offer insurance to their 
employees.

     LRoughly 2 million fewer people, on net, would 
enroll in employment-based coverage in 2020, and that number 
would grow to roughly 7 million in 2026. Part of that net 
reduction in employment-based coverage would occur because 
fewer employees would take up the offer of such coverage in the 
absence of the individual mandate penalties. In addition, CBO 
and JCT expect that, over time, fewer employers would offer 
health insurance to their workers.

    CBO and JCT estimate that 48 million people under age 65, 
or roughly 17 percent of the nonelderly population, would be 
uninsured in 2020 if the legislation was enacted. That figure 
would grow to 52 million, or roughly 19 percent of the 
nonelderly population, in 2026. (That figure is currently about 
10 percent and is projected to remain at that level in each 
year through 2026 under current law.) Although the agencies 
expect that the legislation would increase the number of 
uninsured broadly, the increase would be disproportionately 
larger among older people with lower income; in particular, 
people between 50 and 64 years old with income of less than 200 
percent of the FPL would make up a larger share of the 
uninsured (see Figure 2).

                Net Effects on Health Insurance Premiums

    The legislation would tend to increase average premiums in 
the nongroup market prior to 2020 and lower average premiums 
thereafter, relative to the outcomes under current law. (This 
discussion is focused on premiums before any applicable tax 
credits and before any surcharges for not maintaining 
continuous coverage.)
    In 2018 and 2019, according to CBO and JCT's estimates, 
average premiums for single policyholders in the nongroup 
market would be 15 percent to 20 percent higher than under 
current law mainly because of the elimination of the individual 
mandate penalties. Eliminating those penalties would markedly 
reduce enrollment in the nongroup market and increase the share 
of enrollees who would be less healthy. CBO and JCT expect that 
grants from the Patient and State Stability Fund would largely 
be used for reinsurance programs, particularly in 2018 and 
2019, when many states would rely on the federal default before 
establishing their own programs and, as explained earlier, that 
those payments would help lower premiums in the nongroup 
market. The agencies estimate that program would have a 
relatively small effect on premiums in 2018 because there would 
not be much time between enactment of the legislation and 
insurers' deadlines for setting premiums for 2018. By 2019, 
however, in CBO and JCT's judgment, the Patient and State 
Stability Fund would have the effect of somewhat moderating the 
increases in average premiums in the nongroup market resulting 
from the legislation.
    Starting in 2020, the increase in average premiums from 
repealing the individual mandate penalties would be more than 
offset by the combination of three main factors. First, the mix 
of people enrolled in coverage obtained in the nongroup market 
is anticipated to be younger, on average, than the mix under 
current law. Second, premiums, on average, are estimated to 
fall because of the elimination of actuarial value 
requirements, which would result in plans that cover a lower 
share of health care costs, on average. Third, reinsurance 
programs supported by the Patient and State Stability Fund are 
estimated to reduce premiums. If those funds were devoted to 
other purposes, then premium reductions would be smaller. By 
2026, average premiums for single policyholders in the nongroup 
market under the legislation would be roughly 10 percent lower 
than the estimates under current law.
    The changes in premiums would vary for people of different 
ages. The change in age-rating rules, effective in 2019, would 
directly change the premiums faced by different age groups, 
substantially reducing premiums for young adults and raising 
premiums for older people. By 2026, CBO and JCT project, 
premiums in the nongroup market would be 20 percent to 25 
percent lower for a 21-year-old and 8 percent to 10 percent 
lower for a 40-year-old--but 20 percent to 25 percent higher 
for a 64-year-old.

                  Revenue Effects of Other Provisions

    JCT estimates that the legislation would reduce revenues by 
$592 billion over the 2017-2026 period as a result of 
provisions that would repeal many of the revenue-related 
provisions of the ACA (apart from provisions related to health 
insurance coverage discussed above). Those with the most 
significant budgetary effects include an increase in the 
Hospital Insurance payroll tax rate for high-income taxpayers, 
a surtax on those taxpayers' net investment income, and annual 
fees imposed on health insurers.\8\
---------------------------------------------------------------------------
    \8\JCT published 10 documents (JCX-7-17 through JCX-16-17) on March 
7, 2017, relating to the legislation. For more information, see 
www.jct.gov/publications.html.
---------------------------------------------------------------------------

              Direct Spending Effects of Other Provisions

    The legislation would also make changes to spending for 
other federal health care programs. CBO and JCT estimate that 
those provisions would increase direct spending by about $7 
billion over the 2017-2026 period.

    Prevention and Public Health Fund. The legislation would, 
beginning in fiscal year 2019, repeal the provision that 
established the Prevention and Public Health Fund and rescind 
all unobligated balances. The Department of Health and Human 
Services awards grants through the fund to public and private 
entities to carry out prevention, wellness, and public health 
activities. Funding under current law is projected to be $1 
billion in 2017 and to rise to $2 billion in 2025 and each year 
thereafter. CBO estimates that eliminating that funding would 
reduce direct spending by $9 billion over the 2017-2026 period.

    Community Health Center Program. The legislation would 
increase the funds available to the Community Health Center 
Program, which provides grant funds to health centers that 
offer primary and preventive care to patients regardless of 
their ability to pay. Under current law, the program will 
receive about $4 billion in fiscal year 2017. The legislation 
would increase funding for the program by $422 million in 
fiscal year 2017. CBO estimates that implementing the provision 
would increase direct spending by $422 million over the 2017-
2026 period.

    Provision Affecting Planned Parenthood. For a one-year 
period following enactment, the legislation would prevent 
federal funds from being made available to an entity (including 
its affiliates, subsidiaries, successors, and clinics) if it 
is:

     LA nonprofit organization described in section 
501(c)(3) of the Internal Revenue Code and exempt from tax 
under section 501(a) of the code;

     LAn essential community provider that is primarily 
engaged in providing family planning and reproductive health 
services and related medical care;

     LAn entity that provides abortions--except in 
instances in which the pregnancy is the result of an act of 
rape or incest or the woman's life is in danger; and

     LAn entity that had expenditures under the 
Medicaid program that exceeded $350 million in fiscal year 
2014.

    CBO expects that, according to those criteria, only Planned 
Parenthood Federation of America and its affiliates and clinics 
would be affected. Most federal funds received by such entities 
come from payments for services provided to enrollees in 
states' Medicaid programs. CBO estimates that the prohibition 
would reduce direct spending by $178 million in 2017 and by 
$234 million over the 2017-2026 period. Those savings would be 
partially offset by increased spending for other Medicaid 
services, as discussed below.
    To the extent that there would be reductions in access to 
care under the legislation, they would affect services that 
help women avert pregnancies. The people most likely to 
experience reduced access to care would probably reside in 
areas without other health care clinics or medical 
practitioners who serve low-income populations. CBO projects 
that about 15 percent of those people would lose access to 
care.
    The government would incur some costs for Medicaid 
beneficiaries currently served by affected entities because the 
costs of about 45 percent of all births are paid for by the 
Medicaid program. CBO estimates that the additional births 
stemming from the reduced access under the legislation would 
add to federal spending for Medicaid. In addition, some of 
those children would themselves qualify for Medicaid and 
possibly for other federal programs. By CBO's estimates, in the 
one-year period in which federal funds for Planned Parenthood 
would be prohibited under the legislation, the number of births 
in the Medicaid program would increase by several thousand, 
increasing direct spending for Medicaid by $21 million in 2017 
and by $77 million over the 2017-2026 period. Overall, with 
those costs netted against the savings estimated above, 
implementing the provision would reduce direct spending by $156 
million over the 2017-2026 period, CBO estimates.

    Repeal of Medicaid Provisions. Under current law, states 
can elect the Community First Choice option, allowing them to 
receive a 6 percentage-point increase in their federal matching 
rate for some services provided by home and community-based 
attendants to certain Medicaid recipients. The legislation 
would terminate the increase in the federal matching funds 
beginning in calendar year 2020, which would decrease direct 
spending by about $12 billion over the next 10 years.

    Repeal of Reductions to Allotments for Disproportionate 
Share Hospitals. Under current law, Medicaid allotments to 
states for payments to hospitals that treat a disproportionate 
share of uninsured and Medicaid patients are to be cut 
significantly in each year from 2018 to 2025. The cuts are 
currently scheduled to be $2 billion in 2018 and to increase 
each year until they reach $8 billion in 2024 and 2025. The 
legislation would eliminate those cuts for states that have not 
expanded Medicaid under the ACA starting in 2018 and for the 
remaining states starting in 2020, boosting outlays by $31 
billion over the next 10 years.

    Safety Net Funding for States That Did Not Expand Medicaid. 
The legislation would provide $2 billion in funding in each 
year from 2018 to 2021 to states that did not expand Medicaid 
eligibility under the ACA. Those states could use the funding, 
within limits, to supplement payments to providers that treat 
Medicaid enrollees. Such payments to providers would not be 
subject to the per capita caps also established by the proposed 
legislation. Any states that chose to expand Medicaid coverage 
as of July 1 of each year from 2017 through 2020 would lose 
access to the funding available under this provision in the 
following year and thereafter. CBO estimates that this 
provision would increase direct spending by $8 billion over the 
2017-2026 period.

    Reductions to States' Medicaid Costs. The legislation would 
make a number of additional changes to the Medicaid program, 
including these:

     LRequiring states to treat lottery winnings and 
certain other income as income for purposes of determining 
eligibility;

     LDecreasing the period when Medicaid benefits may 
be covered retroactively from up to three months before a 
recipient's application to the first of the month in which a 
recipient makes an application;

     LEliminating federal payments to states for 
Medicaid services provided to applicants who did not provide 
satisfactory evidence of citizenship or nationality during a 
reasonable opportunity period; and

     LEliminating states' option to increase the amount 
of allowable home equity from $500,000 to $750,000 for 
individuals applying for Medicaid coverage of long-term 
services and supports.

    Together, CBO estimates, those changes would decrease 
direct spending by about $7 billion over the 2017-2026 period.

              Changes in Spending Subject to Appropriation

    CBO has not completed an estimate of the potential impact 
of the legislation on discretionary spending, which would be 
subject to future appropriation action.

                 UNCERTAINTY SURROUNDING THE ESTIMATES

    CBO and JCT considered the potential responses of many 
parties that would be affected by the legislation, including 
these:

     LFederal agencies--which would need to implement 
major changes in the regulation of the health care system and 
administration of new subsidy structures and eligibility 
verification systems in a short time frame;

     LStates--which would need to decide how to use 
Patient and State Stability Fund grants, whether to pass new 
laws affecting the nongroup market, how to respond to the 
reduction in the federal matching rate for certain Medicaid 
enrollees, how to respond to constraints from the cap on 
Medicaid payments, and how to provide information to the 
federal government about insurers and enrollees;

     LInsurers--who would need to decide about the 
extent of their participation in the insurance market and what 
types of plans to sell in the face of different market rules 
and federal subsidies;

     LEmployers--who would need to decide whether to 
offer insurance given the different federal subsidies and 
insurance products available to their employees;

     LIndividuals--who would make decisions about 
health insurance in the context of different premiums, 
subsidies, and penalties than those under current law; and

     LDoctors and hospitals--who would need to 
negotiate contracts with insurers in a new regulatory 
environment.

    Each of those responses is difficult to predict. Moreover, 
the responses would depend upon how the provisions in the 
legislation were implemented, such as whether advance payments 
of the new tax credits were made reliably. And flaws in the 
determination of eligibility, for instance, could keep 
subsidies from people who were eligible or provide them to 
people who were not.
    In addition, CBO and JCT's projections under current law 
itself are inexact, which could also affect the estimated 
effects. For example, enrollment in the marketplaces under 
current law could be lower than is projected, which would tend 
to decrease the budgetary savings of the legislation. 
Alternatively, the average subsidy per enrollee under current 
law could be higher than is projected, which would tend to 
increase the budgetary savings of the legislation.
    CBO and JCT have endeavored to develop estimates that are 
in the middle of the distribution of potential outcomes. One 
way to assess the range of uncertainty around the estimated 
effects of the legislation is to compare previous projections 
with actual results. For example, some aspects of CBO and JCT's 
projections of health insurance coverage and related spending 
made in July 2012 (after the Supreme Court issued a decision 
that essentially made the expansion of the Medicaid program 
under the ACA an option for states) can be compared with actual 
results for 2016. Projected spending on people made eligible 
for Medicaid because of the ACA was about 60 percent of the 
actual amount. The number of people predicted in 2012 to 
purchase insurance through the marketplaces in 2016 was more 
than twice the actual number. The decline in the number of 
insured people from 2012 to 2016 was projected to be 23 
million, and the decline measured in the National Health 
Interview Survey turned out to be 20 million. CBO and JCT have 
continued to learn from experience with the ACA and have 
endeavored to use that experience to improve their modeling.
    That comparison of projections with actual results and the 
great uncertainties surrounding the actions of the many parties 
that would be affected by the legislation suggest that outcomes 
of the legislation could differ substantially from some of the 
estimates provided here. Nevertheless, CBO and JCT are 
confident about the direction of certain effects of the 
legislation. For example, spending on Medicaid would almost 
surely be lower than under current law. The cost of the new tax 
credit would probably be lower than the cost of the subsidies 
for coverage through marketplaces under current law. And the 
number of uninsured people under the legislation would almost 
surely be greater than under current law.

                      INCREASE IN LONG-TERM DIRECT
                         SPENDING AND DEFICITS

    CBO estimates that enacting the legislation would not 
increase net direct spending or on-budget deficits by more than 
$5 billion in any of the four consecutive 10-year periods 
beginning in 2027.

                       MANDATES ON STATE, LOCAL,
                         AND TRIBAL GOVERNMENTS

    JCT and CBO reviewed the provisions of the legislation and 
determined that they would impose no intergovernmental mandates 
as defined in the Unfunded Mandates Reform Act. For large 
entitlement programs like Medicaid, UMRA defines an increase in 
the stringency of conditions or a cap on federal funding as an 
intergovernmental mandate if the affected governments lack 
authority to offset those costs while continuing to provide 
required services. As discussed earlier in this estimate, the 
legislation would eliminate the enhanced federal matching rate 
for some future enrollees, establish new per capita caps in the 
Medicaid program, and make other changes that would affect 
Medicaid spending--some of which would provide additional 
assistance to states.
    On net, CBO estimates that states would see an overall 
decrease in federal assistance, as reflected in estimates of 
federal savings in the Medicaid program. In response to the 
caps and other changes, CBO anticipates that states could use 
existing flexibility allowed in the Medicaid program and 
additional authorities provided by the legislation to cut 
payments to health care providers and health plans, eliminate 
optional services, restrict eligibility for enrollment, or (to 
the extent feasible) change the way services are delivered to 
save costs. Because flexibility in the program would allow 
states to make such changes and still provide statutorily 
required services, the per capita caps and other changes in 
Medicaid would not impose intergovernmental mandates as defined 
in UMRA.

                     MANDATES ON THE PRIVATE SECTOR

    JCT and CBO have determined that the legislation would 
impose private-sector mandates as defined in UMRA. On the basis 
of information from JCT, CBO estimates that the aggregate 
direct cost of the mandates imposed by the legislation would 
exceed the annual threshold established in UMRA for private-
sector mandates ($156 million in 2017, adjusted annually for 
inflation).
    The tax provisions of the legislation contain two mandates. 
Specifically, the legislation would recapture excess advance 
payments of premium tax credits (so that the full amount of 
excess advance payments is treated as an additional tax 
liability for the individual) and repeal the small business 
(health insurance) tax credit.
    The nontax provisions of the legislation would impose a 
private-sector mandate as defined in UMRA on insurers that 
offer health insurance coverage in the individual or small-
group market. The legislation would require those insurers to 
charge a penalty equal to 30 percent of the monthly premium for 
a period of 12 months to individuals who enroll in insurance in 
a given year after having allowed their health insurance to 
lapse for more than 63 days during the previous year. CBO 
estimates that the costs of complying with the mandate would be 
largely offset by the penalties insurers would collect.

                         ESTIMATE PREPARED BY:

Federal Spending
Kate Fritzsche, Sarah Masi, Daniel Hoople, Robert Stewart, Lisa 
        Ramirez-Branum, Andrea Noda, Allison Percy, Sean Lyons, 
        Alexandra Minicozzi, Eamon Molloy, Ben Hopkins, Susan Yeh 
        Beyer, Jared Maeda, Christopher Zogby, Romain Parsad, Ezra 
        Porter, Lori Housman, Kevin McNellis, Jamease Kowalczyk, Noah 
        Meyerson, T.J. McGrath, Rebecca Verreau, Alissa Ardito, and the 
        staff of the Joint Committee on Taxation
Federal Revenues
Staff of the Joint Committee on Taxation
Impact on State, Local, and Tribal Governments
Leo Lex, Zachary Byrum, and the staff of the Joint Committee on 
        Taxation
Impact on the Private Sector
Amy Petz and the staff of the Joint Committee on Taxation

                    ESTIMATE REVIEWED AND EDITED BY:

Mark Hadley, Theresa Gullo, Jeffrey Kling, Robert Sunshine, David 
        Weaver, John Skeen, Kate Kelly, Jorge Salazar, and Darren Young

                         ESTIMATE APPROVED BY:

Holly Harvey, Deputy Assistant Director for Budget Analysis; Jessica 
        Banthin, Deputy Assistant Director for Health, Retirement, and 
        Long-Term Analysts; Chad Chirico, Chief, Low-Income Health 
        Programs and Prescription Drugs Cost Estimates Unit

 TABLE 1.--SUMMARY OF THE DIRECT SPENDING AND REVENUE EFFECTS OF THE AHCA, THE BUDGET RECONCILIATION RECOMMENDATIONS OF THE HOUSE COMMITTEES ON WAYS AND
                                                      MEANS AND ENERGY AND COMMERCE, MARCH 9, 2017
                                                          [Billions of dollars, by fiscal year]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    2017     2018     2019     2020     2021      2022      2023      2024      2025      2026     2017-2021   2017-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              CHANGES IN DIRECT SPENDING\a\
Coverage Provisions:
  Estimated Budget Authority....     -6.6    -12.5    -22.9    -97.6    -139.1    -157.4    -173.8    -186.9    -199.4    -210.5      -278.6    -1,206.7
  Estimated Outlays.............     -6.6    -27.5    -25.6    -92.5    -138.6    -158.5    -175.2    -188.5    -201.3    -212.0      -290.7    -1,226.2
Non Coverage Provisions:
  Estimated Budget Authority....      0.3     -0.5     -0.7      0.6       1.7      -0.2       1.0       1.1       0.7       0.0         1.3         3.8
  Estimated Outlays.............     -0.1      0.3     -0.1      0.8       1.8       0.5       0.8       1.5       1.3       0.3         2.7         7.1
Total Changes in Direct
 Spending:
  Estimated Budget Authority....     -6.3    -13.0    -23.6    -97.1    -137.4    -157.6    -172.8    -185.8    -198.7    -210.5      -277.4    -1,202.8
  Estimated Outlays.............     -6.7    -27.2    -25.7    -91.7    -136.9    -158.0    -174.3    -187.0    -200.0    -211.7      -288.1    -1,219.1
 
                                                                 CHANGES IN REVENUES\b\
 
Coverage Provisions.............     -3.8    -13.7    -16.8    -25.5     -33.6     -36.4     -38.9     -40.4     -41.0     -40.7       -93.5      -290.9
Non Coverage Provisions.........     -2.1    -37.5    -41.8    -57.6     -65.1     -70.2     -76.0     -83.1     -79.7     -78.7      -204.2      -591.9
                                 -----------------------------------------------------------------------------------------------------------------------
      Total Changes in Revenues.     -5.9    -51.2    -58.6    -83.1     -98.7    -106.6    -114.9    -123.5    -120.6    -119.4      -297.6      -882.8
 
                                   INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING OR REVENUES
 
Net Increase or Decrease (-) in      -0.8     24.0     33.0     -8.6     -38.2     -51.3     -59.4     -63.5     -79.4     -92.4         9.4      -336.5
 the Deficit....................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
 
Notes: The costs of this legislation fall within budget function 550 (health), 570 (Medicare), 600 (Income Security), and 650 (Social Security).
AHCA = American Health Care Act; numbers may not add up to totals because of rounding.
 
\a\For outlays, a positive number indicates an increase (adding to the deficit) and a negative number indicates a decrease (reducing the deficit).
\b\For revenues, a negative number indicates a decrease (adding to the deficit).


 TABLE 2.--ESTIMATE OF THE DIRECT SPENDING AND REVENUE EFFECTS OF THE AHCA, THE BUDGET RECONCILIATION RECOMMENDATIONS OF THE  HOUSE COMMITTEES ON WAYS AND MEANS AND ENERGY AND COMMERCE, MARCH
                                                                                             9, 2017
                                                                              [Billions of dollars, by fiscal year]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            2017     2018     2019     2020     2021      2022      2023      2024      2025      2026     2017-2021   2017-2026
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  CHANGES IN DIRECT SPENDING\a\
Coverage Provisions:
  Estimated Budget Authority............................................     -6.6    -12.5    -22.9    -97.6    -139.1    -157.4    -173.8    -186.9    -199.4    -210.5      -278.6    -1,206.7
  Estimated Outlays.....................................................     -6.6    -27.5    -25.6    -92.5    -138.6    -158.5    -175.2    -188.5    -201.3    -212.0      -290.7    -1,226.2
    On-Budget...........................................................     -6.6    -27.5    -25.6    -92.5    -138.6    -158.2    -174.7    -187.9    -200.7    -211.4      -290.7    -1,223.6
    Off-Budget..........................................................        0      (*)      (*)      (*)      -0.1      -0.2      -0.4      -0.6      -0.6      -0.6         (*)        -2.5
Prevention and Public Health Fund:
  Estimated Budget Authority............................................        0     -0.9     -0.9     -1.0      -1.0      -1.5      -1.0      -1.7      -2.0      -2.0        -3.8       -12.0
  Estimated Outlays.....................................................        0     -0.1     -0.4     -0.7      -0.9      -1.0      -1.1      -1.3      -1.4      -1.7        -2.2        -8.8
Community Health Center Program:
  Estimated Budget Authority............................................      0.4      0.0        0        0         0         0         0         0         0         0         0.4         0.4
  Estimated Outlays.....................................................      0.1      0.3      0.1        0         0         0         0         0         0         0         0.4         0.4
Provision Affecting Planned Parenthood:
  Estimated Budget Authority............................................     -0.2      (*)      (*)      (*)       (*)       (*)       (*)       (*)       (*)       (*)        -0.2        -0.2
  Estimated Outlays.....................................................     -0.2      (*)      (*)      (*)       (*)       (*)       (*)       (*)       (*)       (*)        -0.2        -0.2
Repeal of Medicaid Provisions:\b\
  Estimated Budget Authority............................................        0        0        0     -0.8      -1.3      -1.6      -1.9      -2.0      -2.1      -2.2        -2.1       -11.7
  Estimated Outlays.....................................................        0        0        0     -0.8      -1.3      -1.6      -1.9      -2.0      -2.1      -2.2        -2.1       -11.7
Repeal of Medicaid Expansion:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Repeal of Reductions to Allotments for DSH:
  Estimated Budget Authority............................................        0      0.6      1.0      1.9       2.8       3.7       4.7       5.7       5.7       5.1         6.3        31.2
  Estimated Outlays.....................................................        0      0.6      1.0      1.9       2.8       3.7       4.7       5.7       5.7       5.1         6.3        31.2
Reductions to States' Medicaid Costs:\b\
  Estimated Budget Authority............................................        0     -0.3     -0.6     -0.8      -0.8      -0.8      -0.9      -0.9      -0.9      -1.0        -2.5        -7.1
  Estimated Outlays.....................................................        0     -0.3     -0.6     -0.8      -0.8      -0.8      -0.9      -0.9      -0.9      -1.0        -2.5        -7.1
Safety Net Funding for Non Expansion States:
  Estimated Budget Authority............................................        0      2.0      2.0      2.0       2.0       0.0       0.0       0.0       0.0       0.0         8.0         8.0
  Estimated Outlays.....................................................        0      1.8      2.0      2.0       2.0       0.2       0.0       0.0       0.0       0.0         7.8         8.0
Providing Incentives for Increased Frequency of Eligibility
 Redeterminations:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Per Capita Allotment for Medical Assistance:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Repeal of Cost-Sharing Subsidy:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Patient and State Stability Fund:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Continuous Health Insurance Coverage Incentive:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Increasing Levels of Coverage Options:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Change in Permissible Age Variation:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Recapture Excess Advance Payments of Premium Tax Credits:
  Estimated Budget Authority............................................        0     -2.0     -2.2     -0.7         0         0         0         0         0         0        -4.9        -4.9
  Estimated Outlays.....................................................        0     -2.0     -2.2     -0.7         0         0         0         0         0         0        -4.9        -4.9
Additional Modifications to Premium Tax Credit:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Premium Tax Credit:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Small Business Tax Credit:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Individual Mandate:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Employer Mandate:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
  Total Changes in Direct Spending:
    Estimated Budget Authority..........................................     -6.3    -13.0    -23.6    -97.1    -137.4    -157.6    -172.8    -185.8    -198.7    -210.5      -277.4    -1,202.8
    Estimated Outlays...................................................     -6.7    -27.2    -25.7    -91.7    -136.9    -158.0    -174.3    -187.0    -200.0    -211.7      -288.1    -1,219.1
      On-Budget.........................................................     -6.7    -27.2    -25.7    -91.7    -136.8    -157.7    -173.9    -186.4    -199.4    -211.1      -288.0    -1,216.6
      Off-Budget........................................................        0      (*)      (*)      (*)      -0.1      -0.2      -0.4      -0.6      -0.6      -0.6         (*)        -2.5
 
                                                                                     CHANGES IN REVENUES\c\
Coverage Provisions:
  Estimated Revenues....................................................     -3.8    -13.7    -16.8    -25.5     -33.6     -36.4     -38.9     -40.4     -41.0     -40.7       -93.5      -290.9
    On-Budget...........................................................     -4.5    -17.0    -19.9    -27.6     -35.5     -38.4     -41.7     -44.7     -46.7     -48.0      -104.5      -324.2
    Off-Budget..........................................................      0.7      3.3      3.1      2.0       1.9       2.0       2.8       4.3       5.8       7.3        11.1        33.3
Recapture Excess Advance Payments of Premium Tax Credits................        0      0.6      0.7      0.5         0         0         0         0         0         0         1.8         1.8
  Additional Modifications to Premium Tax Credit........................
                                                                                                           [Included in estimate of coverage provisions]
  Premium Tax Credit....................................................
                                                                                                           [Included in estimate of coverage provisions]
  Small Business Tax Credit.............................................
                                                                                                           [Included in estimate of coverage provisions]
  Individual Mandate....................................................
                                                                                                           [Included in estimate of coverage provisions]
  Employer Mandate......................................................
                                                                                                           [Included in estimate of coverage provisions]
Repeal of the Tax on Employee Health Insurance Premiums and Health Plan         0        0        0     -3.4      -6.9      -8.7     -10.7     -13.6      -5.5         0       -10.3       -48.7
 Benefits\d\............................................................
Repeal of Tax on Over-the-Counter Medications...........................        0     -0.4     -0.5     -0.6      -0.6      -0.6      -0.6      -0.7      -0.7      -0.7        -2.1        -5.5
Repeal of Increase of Tax on Health Savings.............................        0      (*)      (*)      (*)       (*)       (*)       (*)       (*)       (*)       (*)         (*)        -0.1
Repeal of Limitations on Contributions to Flexible Spending Accounts....        0     -0.3     -1.2     -1.6      -1.7      -1.8      -2.2      -2.6      -3.3      -4.1        -4.7       -18.6
Repeal of Tax on Prescription Medications...............................        0     -3.1     -2.7     -2.7      -2.7      -2.7      -2.7      -2.7      -2.7      -2.7       -11.2       -24.8
Repeal of Medical Device Excise Tax.....................................        0     -1.4     -1.9     -2.0      -2.1      -2.2      -2.3      -2.4      -2.6      -2.7        -7.4       -19.6
Repeal of Health Insurance Tax..........................................        0    -12.8    -13.5    -14.3     -15.1     -15.9     -16.8     -17.8     -18.7     -19.7       -55.7      -144.7
Repeal of Elimination of Deduction for Expenses Allocable to Medicare           0     -0.1     -0.2     -0.2      -0.2      -0.2      -0.2      -0.2      -0.2      -0.2        -0.6        -1.7
 Part D Subsidy.........................................................
Repeal of Increase in Income Threshold for Determining Medical Care          -0.2     -2.0     -3.2     -3.4      -3.6      -3.9      -4.2      -4.5      -4.8      -5.1       -12.4       -34.9
 Deduction..............................................................
Repeal of Medicare Tax Increase.........................................     -0.4     -6.5    -10.1    -11.4     -12.3     -13.2     -14.1     -15.2     -16.5     -17.6       -40.8      -117.3
Refundable Tax Credit for Health Insurance..............................
                                                                                                           [Included in estimate of coverage provisions]
Maximum Contribution Limit to Health Savings............................        0     -1.0     -1.6     -1.7      -1.9      -2.1      -2.3      -2.5      -2.7      -2.9        -6.2       -18.6
Allow Both Spouses to Make Catch-up Contributions to the Same Health            0      (*)      (*)      (*)       (*)       (*)       (*)       (*)      -0.1      -0.1        -0.1        -0.4
 Savings Account........................................................
Special Rule for Certain Medical Expenses Incurred Before Establishment         0      (*)      (*)      (*)       (*)       (*)       (*)       (*)       (*)       (*)        -0.1        -0.2
 of Health Savings......................................................
Repeal of Tanning Tax...................................................        0      (*)     -0.1     -0.1      -0.1      -0.1      -0.1      -0.1      -0.1      -0.1        -0.2        -0.6
Repeal of Net Investment Tax............................................     -1.5    -10.5     -7.5    -16.7     -17.8     -18.7     -19.7     -20.7     -21.7     -22.7       -54.1      -157.6
Remuneration............................................................        0      (*)      (*)      (*)      -0.1      -0.1      -0.1      -0.1      -0.1      -0.1        -0.1        -0.4
  Total Changes in Revenues.............................................     -5.9    -51.2    -58.6    -83.1     -98.7    -106.6    -114.9    -123.5    -120.6    -119.4      -297.6      -882.8
    On-Budget...........................................................     -6.6    -53.8    -60.8    -83.3     -98.0    -105.5    -114.0    -123.2    -123.3    -124.7      -302.7      -893.5
    Off-Budget..........................................................      0.7      2.6      2.2      0.2      -0.7      -1.2      -1.0      -0.3       2.7       5.3         5.0        10.7
 
                                                       INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING OR REVENUES
 
Net Increase or Decrease (-) in the Deficit.............................     -0.8     24.0     33.0     -8.6     -38.2     -51.3     -59.4     -63.5     -79.4     -92.4         9.4      -336.5
  On-Budget.............................................................      (*)     26.6     35.1     -8.4     -38.8     -52.3     -59.9     -63.2     -76.0     -86.4        14.5      -323.3
  Off-Budget............................................................     -0.7     -2.6     -2.2     -0.2       0.6       0.9       0.5      -0.3      -3.3      -5.9        -5.1       -13.2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
 
Notes: The costs of this legislation fall within budget function 550 (health), 570 (Medicare), 600 (Income Security), and 650 (Social Security).
Numbers may not add up to totals because of rounding; DSH = Disproportionate Share Hospital; AHCA = American Health Care Act;
* = an increase or decrease between zero and $50 million.
 
\a\For outlays, a positive number indicates an increase (adding to the deficit) and a negative number indicates a decrease (reducing the deficit).
\b\Estimate interacts with the provision related to the Per Capita Allotment for Medical Assistance.
\c\For revenues, a positive number indicates an increase (reducing the deficit) and a negative number indicates a decrease (adding to the deficit).
\d\This estimate does not include effects of interactions with other subsidies; those effects are included in estimates of other relevant provisions.


                                    TABLE 3.--NET BUDGETARY EFFECTS OF THE INSURANCE COVERAGE PROVISIONS OF THE AHCA
                                                          [Billions of dollars, by fiscal year]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                              Total 2017-
                                                2017     2018     2019     2020     2021      2022      2023      2024      2025      2026       2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
Medicaid Outlays............................       -3      -18      -26      -68       -94      -111      -124      -135      -146      -155        -880
Subsidies for Coverage Through Marketplaces        -5      -11      -16      -62       -87       -91       -95       -99      -102      -106        -673
 and Related Spending and Revenues\a,b\.....
Small-Employer Tax Credits\b,c\.............      (*)      (*)      (*)      (*)        -1        -1        -1        -1        -1        -1          -6
Tax Credits for Nongroup Insurance\b,d\.....        0        0        0       30        44        47        52        58        63        68         361
Penalty Payments by Employers\c\............        2       16       20       15        16        18        19        20        22        23         171
Penalty Payments by Uninsured People........        3        3        3        3         4         4         4         4         4         5          38
Patient and State Stability Fund Grants.....        0        0       12       15        10         9         9         8         8         8          80
Medicare\e\.................................        0        1        3        4         6         6         6         6         6         6          43
Other Effects on Revenues and Outlays\d,f\..       -1       -5       -5       -4        -4        -4        -6       -10       -14       -18         -70
                                             -----------------------------------------------------------------------------------------------------------
  Total Effect on the Deficit...............       -3      -14       -9      -67      -105      -122      -136      -148      -160      -171        -935
Memorandum:
Decreases in Mandatory Spending.............       -7      -27      -26      -93      -139      -158      -175      -188      -201      -212      -1,226
Decreases in Revenues.......................       -4      -14      -17      -26       -34       -36       -39       -40       -41       -41        -291
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
 
Except in the memorandum lines, positive numbers indicate an increase in the deficit, and negative numbers indicate a decrease in the deficit.
 
Numbers may not add up to totals because of rounding; AHCA = American Health Care Act; * = between -$500 million and zero.
 
\a\Related spending and revenues include spending for the Basic Health Program and net spending and revenues for risk adjustment.
\b\Includes effects on outlays and on revenues.
\c\Effects on the deficit include the associated effects of changes in taxable compensation on revenues.
\d\Includes costs for a new tax credit for continuation of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).
\e\Effects arise mostly from changes in Disproportionate Share Hospital payments.
\f\Consists mainly of the effects of changes in taxable compensation on revenues. CBO also estimates that outlays for Social Security benefits would
  decrease by about $3 billion over the 2017-2026 period.


 TABLE 4.--ILLUSTRATIVE EXAMPLE OF SUBSIDIES FOR NONGROUP HEALTH INSURANCE UNDER CURRENT LAW AND THE AHCA, 2026
                                                    [Dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                     Actuarial
                                                                                                   value of plan
                                                                    Premium tax     Net premium     after cost-
                                                    Premium\a\       credit\b\         paid           sharing
                                                                                                     subsidies
                                                                                                   (percent)\c\
----------------------------------------------------------------------------------------------------------------
                     SINGLE INDIVIDUAL WITH ANNUAL INCOME OF $26,500 (175 PERCENT OF FPL)\d\
Current Law:
  21 years old..................................           5,100           3,400           1,700
  40 years old..................................           6,500           4,800           1,700        87
  64 years old..................................          15,300          13,600           1,700
                                                 ---------------------------------------------------------------
AHCA:
  21 years old..................................           3,900           2,450           1,450
  40 years old..................................           6,050           3,650           2,400        65
  64 years old..................................          19,500           4,900          14,600
----------------------------------------------------------------------------------------------------------------
                     SINGLE INDIVIDUAL WITH ANNUAL INCOME OF $68,200 (450 PERCENT OF FPL)\d\
Current Law:
  21 years old..................................           5,100               0           5,100
  40 years old..................................           6,500               0           6,500        70
  64 years old..................................          15,300               0          15,300
                                                 ---------------------------------------------------------------
AHCA:
  21 years old..................................           3,900           2,450           1,450
  40 years old..................................           6,050           3,650           2,400        65
  64 years old..................................          19,500           4,900          14,600
----------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
 
All dollar figures have been rounded to the nearest $50; AHCA = American Health Care Act; FPL = federal poverty
  level.
 
\a\For this illustration, CBO projected the average national premiums for a 21-year-old in the nongroup health
  insurance market in 2026 both under current law and under the AHCA. On the basis of those amounts, CBO
  calculated premiums for a 40-year-old and a 64-year-old, assuming that the person lives in a state that uses
  the federal default age-rating methodology, which limits variation of premiums to a ratio of 3 to 1 for adults
  under current law and 5 to 1 for adults under the AHCA. CBO projects that, under current law, most states will
  use the default 3-to-1 age-rating curve; under the AHCA, CBO projects, most would use an age-rating curve with
  a maximum ratio of 5 to 1.
\b\Under current law, premium tax credits are calculated as the difference between the reference premium and a
  specified percentage of income for a person with income at a given percentage of the FPL. The reference
  premium is the premium for the second-lowest-cost silver plan available in the marketplace in the area in
  which the person resides. A silver plan covers about 70 percent of the costs of covered benefits. CBO's
  projection of the maximum percentage of income for calculating premium tax credits in 2026 for someone with
  income at 175 percent of the FPL takes into account the probability, estimated in CBO's March 2016 baseline,
  that additional indexing may apply. Under the AHCA, the premium tax credits offered for nongroup coverage
  would be indexed to the consumer price index for all urban consumers plus 1 percentage point. In 2026, CBO
  projects, those tax credits would be about 22 percent higher than the amounts specified in 2020.
\c\The actuarial value of a plan is the percentage of costs for covered services that the plan pays. Cost-
  sharing subsidies are payments made by the federal government to insurers that reduce the cost-sharing amounts
  (out-of-pocket payments required under insurance policies) for covered people whose income is generally
  between 100 percent and 250 percent of the FPL. The cost-sharing subsidy amounts in this example would range
  from $1,100 for a 21-year-old with income at 175 percent of the FPL to $3,350 for a 64-year-old at the same
  income level. Under current law, cost-sharing subsidies have the effect of increasing the actuarial value of
  the plan from 70 percent for a typical silver plan to 94 percent for people whose income is between 100
  percent and 149 percent of the FPL; 87 percent for people between 150 percent and 199 percent of the FPL; and
  73 percent for people between 200 percent and 249 percent of the FPL. People whose income is 250 percent of
  the FPL or more would receive a standard 70 percent actuarial value when purchasing a silver plan. CBO
  projects that, under the AHCA, the elimination of required actuarial values and the structure of new tax
  credits would, by 2026, result in a reduction to about 65 percent in the average actuarial value of plans
  purchased in the nongroup market.
\d\Income levels reflect modified adjusted gross income, which equals adjusted gross income plus untaxed Social
  Security benefits, foreign earned income that is excluded from adjusted gross income, tax-exempt interest, and
  income of dependent filers. CBO projects that in 2026, a modified adjusted gross income of $26,500 would equal
  175 percent of the FPL and an income of $68,200 would equal 450 percent of the FPL.


               TABLE 5.--EFFECTS OF THE AHCA ON HEALTH INSURANCE COVERAGE FOR PEOPLE UNDER AGE 65
                                     [Millions of people, by calendar year]
----------------------------------------------------------------------------------------------------------------
                                       2017   2018   2019   2020   2021    2022    2023    2024    2025    2026
----------------------------------------------------------------------------------------------------------------
Total Population Under Age 65.......    273    274    275    276     276     277     278     279     279     280
Uninsured Under Current Law.........     26     26     27     27      27      27      27      28      28      28
Change in Coverage Under the AHCA:
  Medicaid\a\.......................     -1     -5     -6     -9     -12     -13     -13     -14     -14     -14
  Nongroup coverage, including           -2     -6     -7     -9      -8      -8      -6      -5      -4      -2
   marketplaces\b\..................
  Employment-based coverage.........     -1     -2     -2     -2      -2      -2      -3      -5      -5      -7
  Other coverage\c\.................    (*)    (*)    (*)     -1      -1      -1      -1      -1      -1      -1
  Uninsured.........................      4     14     16     21      23      23      23      24      24      24
Uninsured Under the AHCA............     31     41     43     48      50      50      51      51      51      52
Percentage of the Population Under
 Age 65 With Insurance Under the
 AHCA:
  Including all U.S. residents......     89     85     84     83      82      82      82      82      82      81
  Excluding unauthorized immigrants.     91     87     87     85      84      84      84      84      84      84
----------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
 
Estimates are based on CBO's March 2016 baseline, adjusted for subsequent legislation. They reflect average
  enrollment over the course of a year among noninstitutionalized civilian residents of the 50 states and the
  District of Columbia who are under the age of 65, and they include spouses and dependents covered under family
  policies.
 
AHCA = American Health Care Act; * = a reduction that falls between zero and 500,000 people.
 
\a\Includes noninstitutionalized enrollees with full Medicaid benefits.
\b\Under current law, many people can purchase subsidized health insurance coverage through the marketplaces
  (sometimes called exchanges) operated by the federal government, by state governments, or as partnerships
  between federal and state governments. People also can purchase unsubsidized coverage in the nongroup market
  outside of those marketplaces. Under the AHCA, people could receive subsidies for coverage purchased either
  inside or outside of the marketplaces.
\c\Includes coverage under the Basic Health Program, which allows states to establish a coverage program
  primarily for people whose income is between 138 percent and 200 percent of the federal poverty level. To
  subsidize that coverage, the federal government provides states with funding that is equal to 95 percent of
  the subsidies for which those people would otherwise have been eligible by purchasing health insurance through
  a marketplace. Payments for that program would be rescinded by the AHCA in 2020.

  
  
                       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.

         Statement of General Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII, the general 
performance goal or objective of this legislation is to advance 
the repeal and replacement of PPACA and begin the process of 
lowering health care costs, increasing plan options for 
consumers, and helping to ensure the Medicaid health care 
safety is put on sustainable footing.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII, no provision of 
the Committee Print is known to be duplicative of another 
Federal program, including any program that was included in a 
report to Congress pursuant to section 21 of Public Law 111-139 
or the most recent Catalog of Federal Domestic Assistance.

                        Committee Cost Estimate

    Pursuant to clause 3(d)(1) of rule XIII, 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.

       Earmark, Limited Tax Benefits, and Limited Tariff Benefits

    Pursuant to clause 9(e), 9(f), and 9(g) of rule XXI, the 
Committee finds that the Committee Print contains no earmarks, 
limited tax benefits, or limited tariff benefits.

                  Disclosure of Directed Rule Makings

    Pursuant to section 3(i) of H. Res. 5, the Committee finds 
that the Committee Print contains no directed rule makings.

                      Advisory Committee Statement

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

                  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--Patient Access to Public Health Programs

Section 101. The Prevention and Public Health Fund: This 
section repeals Section 4002 of the Patient Protection and 
Affordable Care Act. Section 4002 established the Prevention 
and Public Health Fund (PPHF) as a permanent advanced 
appropriation for prevention, wellness, and public health 
initiatives to be administered Department of Health and Human 
Services (HHS). This section repeals PPHF appropriations for 
fiscal year (FY) 2019 onwards and rescinds unobligated funds at 
the end of FY 2018.
Section 102. Community Health Center Program: This section 
provides increased funding for the Community Health Center 
Fund, which awards grants to Federally Qualified Health Centers 
(FQHCs).
Section 103. Federal Payments to States: This section imposes a 
one-year freeze on mandatory funding to a class of providers 
designated as prohibited entities. A prohibited entity is one 
that meets the following criteria: it is designated as a non-
profit by the Internal Revenue Service; it is an essential 
community provider primarily engaged in family planning and 
reproductive health services; it provides abortions in cases 
that do not meet the Hyde amendment exception for federal 
payment; and it received over $350 million in federal and state 
Medicaid dollars in fiscal year 2014.

Subtitle B--Medicaid Program Enhancement

Section 111. Repeal of Medicaid Provisions: This section 
repeals States' expanded authority to make presumptive 
eligibility determinations for certain populations and alter 
mandatory Medicaid income eligibility level for poverty-related 
children back to 100 percent of federal poverty level. In 
addition, this section repeals the 6-percentage point bonus in 
the federal match rate for community-based attendant services.
Section 112. Repeal of Medicaid Expansion: This section 
codifies NFIB v. Sebelius by making Medicaid expansion optional 
for States. This section also repeals the State option to 
extend coverage to adults above 133 percent of federal poverty 
by December 31, 2019, and ends the enhanced match rate for 
newly eligible beneficiaries after December 31, 2019. States 
can keep the enhanced match for newly eligible expenditures 
that occur before January 1, 2020. However, for expenditures 
after January 1, 2020, the newly eligible matching rate would 
only apply to expenditures for newly eligible individuals who 
were enrolled in Medicaid (under the State plan or a waiver) as 
of December 31, 2019 and do not have a break in eligibility for 
more than one month after that date. After January 1, 2020, the 
State could only enroll newly eligible individuals at the 
State's traditional FMAP for that individual. This section also 
amends the formula for the expansion State matching rate so 
that the matching rate stops phasing up after calendar year 
(CY) 2017 and the transition percentage would remain at the CY 
2017 level for each subsequent year. In addition, for 
expenditures after January 1, 2020, the expansion State 
matching rate would only apply to expenditures for individuals 
who are eligible for the expansion State matching rate and were 
enrolled in Medicaid (under the State plan or a waiver) as of 
December 31, 2019, and do not have a break in eligibility for 
more than one month after that date. After January 1, 2020, the 
State would have the option to enroll newly eligible 
individuals, but the State would receive the State's 
traditional federal medical assistance program (FMAP) for that 
individual.
    The section also repeals the requirement that State 
Medicaid plans must provide the same ``essential health 
benefits'' that are required by plans on the exchanges, 
returning flexibility to the States on December 31, 2019.
Section 113. Elimination of DSH Cuts: This section repeals the 
Medicaid Disproportionate Share Hospital (DSH) cuts for non-
expansion States in 2018. States that expanded Medicaid would 
have their DSH cuts repealed in 2020.
Section 114. Reducing State Medicaid Costs: This section would 
eliminate an unintended consequence in the current statute and 
regulations by requiring States, for purposes of determining 
modified adjusted gross income (MAGI) for Medicaid and CHIP 
eligibility, to consider monetary winnings from lotteries (and 
other lump sum payments) as if they were obtained over multiple 
months, even if obtained in a single month.
    This section would close the loophole by requiring 
individuals to provide documentation of citizenship or lawful 
presence before obtaining coverage.
    This section would repeal the authority for States to elect 
to substitute a higher home equity limit that is above the 
statutory minimum in law. It would apply to Medicaid 
eligibility determinations that are made more than 180 days 
after enactment. In situations where the Secretary of HHS 
determines that State legislation would be required to amend 
the State plan, then States would have additional time to 
comply with these requirements.
Section 115. Safety Net Funding for Non-Expansion States: This 
section provides $10 billion over five years to non-expansion 
States for safety net funding for CY 2018 through CY 2022.
Section 116. Providing Incentives for Increased Frequency of 
Eligibility Redetermination: This section requires States with 
Medicaid expansion populations to re-determine expansion 
enrollees' eligibility every 6 months. This policy also 
provides a temporary five percent FMAP increase to States for 
activities directly related to complying with this section.

Subtitle C--Per Capita Allotment for Medical Assistance

Section 121. Per Capita Allotment for Medical Assistance: 
Reforms federal Medicaid financing by creating a per capita cap 
model (i.e., per enrollee limits on federal payments to States) 
starting in FY 2020. Section 121 would use each State's 
spending in FY 2016 as the base year to set targeted spending 
for each enrollee category (elderly, blind and disabled, 
children, non-expansion adults, and expansion adults) in FY 
2019 and subsequent years for that State. Each State's targeted 
spending amount would increase by the percentage increase in 
the medical care component of the consumer price index for all 
urban consumers from September 2019 to September of the next 
fiscal year. Starting in FY 2020, any State with spending 
higher than their specified targeted aggregate amount would 
receive reductions to their Medicaid funding for the following 
fiscal year.
    Section 121 would also modernize Medicaid's data and 
reporting systems. The additional reporting requirements would 
include data on medical assistance expenditures within 
categories of services and categories of all enrollees on 
Medicaid.
    Certain payments are exempt from the caps. For example, DSH 
payments operate outside of the caps since they are already a 
capped allotment. Administrative payments are also exempt. In 
addition, certain populations would be exempt.
    Finally, to ensure that gaming does not take place, the 
Secretary of Health and Human Services (HHS) would conduct 
audits of each State's enrollment and expenditures reported on 
the Form CMS-64 for FY 2016, FY 2019, and subsequent years.

Subtitle D--Patient Relief and Health Insurance Market Stability

Section 131. Repeal of Cost-Sharing Subsidy: This section 
repeals the Affordable Care Act (ACA) cost-sharing subsidy 
program at the end of 2019. The Obama administration made 
payments through this program without an appropriation, leading 
to a lawsuit from House Republicans arguing that Congress and 
in particular, the House of Representatives alone holds the 
constitutional power of the purse. The lawsuit is being held in 
abeyance. The next filing date in the case for both parties is 
May 22, 2017.
Section 132. Patient and State Stability Fund: This section 
establishes the Patient and State Stability Fund, which is 
designed to lower patient costs and stabilize State markets.
    If a State chooses not to use the funding for their own 
program, the resources will be available to the Administrator 
of CMS to help stabilize premiums for patients.
    This section annually appropriates $15 billion for State 
use for 2018 and 2019. For years 2020 through 2026, $10 billion 
is appropriated annually. A State match is phased in beginning 
in 2020 at a different schedule, depending if a State chooses 
to use the money for their own program or utilizes the federal 
default program administered through CMS.
Section 133. Continuous Health Insurance Coverage Incentive: 
The continuous coverage incentive would limit adverse selection 
in health care markets. Beginning in open enrollment for 
benefit year 2019, there will be a 12-month lookback period to 
determine if the applicant went longer than 63 days without 
continuous health insurance coverage. If the applicant had a 
lapse in coverage for greater than 63 days, issuers will assess 
a flat 30 percent late-enrollment surcharge on top of their 
base premium based on their decision to forgo coverage. This 
late-enrollment surcharge would be the same for all market 
entrants, regardless of health status, and discontinued after 
12 months, incentivizing enrollees to remain covered. This 
process would begin for special enrollment period applicants in 
benefit year 2018.
Section 134. Increasing Coverage Options: Under the ACA, plan 
issuers are required to label their offerings by metal tier: 
Bronze, Silver, Gold, and Platinum. These metal tiers are 
determined by a calculation known as actuarial value (AV). This 
section repeals the AV standards.
Section 135. Change in Permissible Age Variation in Health 
Insurance Premium Rate: Current law limits the cost of the most 
generous plan for older Americans to three times the cost of 
the least generous plan for younger Americans. The true cost of 
care is 4.8-to-one, according to health economists. This 
provision loosens the ratio to five-to-one and gives States the 
flexibility to set their own ratio.
  

       Changes in Existing Law Made by Title I of FY2017 Budget 
 Reconciliation, as Recommended 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 
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, and existing law in which no 
change is proposed is shown in roman):

PATIENT PROTECTION AND AFFORDABLE CARE ACT

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

           *       *       *       *       *       *       *


        Subtitle D--Available Coverage Choices for All Americans

PART 1--ESTABLISHMENT OF QUALIFIED HEALTH PLANS

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SEC. 1302. ESSENTIAL HEALTH BENEFITS REQUIREMENTS.

  (a) Essential Health Benefits Package.--In this title, the 
term ``essential health benefits package'' means, with respect 
to any health plan, coverage that--
          (1) provides for the essential health benefits 
        defined by the Secretary under subsection (b);
          (2) limits cost-sharing for such coverage in 
        accordance with subsection (c); and
          (3) subject to subsection (e) and with respect to a 
        plan year before plan year 2020, provides either the 
        bronze, silver, gold, or platinum level of coverage 
        described in subsection (d).
  (b) Essential Health Benefits.--
          (1) In general.--Subject to paragraph (2), the 
        Secretary shall define the essential health benefits, 
        except that such benefits shall include at least the 
        following general categories and the items and services 
        covered within the categories:
                  (A) Ambulatory patient services.
                  (B) Emergency services.
                  (C) Hospitalization.
                  (D) Maternity and newborn care.
                  (E) Mental health and substance use disorder 
                services, including behavioral health 
                treatment.
                  (F) Prescription drugs.
                  (G) Rehabilitative and habilitative services 
                and devices.
                  (H) Laboratory services.
                  (I) Preventive and wellness services and 
                chronic disease management.
                  (J) Pediatric services, including oral and 
                vision care.
          (2) Limitation.--
                  (A) In general.--The Secretary shall ensure 
                that the scope of the essential health benefits 
                under paragraph (1) is equal to the scope of 
                benefits provided under a typical employer 
                plan, as determined by the Secretary. To inform 
                this determination, the Secretary of Labor 
                shall conduct a survey of employer-sponsored 
                coverage to determine the benefits typically 
                covered by employers, including multiemployer 
                plans, and provide a report on such survey to 
                the Secretary.
                  (B) Certification.--In defining the essential 
                health benefits described in paragraph (1), and 
                in revising the benefits under paragraph 
                (4)(H), the Secretary shall submit a report to 
                the appropriate committees of Congress 
                containing a certification from the Chief 
                Actuary of the Centers for Medicare & Medicaid 
                Services that such essential health benefits 
                meet the limitation described in paragraph (2).
          (3) Notice and hearing.--In defining the essential 
        health benefits described in paragraph (1), and in 
        revising the benefits under paragraph (4)(H), the 
        Secretary shall provide notice and an opportunity for 
        public comment.
          (4) Required elements for consideration.--In defining 
        the essential health benefits under paragraph (1), the 
        Secretary shall--
                  (A) ensure that such essential health 
                benefits reflect an appropriate balance among 
                the categories described in such subsection, so 
                that benefits are not unduly weighted toward 
                any category;
                  (B) not make coverage decisions, determine 
                reimbursement rates, establish incentive 
                programs, or design benefits in ways that 
                discriminate against individuals because of 
                their age, disability, or expected length of 
                life;
                  (C) take into account the health care needs 
                of diverse segments of the population, 
                including women, children, persons with 
                disabilities, and other groups;
                  (D) ensure that health benefits established 
                as essential not be subject to denial to 
                individuals against their wishes on the basis 
                of the individuals' age or expected length of 
                life or of the individuals' present or 
                predicted disability, degree of medical 
                dependency, or quality of life;
                  (E) provide that a qualified health plan 
                shall not be treated as providing coverage for 
                the essential health benefits described in 
                paragraph (1) unless the plan provides that--
                          (i) coverage for emergency department 
                        services will be provided without 
                        imposing any requirement under the plan 
                        for prior authorization of services or 
                        any limitation on coverage where the 
                        provider of services does not have a 
                        contractual relationship with the plan 
                        for the providing of services that is 
                        more restrictive than the requirements 
                        or limitations that apply to emergency 
                        department services received from 
                        providers who do have such a 
                        contractual relationship with the plan; 
                        and
                          (ii) if such services are provided 
                        out-of-network, the cost-sharing 
                        requirement (expressed as a copayment 
                        amount or coinsurance rate) is the same 
                        requirement that would apply if such 
                        services were provided in-network;
                  (F) provide that if a plan described in 
                section 1311(b)(2)(B)(ii) (relating to stand-
                alone dental benefits plans) is offered through 
                an Exchange, another health plan offered 
                through such Exchange shall not fail to be 
                treated as a qualified health plan solely 
                because the plan does not offer coverage of 
                benefits offered through the stand-alone plan 
                that are otherwise required under paragraph 
                (1)(J); and
                  (G) periodically review the essential health 
                benefits under paragraph (1), and provide a 
                report to Congress and the public that 
                contains--
                          (i) an assessment of whether 
                        enrollees are facing any difficulty 
                        accessing needed services for reasons 
                        of coverage or cost;
                          (ii) an assessment of whether the 
                        essential health benefits needs to be 
                        modified or updated to account for 
                        changes in medical evidence or 
                        scientific advancement;
                          (iii) information on how the 
                        essential health benefits will be 
                        modified to address any such gaps in 
                        access or changes in the evidence base;
                          (iv) an assessment of the potential 
                        of additional or expanded benefits to 
                        increase costs and the interactions 
                        between the addition or expansion of 
                        benefits and reductions in existing 
                        benefits to meet actuarial limitations 
                        described in paragraph (2); and
                  (H) periodically update the essential health 
                benefits under paragraph (1) to address any 
                gaps in access to coverage or changes in the 
                evidence base the Secretary identifies in the 
                review conducted under subparagraph (G).
          (5) Rule of construction.--Nothing in this title 
        shall be construed to prohibit a health plan from 
        providing benefits in excess of the essential health 
        benefits described in this subsection.
  (c) Requirements Relating to Cost-Sharing.--
          (1) Annual limitation on cost-sharing.--
                  (A) 2014.--The cost-sharing incurred under a 
                health plan with respect to self-only coverage 
                or coverage other than self-only coverage for a 
                plan year beginning in 2014 shall not exceed 
                the dollar amounts in effect under section 
                223(c)(2)(A)(ii) of the Internal Revenue Code 
                of 1986 for self-only and family coverage, 
                respectively, for taxable years beginning in 
                2014.
                  (B) 2015 and later.--In the case of any plan 
                year beginning in a calendar year after 2014, 
                the limitation under this paragraph shall--
                          (i) in the case of self-only 
                        coverage, be equal to the dollar amount 
                        under subparagraph (A) for self-only 
                        coverage for plan years beginning in 
                        2014, increased by an amount equal to 
                        the product of that amount and the 
                        premium adjustment percentage under 
                        paragraph (4) for the calendar year; 
                        and
                          (ii) in the case of other coverage, 
                        twice the amount in effect under clause 
                        (i).
                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.
          (2)
          (3) Cost-sharing.--In this title--
                  (A) In general.--The term ``cost-sharing'' 
                includes--
                          (i) deductibles, coinsurance, 
                        copayments, or similar charges; and
                          (ii) any other expenditure required 
                        of an insured individual which is a 
                        qualified medical expense (within the 
                        meaning of section 223(d)(2) of the 
                        Internal Revenue Code of 1986) with 
                        respect to essential health benefits 
                        covered under the plan.
                  (B) Exceptions.--Such term does not include 
                premiums, balance billing amounts for non-
                network providers, or spending for non-covered 
                services.
          (4) Premium adjustment percentage.--For purposes of 
        paragraph (1)(B)(i), the premium adjustment percentage 
        for any calendar year is the percentage (if any) by 
        which the average per capita premium for health 
        insurance coverage in the United States for the 
        preceding calendar year (as estimated by the Secretary 
        no later than October 1 of such preceding calendar 
        year) exceeds such average per capita premium for 2013 
        (as determined by the Secretary).
  (d) Levels of Coverage.--
          (1) Levels of coverage defined.--The levels of 
        coverage described in this subsection are as follows:
                  (A) Bronze level.--A plan in the bronze level 
                shall provide a level of coverage that is 
                designed to provide benefits that are 
                actuarially equivalent to 60 percent of the 
                full actuarial value of the benefits provided 
                under the plan.
                  (B) Silver level.--A plan in the silver level 
                shall provide a level of coverage that is 
                designed to provide benefits that are 
                actuarially equivalent to 70 percent of the 
                full actuarial value of the benefits provided 
                under the plan.
                  (C) Gold level.--A plan in the gold level 
                shall provide a level of coverage that is 
                designed to provide benefits that are 
                actuarially equivalent to 80 percent of the 
                full actuarial value of the benefits provided 
                under the plan.
                  (D) Platinum level.--A plan in the platinum 
                level shall provide a level of coverage that is 
                designed to provide benefits that are 
                actuarially equivalent to 90 percent of the 
                full actuarial value of the benefits provided 
                under the plan.
          (2) Actuarial value.--
                  (A) In general.--Under regulations issued by 
                the Secretary, the level of coverage of a plan 
                shall be determined on the basis that the 
                essential health benefits described in 
                subsection (b) shall be provided to a standard 
                population (and without regard to the 
                population the plan may actually provide 
                benefits to).
                  (B) Employer contributions.--The Secretary 
                shall issue regulations under which employer 
                contributions to a health savings account 
                (within the meaning of section 223 of the 
                Internal Revenue Code of 1986) may be taken 
                into account in determining the level of 
                coverage for a plan of the employer.
                  (C) Application.--In determining under this 
                title, the Public Health Service Act, or the 
                Internal Revenue Code of 1986 the percentage of 
                the total allowed costs of benefits provided 
                under a group health plan or health insurance 
                coverage that are provided by such plan or 
                coverage, the rules contained in the 
                regulations under this paragraph shall apply.
          (3) Allowable variance.--The Secretary shall develop 
        guidelines to provide for a de minimis variation in the 
        actuarial valuations used in determining the level of 
        coverage of a plan to account for differences in 
        actuarial estimates.
          (4) Plan reference.--In this title, any reference to 
        a bronze, silver, gold, or platinum plan shall be 
        treated as a reference to a qualified health plan 
        providing a bronze, silver, gold, or platinum level of 
        coverage, as the case may be.
          (5) Sunset.--The provisions of this subsection shall 
        not apply after December 31, 2019, and after such date 
        any reference to this subsection or level of coverage 
        or plan described in this subsection and any 
        requirement under law applying such a level of coverage 
        or plan shall have no force or effect (and such a 
        requirement shall be applied as if this section had 
        been repealed).
  (e) Catastrophic Plan.--
          (1) In general.--A health plan not providing a 
        bronze, silver, gold, or platinum level of coverage 
        shall be treated as meeting the requirements of 
        subsection (d) with respect to any plan year if--
                  (A) the only individuals who are eligible to 
                enroll in the plan are individuals described in 
                paragraph (2); and
                  (B) the plan provides--
                          (i) except as provided in clause 
                        (ii), the essential health benefits 
                        determined under subsection (b), except 
                        that the plan provides no benefits for 
                        any plan year until the individual has 
                        incurred cost-sharing expenses in an 
                        amount equal to the annual limitation 
                        in effect under subsection (c)(1) for 
                        the plan year (except as provided for 
                        in section 2713); and
                          (ii) coverage for at least three 
                        primary care visits.
          (2) Individuals eligible for enrollment.--An 
        individual is described in this paragraph for any plan 
        year if the individual--
                  (A) has not attained the age of 30 before the 
                beginning of the plan year; or
                  (B) has a certification in effect for any 
                plan year under this title that the individual 
                is exempt from the requirement under section 
                5000A of the Internal Revenue Code of 1986 by 
                reason of--
                          (i) section 5000A(e)(1) of such Code 
                        (relating to individuals without 
                        affordable coverage); or
                          (ii) section 5000A(e)(5) of such Code 
                        (relating to individuals with 
                        hardships).
          (3) Restriction to individual market.--If a health 
        insurance issuer offers a health plan described in this 
        subsection, the issuer may only offer the plan in the 
        individual market.
  (f) Child-only Plans.--If a qualified health plan is offered 
through the Exchange in any level of coverage specified under 
subsection (d), the issuer shall also offer that plan through 
the Exchange in that level as a plan in which the only 
enrollees are individuals who, as of the beginning of a plan 
year, have not attained the age of 21, and such plan shall be 
treated as a qualified health plan.
  (g) Payments to Federally-Qualified Health Centers.--If any 
item or service covered by a qualified health plan is provided 
by a Federally-qualified health center (as defined in section 
1905(l)(2)(B) of the Social Security Act (42 U.S.C. 
1396d(l)(2)(B)) to an enrollee of the plan, the offeror of the 
plan shall pay to the center for the item or service an amount 
that is not less than the amount of payment that would have 
been paid to the center under section 1902(bb) of such Act (42 
U.S.C. 1396a(bb)) for such item or service.

           *       *       *       *       *       *       *


       Subtitle E--Affordable Coverage Choices for All Americans

        PART I--PREMIUM TAX CREDITS AND COST-SHARING REDUCTIONS

Subpart A--Premium Tax Credits and Cost-Sharing Reductions

           *       *       *       *       *       *       *


[SEC. 1402. REDUCED COST-SHARING FOR INDIVIDUALS ENROLLING IN QUALIFIED 
                    HEALTH PLANS.

  [(a) In General.--In the case of an eligible insured enrolled 
in a qualified health plan--
          [(1) the Secretary shall notify the issuer of the 
        plan of such eligibility; and
          [(2) the issuer shall reduce the cost-sharing under 
        the plan at the level and in the manner specified in 
        subsection (c).
  [(b) Eligible Insured.--In this section, the term ``eligible 
insured'' means an individual--
          [(1) who enrolls in a qualified health plan in the 
        silver level of coverage in the individual market 
        offered through an Exchange; and
          [(2) whose household income exceeds 100 percent but 
        does not exceed 400 percent of the poverty line for a 
        family of the size involved.
In the case of an individual described in section 36B(c)(1)(B) 
of the Internal Revenue Code of 1986, the individual shall be 
treated as having household income equal to 100 percent for 
purposes of applying this section.
  [(c) Determination of Reduction in Cost-Sharing.--
          [(1) Reduction in out-of-pocket limit.--
                  [(A) In general.--The reduction in cost-
                sharing under this subsection shall first be 
                achieved by reducing the applicable out-of 
                pocket limit under section 1302(c)(1) in the 
                case of--
                          [(i) an eligible insured whose 
                        household income is more than 100 
                        percent but not more than 200 percent 
                        of the poverty line for a family of the 
                        size involved, by two-thirds;
                          [(ii) an eligible insured whose 
                        household income is more than 200 
                        percent but not more than 300 percent 
                        of the poverty line for a family of the 
                        size involved, by one-half; and
                          [(iii) an eligible insured whose 
                        household income is more than 300 
                        percent but not more than 400 percent 
                        of the poverty line for a family of the 
                        size involved, by one-third.
                  [(B) Coordination with actuarial value 
                limits.--
                          [(i) In general.--The Secretary shall 
                        ensure the reduction under this 
                        paragraph shall not result in an 
                        increase in the plan's share of the 
                        total allowed costs of benefits 
                        provided under the plan above--
                                  [(I) 94 percent in the case 
                                of an eligible insured 
                                described in paragraph (2)(A);
                                  [(II) 87 percent in the case 
                                of an eligible insured 
                                described in paragraph (2)(B);
                                  [(III) 73 percent in the case 
                                of an eligible insured whose 
                                household income is more than 
                                200 percent but not more than 
                                250 percent of the poverty line 
                                for a family of the size 
                                involved; and
                                  [(IV) 70 percent in the case 
                                of an eligible insured whose 
                                household income is more than 
                                250 percent but not more than 
                                400 percent of the poverty line 
                                for a family of the size 
                                involved.
                          [(ii) Adjustment.--The Secretary 
                        shall adjust the out-of pocket limits 
                        under paragraph (1) if necessary to 
                        ensure that such limits do not cause 
                        the respective actuarial values to 
                        exceed the levels specified in clause 
                        (i).
          [(2) Additional reduction for lower income 
        insureds.--The Secretary shall establish procedures 
        under which the issuer of a qualified health plan to 
        which this section applies shall further reduce cost-
        sharing under the plan in a manner sufficient to--
                  [(A) in the case of an eligible insured whose 
                household income is not less than 100 percent 
                but not more than 150 percent of the poverty 
                line for a family of the size involved, 
                increase the plan's share of the total allowed 
                costs of benefits provided under the plan to 94 
                percent of such costs;
                  [(B) in the case of an eligible insured whose 
                household income is more than 150 percent but 
                not more than 200 percent of the poverty line 
                for a family of the size involved, increase the 
                plan's share of the total allowed costs of 
                benefits provided under the plan to 87 percent 
                of such costs; and
                  [(C) in the case of an eligible insured whose 
                household income is more than 200 percent but 
                not more than 250 percent of the poverty line 
                for a family of the size involved, increase the 
                plan's share of the total allowed costs of 
                benefits provided under the plan to 73 percent 
                of such costs.
          [(3) Methods for reducing cost-sharing.--
                  [(A) In general.--An issuer of a qualified 
                health plan making reductions under this 
                subsection shall notify the Secretary of such 
                reductions and the Secretary shall make 
                periodic and timely payments to the issuer 
                equal to the value of the reductions.
                  [(B) Capitated payments.--The Secretary may 
                establish a capitated payment system to carry 
                out the payment of cost-sharing reductions 
                under this section. Any such system shall take 
                into account the value of the reductions and 
                make appropriate risk adjustments to such 
                payments.
          [(4) Additional benefits.--If a qualified health plan 
        under section 1302(b)(5) offers benefits in addition to 
        the essential health benefits required to be provided 
        by the plan, or a State requires a qualified health 
        plan under section 1311(d)(3)(B) to cover benefits in 
        addition to the essential health benefits required to 
        be provided by the plan, the reductions in cost-sharing 
        under this section shall not apply to such additional 
        benefits.
          [(5) Special rule for pediatric dental plans.--If an 
        individual enrolls in both a qualified health plan and 
        a plan described in section 1311(d)(2)(B)(ii)(I) for 
        any plan year, subsection (a) shall not apply to that 
        portion of any reduction in cost-sharing under 
        subsection (c) that (under regulations prescribed by 
        the Secretary) is properly allocable to pediatric 
        dental benefits which are included in the essential 
        health benefits required to be provided by a qualified 
        health plan under section 1302(b)(1)(J).
  [(d) Special Rules for Indians.--
          [(1) Indians under 300 percent of poverty.--If an 
        individual enrolled in any qualified health plan in the 
        individual market through an Exchange is an Indian (as 
        defined in section 4(d) of the Indian Self-
        Determination and Education Assistance Act (25 U.S.C. 
        450b(d))) whose household income is not more than 300 
        percent of the poverty line for a family of the size 
        involved, then, for purposes of this section--
                  [(A) such individual shall be treated as an 
                eligible insured; and
                  [(B) the issuer of the plan shall eliminate 
                any cost-sharing under the plan.
          [(2) Items or services furnished through Indian 
        health providers.--If an Indian (as so defined) 
        enrolled in a qualified health plan is furnished an 
        item or service directly by the Indian Health Service, 
        an Indian Tribe, Tribal Organization, or Urban Indian 
        Organization or through referral under contract health 
        services--
                  [(A) no cost-sharing under the plan shall be 
                imposed under the plan for such item or 
                service; and
                  [(B) the issuer of the plan shall not reduce 
                the payment to any such entity for such item or 
                service by the amount of any cost-sharing that 
                would be due from the Indian but for 
                subparagraph (A).
          [(3) Payment.--The Secretary shall pay to the issuer 
        of a qualified health plan the amount necessary to 
        reflect the increase in actuarial value of the plan 
        required by reason of this subsection.
  [(e) Rules for Individuals Not Lawfully Present.--
          [(1) In general.--If an individual who is an eligible 
        insured is not lawfully present--
                  [(A) no cost-sharing reduction under this 
                section shall apply with respect to the 
                individual; and
                  [(B) for purposes of applying this section, 
                the determination as to what percentage a 
                taxpayer's household income bears to the 
                poverty level for a family of the size involved 
                shall be made under one of the following 
                methods:
                          [(i) A method under which--
                                  [(I) the taxpayer's family 
                                size is determined by not 
                                taking such individuals into 
                                account, and
                                  [(II) the taxpayer's 
                                household income is equal to 
                                the product of the taxpayer's 
                                household income (determined 
                                without regard to this 
                                subsection) and a fraction--
                                          [(aa) the numerator 
                                        of which is the poverty 
                                        line for the taxpayer's 
                                        family size determined 
                                        after application of 
                                        subclause (I), and
                                          [(bb) the denominator 
                                        of which is the poverty 
                                        line for the taxpayer's 
                                        family size determined 
                                        without regard to 
                                        subclause (I).
                          [(ii) A comparable method reaching 
                        the same result as the method under 
                        clause (i).
          [(2) Lawfully present.--For purposes of this section, 
        an individual shall be treated as lawfully present only 
        if the individual is, and is reasonably expected to be 
        for the entire period of enrollment for which the cost-
        sharing reduction under this section is being claimed, 
        a citizen or national of the United States or an alien 
        lawfully present in the United States.
          [(3) Secretarial authority.--The Secretary, in 
        consultation with the Secretary of the Treasury, shall 
        prescribe rules setting forth the methods by which 
        calculations of family size and household income are 
        made for purposes of this subsection. Such rules shall 
        be designed to ensure that the least burden is placed 
        on individuals enrolling in qualified health plans 
        through an Exchange and taxpayers eligible for the 
        credit allowable under this section.
  [(f) Definitions and Special Rules.--In this section:
          [(1) In general.--Any term used in this section which 
        is also used in section 36B of the Internal Revenue 
        Code of 1986 shall have the meaning given such term by 
        such section.
          [(2) Limitations on reduction.--No cost-sharing 
        reduction shall be allowed under this section with 
        respect to coverage for any month unless the month is a 
        coverage month with respect to which a credit is 
        allowed to the insured (or an applicable taxpayer on 
        behalf of the insured) under section 36B of such Code.
          [(3) Data used for eligibility.--Any determination 
        under this section shall be made on the basis of the 
        taxable year for which the advance determination is 
        made under section 1412 and not the taxable year for 
        which the credit under section 36B of such Code is 
        allowed.]

           *       *       *       *       *       *       *


  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; and
          (3) for [each of fiscal years 2018 and 2019] fiscal 
        year 2018, $900,000,000[;].
          [(4) for each of fiscal years 2020 and 2021, 
        $1,000,000,000; and
          [(5) for fiscal year 2022, $1,500,000,000;
          [(6) for fiscal year 2023, $1,000,000,000;
          [(7) for fiscal year 2024, $1,700,000,000; and
          [(8) for fiscal year 2025 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).

           *       *       *       *       *       *       *

                              ----------                              


MEDICARE ACCESS AND CHIP REAUTHORIZATION ACT OF 2015

           *       *       *       *       *       *       *


TITLE II--MEDICARE AND OTHER HEALTH EXTENDERS

           *       *       *       *       *       *       *


Subtitle B--Other Health Extenders

           *       *       *       *       *       *       *


SEC. 221. EXTENSION OF FUNDING FOR COMMUNITY HEALTH CENTERS, THE 
                    NATIONAL HEALTH SERVICE CORPS, AND TEACHING HEALTH 
                    CENTERS.

  (a) Funding for Community Health Centers and the National 
Health Service Corps.--
          (1) Community health centers.--Section 10503(b)(1)(E) 
        of the Patient Protection and Affordable Care Act (42 
        U.S.C. 254b-2(b)(1)(E)) is amended by striking ``for 
        fiscal year 2015'' and inserting ``for each of fiscal 
        years 2015 through 2017, and an additional $422,000,000 
        for fiscal year 2017''.
          (2) National health service corps.--Section 
        10503(b)(2)(E) of the Patient Protection and Affordable 
        Care Act (42 U.S.C. 254b-2(b)(2)(E)) is amended by 
        striking ``for fiscal year 2015'' and inserting ``for 
        each of fiscal years 2015 through 2017''.
  (b) Extension of Teaching Health Centers Program.--Section 
340H(g) of the Public Health Service Act (42 U.S.C. 256h(g)) is 
amended by inserting ``and $60,000,000 for each of fiscal years 
2016 and 2017'' before the period at the end.
  (c) Application.--Amounts appropriated pursuant to this 
section for fiscal year 2016 and fiscal year 2017 are subject 
to the requirements contained in Public Law 113-235 for funds 
for programs authorized under sections 330 through 340 of the 
Public Health Service Act (42 U.S.C. 254b-256).

           *       *       *       *       *       *       *

                              ----------                              


SOCIAL SECURITY ACT

           *       *       *       *       *       *       *


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

Part A--General Provisions

           *       *       *       *       *       *       *


                        civil monetary penalties

  Sec. 1128A. (a) Any person (including an organization, 
agency, or other entity, but excluding a beneficiary, as 
defined in subsection (i)(5)) that--
          (1) knowingly presents or causes to be presented to 
        an officer, employee, or agent of the United States, or 
        of any department or agency thereof, or of any State 
        agency (as defined in subsection (i)(1)), a claim (as 
        defined in subsection (i)(2)) that the Secretary 
        determines--
                  (A) is for a medical or other item or service 
                that the person knows or should know was not 
                provided as claimed, including any person who 
                engages in a pattern or practice of presenting 
                or causing to be presented a claim for an item 
                or service that is based on a code that the 
                person knows or should know will result in a 
                greater payment to the person than the code the 
                person knows or should know is applicable to 
                the item or service actually provided,
                  (B) is for a medical or other item or service 
                and the person knows or should know the claim 
                is false or fraudulent,
                  (C) is presented for a physician's service 
                (or an item or service incident to a 
                physician's service) by a person who knows or 
                should know that the individual who furnished 
                (or supervised the furnishing of) the service--
                          (i) was not licensed as a physician,
                          (ii) was licensed as a physician, but 
                        such license had been obtained through 
                        a misrepresentation of material fact 
                        (including cheating on an examination 
                        required for licensing), or
                          (iii) represented to the patient at 
                        the time the service was furnished that 
                        the physician was certified in a 
                        medical specialty by a medical 
                        specialty board when the individual was 
                        not so certified,
                  (D) is for a medical or other item or service 
                furnished during a period in which the person 
                was excluded from the program under which the 
                claim was made pursuant to a determination by 
                the Secretary under this section or under 
                section 1128, 1156, 1160(b) (as in effect on 
                September 2, 1982), 1862(d) (as in effect on 
                the date of the enactment of the Medicare and 
                Medicaid Patient and Program Protection Act of 
                1987), or 1866(b) or as a result of the 
                application of the provisions of section 
                1842(j)(2), or
                  (E) is for a pattern of medical or other 
                items or services that a person knows or should 
                know are not medically necessary;
          (2) knowingly presents or causes to be presented to 
        any person a request for payment which is in violation 
        of the terms of (A) an assignment under section 
        1842(b)(3)(B)(ii), or (B) an agreement with a State 
        agency (or other requirement of a State plan under 
        title XIX) not to charge a person for an item or 
        service in excess of the amount permitted to be 
        charged, or (C) an agreement to be a participating 
        physician or supplier under section 1842(h)(1), or (D) 
        an agreement pursuant to section 1866(a)(1)(G);
          (3) knowingly gives or causes to be given to any 
        person, with respect to coverage under title XVIII of 
        inpatient hospital services subject to the provisions 
        of section 1886, information that he knows or should 
        know is false or misleading, and that could reasonably 
        be expected to influence the decision when to discharge 
        such person or another individual from the hospital;
          (4) in the case of a person who is not an 
        organization, agency, or other entity, is excluded from 
        participating in a program under title XVIII or a State 
        health care program in accordance with this subsection 
        or under section 1128 and who, at the time of a 
        violation of this subsection--
                  (A) retains a direct or indirect ownership or 
                control interest in an entity that is 
                participating in a program under title XVIII or 
                a State health care program, and who knows or 
                should know of the action constituting the 
                basis for the exclusion; or
                  (B) is an officer or managing employee (as 
                defined in section 1126(b)) of such an entity;
          (5) offers to or transfers remuneration to any 
        individual eligible for benefits under title XVIII of 
        this Act, or under a State health care program (as 
        defined in section 1128(h)) that such person knows or 
        should know is likely to influence such individual to 
        order or receive from a particular provider, 
        practitioner, or supplier any item or service for which 
        payment may be made, in whole or in part, under title 
        XVIII, or a State health care program (as so defined);
          (6) arranges or contracts (by employment or 
        otherwise) with an individual or entity that the person 
        knows or should know is excluded from participation in 
        a Federal health care program (as defined in section 
        1128B(f)), for the provision of items or services for 
        which payment may be made under such a program;
          (7) commits an act described in paragraph (1) or (2) 
        of section 1128B(b);
          (8) knowingly makes, uses, or causes to be made or 
        used, a false record or statement material to a false 
        or fraudulent claim for payment for items and services 
        furnished under a Federal health care program; or
          (9) fails to grant timely access, upon reasonable 
        request (as defined by the Secretary in regulations), 
        to the Inspector General of the Department of Health 
        and Human Services, for the purpose of audits, 
        investigations, evaluations, or other statutory 
        functions of the Inspector General of the Department of 
        Health and Human Services;
          (8) orders or prescribes a medical or other item or 
        service during a period in which the person was 
        excluded from a Federal health care program (as so 
        defined), in the case where the person knows or should 
        know that a claim for such medical or other item or 
        service will be made under such a program;
          (9) knowingly makes or causes to be made any false 
        statement, omission, or misrepresentation of a material 
        fact in any application, bid, or contract to 
        participate or enroll as a provider of services or a 
        supplier under a Federal health care program (as so 
        defined), including Medicare Advantage organizations 
        under part C of title XVIII, prescription drug plan 
        sponsors under part D of title XVIII, medicaid managed 
        care organizations under title XIX, and entities that 
        apply to participate as providers of services or 
        suppliers in such managed care organizations and such 
        plans;
          (10) knows of an overpayment (as defined in paragraph 
        (4) of section 1128J(d)) and does not report and return 
        the overpayment in accordance with such section;
shall be subject, in addition to any other penalties that may 
be prescribed by law, to a civil money penalty of not more than 
$10,000 for each item or service [(or, in cases under paragraph 
(3)] (or, in cases under paragraph (1) in which an individual 
was knowingly enrolled on or after October 1, 2017, pursuant to 
section 1902(a)(10)(A)(i)(VIII) for medical assistance under 
the State plan under title XIX whose income does not meet the 
income threshold specified in such section or in which a claim 
was presented on or after October 1, 2017, as a claim for an 
item or service furnished to an individual described in such 
section but whose enrollment under such State plan is not made 
on the basis of such individual's meeting the income threshold 
specified in such section, $20,000 for each such individual or 
claim; in cases under paragraph (3), $15,000 for each 
individual with respect to whom false or misleading information 
was given; in cases under paragraph (4), $10,000 for each day 
the prohibited relationship occurs; in cases under paragraph 
(7), $50,000 for each such act; or in cases under paragraph 
(9), $50,000 for each false statement or misrepresentation of a 
material fact). In addition, such a person shall be subject to 
an assessment of not more than 3 times the amount claimed for 
each such item or service in lieu of damages sustained by the 
United States or a State agency because of such claim (or, in 
cases under paragraph (7), damages of not more than 3 times the 
total amount of remuneration offered, paid, solicited, or 
received, without regard to whether a portion of such 
remuneration was offered, paid, solicited, or received for a 
lawful purpose; or in cases under paragraph (9), an assessment 
of not more than 3 times the total amount claimed for each item 
or service for which payment was made based upon the 
application containing the false statement or misrepresentation 
of a material fact). In addition the Secretary may make a 
determination in the same proceeding to exclude the person from 
participation in the Federal health care programs (as defined 
in section 1128B(f)(1)) and to direct the appropriate State 
agency to exclude the person from participation in any State 
health care program.
  (b)(1) If a hospital or a critical access hospital knowingly 
makes a payment, directly or indirectly, to a physician as an 
inducement to reduce or limit medically necessary services 
provided with respect to individuals who--
          (A) are entitled to benefits under part A or part B 
        of title XVIII or to medical assistance under a State 
        plan approved under title XIX, and
          (B) are under the direct care of the physician,
the hospital or a critical access hospital shall be subject, in 
addition to any other penalties that may be prescribed by law, 
to a civil money penalty of not more than $2,000 for each such 
individual with respect to whom the payment is made.
  (2) Any physician who knowingly accepts receipt of a payment 
described in paragraph (1) shall be subject, in addition to any 
other penalties that may be prescribed by law, to a civil money 
penalty of not more than $2,000 for each individual described 
in such paragraph with respect to whom the payment is made.
  (3)(A) Any physician who executes a document described in 
subparagraph (B) with respect to an individual knowing that all 
of the requirements referred to in such subparagraph are not 
met with respect to the individual shall be subject to a civil 
monetary penalty of not more than the greater of--
          (i) $5,000, or
          (ii) three times the amount of the payments under 
        title XVIII for home health services which are made 
        pursuant to such certification.
  (B) A document described in this subparagraph is any document 
that certifies, for purposes of title XVIII, that an individual 
meets the requirements of section 1814(a)(2)(C) or 
1835(a)(2)(A) in the case of home health services furnished to 
the individual.
  (c)(1) The Secretary may initiate a proceeding to determine 
whether to impose a civil money penalty, assessment, or 
exclusion under subsection (a) or (b) only as authorized by the 
Attorney General pursuant to procedures agreed upon by them. 
The Secretary may not initiate an action under this section 
with respect to any claim, request for payment, or other 
occurrence described in this section later than six years after 
the date the claim was presented, the request for payment was 
made, or the occurrence took place. The Secretary may initiate 
an action under this section by serving notice of the action in 
any manner authorized by Rule 4 of the Federal Rules of Civil 
Procedure.
  (2) The Secretary shall not make a determination adverse to 
any person under subsection (a) or (b) until the person has 
been given written notice and an opportunity for the 
determination to be made on the record after a hearing at which 
the person is entitled to be represented by counsel, to present 
witnesses, and to cross-examine witnesses against the person.
  (3) In a proceeding under subsection (a) or (b) which--
          (A) is against a person who has been convicted 
        (whether upon a verdict after trial or upon a plea of 
        guilty or nolo contendere) of a Federal crime charging 
        fraud or false statements, and
          (B) involves the same transaction as in the criminal 
        action, the person is estopped from denying the 
        essential elements of the criminal offense.
  (4) The official conducting a hearing under this section may 
sanction a person, including any party or attorney, for failing 
to comply with an order or procedure, failing to defend an 
action, or other misconduct as would interfere with the speedy, 
orderly, or fair conduct of the hearing. Such sanction shall 
reasonably relate to the severity and nature of the failure or 
misconduct. Such sanction may include--
          (A) in the case of refusal to provide or permit 
        discovery, drawing negative factual inferences or 
        treating such refusal as an admission by deeming the 
        matter, or certain facts, to be established,
          (B) prohibiting a party from introducing certain 
        evidence or otherwise supporting a particular claim or 
        defense,
          (C) striking pleadings, in whole or in part,
          (D) staying the proceedings,
          (E) dismissal of the action,
          (F) entering a default judgment,
          (G) ordering the party or attorney to pay attorneys' 
        fees and other costs caused by the failure or 
        misconduct, and
          (H) refusing to consider any motion or other action 
        which is not filed in a timely manner.
  (d) In determining the amount or scope of any penalty, 
assessment, or exclusion imposed pursuant to subsection (a) or 
(b), the Secretary shall take into account--
          (1) the nature of claims and the circumstances under 
        which they were presented,
          (2) the degree of culpability, history of prior 
        offenses, and financial condition of the person 
        presenting the claims, and
          (3) such other matters as justice may require.
  (e) Any person adversely affected by a determination of the 
Secretary under this section may obtain a review of such 
determination in the United States Court of Appeals for the 
circuit in which the person resides, or in which the claim or 
specified claim was presented, by filing in such court (within 
sixty days following the date the person is notified of the 
Secretary's determination) a written petition requesting that 
the determination be modified or set aside. A copy of the 
petition shall be forthwith transmitted by the clerk of the 
court to the Secretary, and thereupon the Secretary shall file 
in the Court the record in the proceeding as provided in 
section 2112 of title 28, United States Code. Upon such filing, 
the court shall have jurisdiction of the proceeding and of the 
question determined therein, and shall have the power to make 
and enter upon the pleadings, testimony, and proceedings set 
forth in such record a decree affirming, modifying, remanding 
for further consideration, or setting aside, in whole or in 
part, the determination of the Secretary and enforcing the same 
to the extent that such order is affirmed or modified. No 
objection that has not been urged before the Secretary shall be 
considered by the court, unless the failure or neglect to urge 
such objection shall be excused because of extraordinary 
circumstances. The findings of the Secretary with respect to 
questions of fact, if supported by substantial evidence on the 
record considered as a whole, shall be conclusive. If any party 
shall apply to the court for leave to adduce additional 
evidence and shall show to the satisfaction of the court that 
such additional evidence is material and that there were 
reasonable grounds for the failure to adduce such evidence in 
the hearing before the Secretary, the court may order such 
additional evidence to be taken before the Secretary and to be 
made a part of the record. The Secretary may modify his 
findings as to the facts, or make new findings, by reason of 
additional evidence so taken and filed, and he shall file with 
the court such modified or new findings, which findings with 
respect to questions of fact, if supported by substantial 
evidence on the record considered as a whole, shall be 
conclusive, and his recommendations, if any, for the 
modification or setting aside of his original order. Upon the 
filing of the record with it, the jurisdiction of the court 
shall be exclusive and its judgment and decree shall be final, 
except that the same shall be subject to review by the Supreme 
Court of the United States, as provided in section 1254 of 
title 28, United States Code.
  (f) Civil money penalties and assessments imposed under this 
section may be compromised by the Secretary and may be 
recovered in a civil action in the name of the United States 
brought in United States district court for the district where 
the claim or specified claim (as defined in subsection (r)) was 
presented, or where the claimant (or, with respect to a person 
described in subsection (o), the person) resides, as determined 
by the Secretary. Amounts recovered under this section shall be 
paid to the Secretary and disposed of as follows:
          (1)(A) In the case of amounts recovered arising out 
        of a claim under title XIX, there shall be paid to the 
        State agency an amount bearing the same proportion to 
        the total amount recovered as the State's share of the 
        amount paid by the State agency for such claim bears to 
        the total amount paid for such claim.
          (B) In the case of amounts recovered arising out of a 
        claim under an allotment to a State under title V, 
        there shall be paid to the State agency an amount equal 
        to three-sevenths of the amount recovered.
          (2) Such portion of the amounts recovered as is 
        determined to have been paid out of the trust funds 
        under sections 1817 and 1841 shall be repaid to such 
        trust funds.
          (3) With respect to amounts recovered arising out of 
        a claim under a Federal health care program (as defined 
        in section 1128B(f)), the portion of such amounts as is 
        determined to have been paid by the program shall be 
        repaid to the program, and the portion of such amounts 
        attributable to the amounts recovered under this 
        section by reason of the amendments made by the Health 
        Insurance Portability and Accountability Act of 1996 
        (as estimated by the Secretary) shall be deposited into 
        the Federal Hospital Insurance Trust Fund pursuant to 
        section 1817(k)(2)(C).
          (4) The remainder of the amounts recovered shall be 
        deposited as miscellaneous receipts of the Treasury of 
        the United States.
The amount of such penalty or assessment, when finally 
determined, or the amount agreed upon in compromise, may be 
deducted from any sum then or later owing by the United States 
or a State agency (or, in the case of a penalty or assessment 
under subsection (o), by a specified State agency (as defined 
in subsection (q)(6)), to the person against whom the penalty 
or assessment has been assessed.
  (g) A determination by the Secretary to impose a penalty, 
assessment, or exclusion under subsection (a) or (b) shall be 
final upon the expiration of the sixty-day period referred to 
in subsection (e). Matters that were raised or that could have 
been raised in a hearing before the Secretary or in an appeal 
pursuant to subsection (e) may not be raised as a defense to a 
civil action by the United States to collect a penalty, 
assessment, or exclusion assessed under this section.
  (h) Whenever the Secretary's determination to impose a 
penalty, assessment, or exclusion under subsection (a) or (b) 
becomes final, he shall notify the appropriate State or local 
medical or professional organization, the appropriate State 
agency or agencies administering or supervising the 
administration of State health care programs (as defined in 
section 1128(h)), and the appropriate utilization and quality 
control peer review organization, and the appropriate State or 
local licensing agency or organization (including the agency 
specified in section 1864(a) and 1902(a)(33)) that such a 
penalty, assessment, or exclusion has become final and the 
reasons therefor.
  (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.
          (2) The term ``claim'' means an application for 
        payments for items and services under a Federal health 
        care program (as defined in section 1128B(f)).
          (3) The term ``item or service'' includes (A) any 
        particular item, device, medical supply, or service 
        claimed to have been provided to a patient and listed 
        in an itemized claim for payment, and (B) in the case 
        of a claim based on costs, any entry in the cost 
        report, books of account or other documents sup- 
        porting such claim.
          (4) The term ``agency of the United States'' includes 
        any contractor acting as a fiscal intermediary, 
        carrier, or fiscal agent or any other claims processing 
        agent for a Federal health care program (as so 
        defined).
          (5) The term ``beneficiary'' means an individual who 
        is eligible to receive items or services for which 
        payment may be made under a Federal health care program 
        (as so defined) but does not include a provider, 
        supplier, or practitioner.
          (6) The term ``remuneration'' includes the waiver of 
        coinsurance and deductible amounts (or any part 
        thereof), and transfers of items or services for free 
        or for other than fair market value. The term 
        ``remuneration'' does not include--
                  (A) the waiver of coinsurance and deductible 
                amounts by a person, if--
                          (i) the waiver is not offered as part 
                        of any advertisement or solicitation;
                          (ii) the person does not routinely 
                        waive coinsurance or deductible 
                        amounts; and
                          (iii) the person--
                                  (I) waives the coinsurance 
                                and deductible amounts after 
                                determining in good faith that 
                                the individual is in financial 
                                need; or
                                  (II) fails to collect 
                                coinsurance or deductible 
                                amounts after making reasonable 
                                collection efforts;
                  (B) subject to subsection (n), any 
                permissible practice described in any 
                subparagraph of section 1128B(b)(3) or in 
                regulations issued by the Secretary;
                  (C) differentials in coinsurance and 
                deductible amounts as part of a benefit plan 
                design as long as the differentials have been 
                disclosed in writing to all beneficiaries, 
                third party payers, and providers, to whom 
                claims are presented and as long as the 
                differentials meet the standards as defined in 
                regulations promulgated by the Secretary not 
                later than 180 days after the date of the 
                enactment of the Health Insurance Portability 
                and Accountability Act of 1996;
                  (D) incentives given to individuals to 
                promote the delivery of preventive care as 
                determined by the Secretary in regulations so 
                promulgated;
                  (E) a reduction in the copayment amount for 
                covered OPD services under section 
                1833(t)(5)(B);
                  (F) any other remuneration which promotes 
                access to care and poses a low risk of harm to 
                patients and Federal health care programs (as 
                defined in section 1128B(f) and designated by 
                the Secretary under regulations);
                  (G) the offer or transfer of items or 
                services for free or less than fair market 
                value by a person, if--
                          (i) the items or services consist of 
                        coupons, rebates, or other rewards from 
                        a retailer;
                          (ii) the items or services are 
                        offered or transferred on equal terms 
                        available to the general public, 
                        regardless of health insurance status; 
                        and
                          (iii) the offer or transfer of the 
                        items or services is not tied to the 
                        provision of other items or services 
                        reimbursed in whole or in part by the 
                        program under title XVIII or a State 
                        health care program (as defined in 
                        section 1128(h));
                  (H) the offer or transfer of items or 
                services for free or less than fair market 
                value by a person, if--
                          (i) the items or services are not 
                        offered as part of any advertisement or 
                        solicitation;
                          (ii) the items or services are not 
                        tied to the provision of other services 
                        reimbursed in whole or in part by the 
                        program under title XVIII or a State 
                        health care program (as so defined);
                          (iii) there is a reasonable 
                        connection between the items or 
                        services and the medical care of the 
                        individual; and
                          (iv) the person provides the items or 
                        services after determining in good 
                        faith that the individual is in 
                        financial need; or
                  (I) effective on a date specified by the 
                Secretary (but not earlier than January 1, 
                2011), the waiver by a PDP sponsor of a 
                prescription drug plan under part D of title 
                XVIII or an MA organization offering an MA-PD 
                plan under part C of such title of any 
                copayment for the first fill of a covered part 
                D drug (as defined in section 1860D-2(e)) that 
                is a generic drug for individuals enrolled in 
                the prescription drug plan or MA-PD plan, 
                respectively.
          (7) The term ``should know'' means that a person, 
        with respect to information--
                  (A) acts in deliberate ignorance of the truth 
                or falsity of the information; or
                  (B) acts in reckless disregard of the truth 
                or falsity of the information,
        and no proof of specific intent to defraud is required.
  (j)(1) The provisions of subsections (d) and (e) of section 
205 shall apply with respect to this section to the same extent 
as they are applicable with respect to title II. The Secretary 
may delegate the authority granted by section 205(d) (as made 
applicable to this section) to the Inspector General of the 
Department of Health and Human Services for purposes of any 
investigation under this section.
  (2) The Secretary may delegate authority granted under this 
section and under section 1128 to the Inspector General of the 
Department of Health and Human Services.
  (k) Whenever the Secretary has reason to believe that any 
person has engaged, is engaging, or is about to engage in any 
activity which makes the person subject to a civil monetary 
penalty under this section, the Secretary may bring an action 
in an appropriate district court of the United States (or, if 
applicable, a United States court of any territory) to enjoin 
such activity, or to enjoin the person from concealing, 
removing, encumbering, or disposing of assets which may be 
required in order to pay a civil monetary penalty if any such 
penalty were to be imposed or to seek other appropriate relief.
  (l) A principal is liable for penalties, assessments, and an 
exclusion under this section for the actions of the principal's 
agent acting within the scope of the agency.
  (m)(1) For purposes of this section, with respect to a 
Federal health care program not contained in this Act, 
references to the Secretary in this section shall be deemed to 
be references to the Secretary or Administrator of the 
department or agency with jurisdiction over such program and 
references to the Inspector General of the Department of Health 
and Human Services in this section shall be deemed to be 
references to the Inspector General of the applicable 
department or agency.
  (2)(A) The Secretary and Administrator of the departments and 
agencies referred to in paragraph (1) may include in any action 
pursuant to this section, claims within the jurisdiction of 
other Federal departments or agencies as long as the following 
conditions are satisfied:
          (i) The case involves primarily claims submitted to 
        the Federal health care programs of the department or 
        agency initiating the action.
          (ii) The Secretary or Administrator of the department 
        or agency initiating the action gives notice and an 
        opportunity to participate in the investigation to the 
        Inspector General of the department or agency with 
        primary jurisdiction over the Federal health care 
        programs to which the claims were submitted.
  (B) If the conditions specified in subparagraph (A) are 
fulfilled, the Inspector General of the department or agency 
initiating the action is authorized to exercise all powers 
granted under the Inspector General Act of 1978 (5 U.S.C. App.) 
with respect to the claims submitted to the other departments 
or agencies to the same manner and extent as provided in that 
Act with respect to claims submitted to such departments or 
agencies.
  (n)(1) Subparagraph (B) of subsection (i)(6) shall not apply 
to a practice described in paragraph (2) unless--
          (A) the Secretary, through the Inspector General of 
        the Department of Health and Human Services, 
        promulgates a rule authorizing such a practice as an 
        exception to remuneration; and
          (B) the remuneration is offered or transferred by a 
        person under such rule during the 2-year period 
        beginning on the date the rule is first promulgated.
  (2) A practice described in this paragraph is a practice 
under which a health care provider or facility pays, in whole 
or in part, premiums for medicare supplemental policies for 
individuals entitled to benefits under part A of title XVIII 
pursuant to section 226A.
  (o) Any person (including an organization, agency, or other 
entity, but excluding a program beneficiary, as defined in 
subsection (q)(4)) that, with respect to a grant, contract, or 
other agreement for which the Secretary provides funding--
          (1) knowingly presents or causes to be presented a 
        specified claim (as defined in subsection (r)) under 
        such grant, contract, or other agreement that the 
        person knows or should know is false or fraudulent;
          (2) knowingly makes, uses, or causes to be made or 
        used any false statement, omission, or 
        misrepresentation of a material fact in any 
        application, proposal, bid, progress report, or other 
        document that is required to be submitted in order to 
        directly or indirectly receive or retain funds provided 
        in whole or in part by such Secretary pursuant to such 
        grant, contract, or other agreement;
          (3) knowingly makes, uses, or causes to be made or 
        used, a false record or statement material to a false 
        or fraudulent specified claim under such grant, 
        contract, or other agreement;
          (4) knowingly makes, uses, or causes to be made or 
        used, a false record or statement material to an 
        obligation (as defined in subsection (s)) to pay or 
        transmit funds or property to such Secretary with 
        respect to such grant, contract, or other agreement, or 
        knowingly conceals or knowingly and improperly avoids 
        or decreases an obligation to pay or transmit funds or 
        property to such Secretary with respect to such grant, 
        contract, or other agreement; or
          (5) fails to grant timely access, upon reasonable 
        request (as defined by such Secretary in regulations), 
        to the Inspector General of the Department, for the 
        purpose of audits, investigations, evaluations, or 
        other statutory functions of such Inspector General in 
        matters involving such grants, contracts, or other 
        agreements;
shall be subject, in addition to any other penalties that may 
be prescribed by law, to a civil money penalty in cases under 
paragraph (1), of not more than $10,000 for each specified 
claim; in cases under paragraph (2), not more than $50,000 for 
each false statement, omission, or misrepresentation of a 
material fact; in cases under paragraph (3), not more than 
$50,000 for each false record or statement; in cases under 
paragraph (4), not more than $50,000 for each false record or 
statement or $10,000 for each day that the person knowingly 
conceals or knowingly and improperly avoids or decreases an 
obligation to pay; or in cases under paragraph (5), not more 
than $15,000 for each day of the failure described in such 
paragraph. In addition, in cases under paragraphs (1) and (3), 
such a person shall be subject to an assessment of not more 
than 3 times the amount claimed in the specified claim 
described in such paragraph in lieu of damages sustained by the 
United States or a specified State agency because of such 
specified claim, and in cases under paragraphs (2) and (4), 
such a person shall be subject to an assessment of not more 
than 3 times the total amount of the funds described in 
paragraph (2) or (4), respectively (or, in the case of an 
obligation to transmit property to the Secretary described in 
paragraph (4), of the value of the property described in such 
paragraph) in lieu of damages sustained by the United States or 
a specified State agency because of such case. In addition, the 
Secretary may make a determination in the same proceeding to 
exclude the person from participation in the Federal health 
care programs (as defined in section 1128B(f)(1)) and to direct 
the appropriate State agency to exclude the person from 
participation in any State health care program.
  (p) The provisions of subsections (c), (d), (g), and (h) 
shall apply to a civil money penalty or assessment under 
subsection (o) in the same manner as such provisions apply to a 
penalty, assessment, or proceeding under subsection (a). In 
applying subsection (d), each reference to a claim under such 
subsection shall be treated as including a reference to a 
specified claim (as defined in subsection (r)).
  (q) For purposes of this subsection and subsections (o) and 
(p):
          (1) The term ``Department'' means the Department of 
        Health and Human Services.
          (2) The term ``material'' means having a natural 
        tendency to influence, or be capable of influencing, 
        the payment or receipt of money or property.
          (3) The term ``other agreement'' includes a 
        cooperative agreement, scholarship, fellowship, loan, 
        subsidy, payment for a specified use, donation 
        agreement, award, or subaward (regardless of whether 
        one or more of the persons entering into the agreement 
        is a contractor or subcontractor).
          (4) The term ``program beneficiary'' means, in the 
        case of a grant, contract, or other agreement designed 
        to accomplish the objective of awarding or otherwise 
        furnishing benefits or assistance to individuals and 
        for which the Secretary provides funding, an individual 
        who applies for, or who receives, such benefits or 
        assistance from such grant, contract, or other 
        agreement. Such term does not include, with respect to 
        such grant, contract, or other agreement, an officer, 
        employee, or agent of a person or entity that receives 
        such grant or that enters into such contract or other 
        agreement.
          (5) The term ``recipient'' includes a subrecipient or 
        subcontractor.
          (6) The term ``specified State agency'' means an 
        agency of a State government established or designated 
        to administer or supervise the administration of a 
        grant, contract, or other agreement funded in whole or 
        in part by the Secretary.
  (r) For purposes of this section, the term ``specified 
claim'' means any application, request, or demand under a 
grant, contract, or other agreement for money or property, 
whether or not the United States or a specified State agency 
has title to the money or property, that is not a claim (as 
defined in subsection (i)(2)) and that--
          (1) is presented or caused to be presented to an 
        officer, employee, or agent of the Department or agency 
        thereof, or of any specified State agency; or
          (2) is made to a contractor, grantee, or any other 
        recipient if the money or property is to be spent or 
        used on the Department's behalf or to advance a 
        Department program or interest, and if the Department--
                  (A) provides or has provided any portion of 
                the money or property requested or demanded; or
                  (B) will reimburse such contractor, grantee, 
                or other recipient for any portion of the money 
                or property which is requested or demanded.
  (s) For purposes of subsection (o), the term ``obligation'' 
means an established duty, whether or not fixed, arising from 
an express or implied contractual, grantor-grantee, or 
licensor-licensee relationship, for a fee-based or similar 
relationship, from statute or regulation, or from the retention 
of any overpayment.

           *       *       *       *       *       *       *


               income and eligibility verification system

  Sec. 1137. (a) In order to meet the requirements of this 
section, a State must have in effect an income and eligibility 
verification system which meets the requirements of subsection 
(d) and under which--
          (1) the State shall require, as a condition of 
        eligibility for benefits under any program listed in 
        subsection (b), that each applicant for or recipient of 
        benefits under that program furnish to the State his 
        social security account number (or numbers, if he has 
        more than one such number), and the State shall utilize 
        such account numbers in the administration of that 
        program so as to enable the association of the records 
        pertaining to the applicant or recipient with his 
        account number;
          (2) wage information from agencies administering 
        State unemployment compensation laws available pursuant 
        to section 3304(a)(16) of the Internal Revenue Code of 
        1954, wage information reported pursuant to paragraph 
        (3) of this subsection, and wage, income, and other 
        information from the Social Security Administration and 
        the Internal Revenue Service available pursuant to 
        section 6103(l)(7) of such Code, shall be requested and 
        utilized to the extent that such information may be 
        useful in verifying eligibility for, and the amount of, 
        benefits available under any program listed in 
        subsection (b), as determined by the Secretary of 
        Health and Human Services (or, in the case of the 
        unemployment compensation program, by the Secretary of 
        Labor, or, in the case of the supplemental nutrition 
        assistance program, by the Secretary of Agriculture);
          (3) employers (as defined in section 453A(a)(2)(B)) 
        (including State and local governmental entities and 
        labor organizations (as defined in section 
        453A(a)(2)(B)(ii))) in such State are required, 
        effective September 30, 1988, to make quarterly wage 
        reports to a State agency (which may be the agency 
        administering the State's unemployment compensation 
        law) except that the Secretary of Labor (in 
        consultation with the Secretary of Health and Human 
        Services and the Secretary of Agriculture) may waive 
        the provisions of this paragraph if he determines that 
        the State has in effect an alternative system which is 
        as effective and timely for purposes of providing 
        employment related income and eligibility data for the 
        purposes described in paragraph (2), and except that no 
        report shall be filed with respect to an employee of a 
        State or local agency performing intelligence or 
        counterintelligence functions, if the head of such 
        agency has determined that filing such a report could 
        endanger the safety of the employee or compromise an 
        ongoing investigation or intelligence mission, and 
        except that in the case of wage reports with respect to 
        domestic service employment, a State may permit 
        employers (as so defined) that make returns with 
        respect to such employment on a calendar year basis 
        pursuant to section 3510 of the Internal Revenue Code 
        of 1986 to make such reports on an annual basis;
          (4) the State agencies administering the programs 
        listed in subsection (b) adhere to standardized formats 
        and procedures established by the Secretary of Health 
        and Human Services (in consultation with the Secretary 
        of Agriculture) under which--
                  (A) the agencies will exchange with each 
                other information in their possession which may 
                be of use in establishing or verifying 
                eligibility or benefit amounts under any other 
                such program;
                  (B) such information shall be made available 
                to assist in the child support program under 
                part D of title IV of this Act, and to assist 
                the Secretary of Health and Human Services in 
                establishing or verifying eligibility or 
                benefit amounts under titles II and XVI of this 
                Act, but subject to the safeguards and 
                restrictions established by the Secretary of 
                the Treasury with respect to information 
                released pursuant to section 6103(l) of the 
                Internal Revenue Code of 1954; and
                  (C) the use of such information shall be 
                targeted to those uses which are most likely to 
                be productive in identifying and preventing 
                ineligibility and incorrect payments, and no 
                State shall be required to use such information 
                to verify the eligibility of all recipients;
          (5) adequate safeguards are in effect so as to assure 
        that--
                  (A) the information exchanged by the State 
                agencies is made available only to the extent 
                necessary to assist in the valid administrative 
                needs of the program receiving such 
                information, and the information released 
                pursuant to section 6103(l) of the Internal 
                Revenue Code of 1954 is only exchanged with 
                agencies authorized to receive such information 
                under such section 6103(l); and
                  (B) the information is adequately protected 
                against unauthorized disclosure for other 
                purposes, as provided in regulations 
                established by the Secretary of Health and 
                Human Services, or, in the case of the 
                unemployment compensation program, the 
                Secretary of Labor, or, in the case of the 
                supplemental nutrition assistance program, the 
                Secretary of Agriculture, or in the case of 
                information released pursuant to section 
                6103(l) of the Internal Revenue Code of 1954, 
                the Secretary of the Treasury;
          (6) all applicants for and recipients of benefits 
        under any such program shall be notified at the time of 
        application, and periodically thereafter, that 
        information available through the system will be 
        requested and utilized; and
          (7) accounting systems are utilized which assure that 
        programs providing data receive appropriate 
        reimbursement from the programs utilizing the data for 
        the costs incurred in providing the data.
  (b) The programs which must participate in the income and 
eligibility verification system are--
          (1) any State program funded under part A of title IV 
        of this Act;
          (2) the medicaid program under title XIX of this Act;
          (3) the unemployment compensation program under 
        section 3304 of the Internal Revenue Code of 1954;
          (4) the supplemental nutrition assistance program 
        established under the Food and Nutrition Act of 2008 (7 
        U.S.C. 2011 et seq.); and
          (5) any State program under a plan approved under 
        title I, X, XIV, or XVI of this Act.
  (c)(1) In order to protect applicants for and recipients of 
benefits under the programs identified in subsection (b), or 
under the supplemental security income program under title XVI, 
from the improper use of information obtained from the 
Secretary of the Treasury under section 6103(l)(7)(B) of the 
Internal Revenue Code of 1954, no Federal, State, or local 
agency receiving such information may terminate, deny, suspend, 
or reduce any benefits of an individual until such agency has 
taken appropriate steps to independently verify information 
relating to--
          (A) the amount of the asset or income involved,
          (B) whether such individual actually has (or had) 
        access to such asset or income for his own use, and
          (C) the period or periods when the individual 
        actually had such asset or income.
  (2) Such individual shall be informed by the agency of the 
findings made by the agency on the basis of such verified 
information, and shall be given an opportunity to contest such 
findings, in the same manner as applies to other information 
and findings relating to eligibility factors under the program.
  (d) The requirements of this subsection, with respect to an 
income and eligibility verification system of a State, are as 
follows:
          (1)(A) The State shall require, as a condition of an 
        individual's eligibility for benefits under a program 
        listed in subsection (b), a declaration in writing, 
        under penalty of perjury--
                  (i) by the individual,
                  (ii) in the case in which eligibility for 
                program benefits is determined on a family or 
                household basis, by any adult member of such 
                individual's family or household (as 
                applicable), or
                  (iii) in the case of an individual born into 
                a family or household receiving benefits under 
                such program, by any adult member or such 
                family or household no later than the next 
                redetermination of eligibility of such family 
                or household following the birth of such 
                individual,
        stating whether the individual is a citizen or national 
        of the United States, and, if that individual is not a 
        citizen or national of the United States, that the 
        individual is in a satisfactory immigration status.
          (B) In this subsection, in the case of the program 
        described in subsection (b)(4)--
                  (i) any reference to the State shall be 
                considered a reference to the State agency, and
                  (ii) any reference to an individual's 
                eligibility for benefits under the program 
                shall be considered a reference to the 
                individual's eligibility to participate in the 
                program as a member of a household, and
                  (iii) the term ``satisfactory immigration 
                status'' means an immigration status which does 
                not make the individual ineligible for benefits 
                under the applicable program.
          (2) If such an individual is not a citizen or 
        national of the United States, there must be presented 
        either--
                  (A) alien registration documentation or other 
                proof of immigration registration from the 
                Immigration and Naturalization Service that 
                contains the individual's alien admission 
                number or alien file number (or numbers if the 
                individual has more than one number), or
                  (B) such other documents as the State 
                determines constitutes reasonable evidence 
                indicating a satisfactory immigration status.
          (3) If the documentation described in paragraph 
        (2)(A) is presented, the State shall utilize the 
        individual's alien file or alien admission number to 
        verify with the Immigration and Naturalization Service 
        the individual's immigration status through an 
        automated or other system (designated by the Service 
        for use with States) that--
                  (A) utilizes the individual's name, file 
                number, admission number, or other means 
                permitting efficient verification, and
                  (B) protects the individual's privacy to the 
                maximum degree possible.
          (4) In the case of such an individual who is not a 
        citizen or national of the United States, if, at the 
        time of application for benefits, the statement 
        described in paragraph (1) is submitted but the 
        documentation required under paragraph (2) is not 
        presented or if the documentation required under 
        paragraph (2)(A) is presented but such documentation is 
        not verified under paragraph (3)--
                  (A) subject to subsection (f)(2), the State--
                          (i) shall provide a reasonable 
                        opportunity to submit to the State 
                        evidence indicating a satisfactory 
                        immigration status, and
                          (ii) may not delay, deny, reduce, or 
                        terminate the individual's eligibility 
                        for benefits under the program on the 
                        basis of the individual's immigration 
                        status until such a reasonable 
                        opportunity has been provided; and
                  (B) if there are submitted documents which 
                the State determines constitutes reasonable 
                evidence indicating such status--
                          (i) the State shall transmit to the 
                        Immigration and Naturalization Service 
                        either photostatic or other similar 
                        copies of such documents, or 
                        information from such documents, as 
                        specified by the Immigration and 
                        Naturalization Service, for official 
                        verification,
                          (ii) subject to subsection (f)(2), 
                        pending such verification, the State 
                        may not delay, deny, reduce, or 
                        terminate the individual's eligibility 
                        for benefits under the program on the 
                        basis of the individual's immigration 
                        status, and
                          (iii) the State shall not be liable 
                        for the consequences of any action, 
                        delay, or failure of the Service to 
                        conduct such verification.
          (5) If the State determines, after complying with the 
        requirements of paragraph (4), that such an individual 
        is not in a satisfactory immigration status under the 
        applicable program--
                  (A) the State shall deny or terminate the 
                individual's eligibility for benefits under the 
                program, and
                  (B) the applicable fair hearing process shall 
                be made available with respect to the 
                individual.
  (e) Each Federal agency responsible for administration of a 
program described in subsection (b) shall not take any 
compliance, disallowance, penalty, or other regulatory action 
against a State with respect to any error in the State's 
determination to make an individual eligible for benefits based 
on citizenship or immigration status--
          (1) if the State has provided such eligibility based 
        on a verification of satisfactory immigration status by 
        the Immigration and Naturalization Service,
          (2) because the State, under subsection 
        (d)(4)(A)(ii), was required to provide a reasonable 
        opportunity to submit documentation,
          (3) because the State, under subsection 
        (d)(4)(B)(ii), was required to wait for the response of 
        the Immigration and Naturalization Service to the 
        State's request for official verification of the 
        immigration status of the individual, or
          (4) because of a fair hearing process described in 
        subsection (d)(5)(B).
  (f) [Subsections (a)(1) and (d)] (1) Subsections (a)(1) and 
(d) shall not apply with respect to aliens seeking medical 
assistance for the treatment of an emergency medical condition 
under section 1903(v)(2).
  (2)(A) Subparagraphs (A) and (B)(ii) of subsection (d)(4) 
shall not apply in the case of an initial determination made on 
or after the date that is 6 months after the date of the 
enactment of this paragraph with respect to the eligibility of 
an alien described in subparagraph (B) for benefits under the 
program listed in subsection (b)(2).
  (B) An alien described in this subparagraph is an individual 
declaring to be a citizen or national of the United States with 
respect to whom a State, in accordance with section 
1902(a)(46)(B), requires--
          (i) pursuant to 1902(ee), the submission of a social 
        security number; or
          (ii) pursuant to 1903(x), the presentation of 
        satisfactory documentary evidence of citizenship or 
        nationality.

           *       *       *       *       *       *       *


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) provide that it shall be in effect in all 
        political subdivisions of the State, and, if 
        administered by them, be mandatory upon them;
          (2) provide for financial participation by the State 
        equal to not less than 40 per centum of the non-Federal 
        share of the expenditures under the plan with respect 
        to which payments under section 1903 are authorized by 
        this title; and, effective July 1, 1969, provide for 
        financial participation by the State equal to all of 
        such non-Federal share or provide for distribution of 
        funds from Federal or State sources, for carrying out 
        the State plan, on an equalization or other basis which 
        will assure that the lack of adequate funds from local 
        sources will not result in lowering the amount, 
        duration, scope, or quality of care and services 
        available under the plan;
          (3) provide for granting an opportunity for a fair 
        hearing before the State agency to any individual whose 
        claim for medical assistance under the plan is denied 
        or is not acted upon with reasonable promptness;
          (4) provide (A) such methods of administration 
        (including methods relating to the establishment and 
        maintenance of personnel standards on a merit basis, 
        except that the Secretary shall exercise no authority 
        with respect to the selection, tenure of office, and 
        compensation of any individual employed in accordance 
        with such methods, and including provision for 
        utilization of professional medical personnel in the 
        administration and, where administered locally, 
        supervision of administration of the plan) as are found 
        by the Secretary to be necessary for the proper and 
        efficient operation of the plan, (B) for the training 
        and effective use of paid subprofessional staff, with 
        particular emphasis on the full-time or part-time 
        employment of recipients and other persons of low 
        income, as community service aides, in the 
        administration of the plan and for the use of nonpaid 
        or partially paid volunteers in a social service 
        volunteer program in providing services to applicants 
        and recipients and in assisting any advisory committees 
        established by the State agency, (C) that each State or 
        local officer, employee, or independent contractor who 
        is responsible for the expenditure of substantial 
        amounts of funds under the State plan, each individual 
        who formerly was such an officer, employee, or 
        contractor, and each partner of such an officer, 
        employee, or contractor shall be prohibited from 
        committing any act, in relation to any activity under 
        the plan, the commission of which, in connection with 
        any activity concerning the United States Government, 
        by an officer or employee of the United States 
        Government, an individual who was such an officer or 
        employee, or a partner of such an officer or employee 
        is prohibited by section 207 or 208 of title 18, United 
        States Code, and (D) that each State or local officer, 
        employee, or independent contractor who is responsible 
        for selecting, awarding, or otherwise obtaining items 
        and services under the State plan shall be subject to 
        safeguards against conflicts of interest that are at 
        least as stringent as the safeguards that apply under 
        section 27 of the Office of Federal Procurement Policy 
        Act (41 U.S.C. 423) to persons described in subsection 
        (a)(2) of such section of that Act;
          (5) either provide for the establishment or 
        designation of a single State agency to administer or 
        to supervise the administration of the plan; or provide 
        for the establishment or designation of a single State 
        agency to administer or to supervise the administration 
        of the plan, except that the determination of 
        eligibility for medical assistance under the plan shall 
        be made by the State or local agency administering the 
        State plan approved under title I or XVI (insofar as it 
        relates to the aged) if the State is eligible to 
        participate in the State plan program established under 
        title XVI, or by the agency or agencies administering 
        the supplemental security income program established 
        under title XVI or the State plan approved under part A 
        of title IV if the State is not eligible to participate 
        in the State plan program established under title XVI;
          (6) provide that the State agency will make such 
        reports, in such form and containing such information, 
        as the Secretary may from time to time require, and 
        comply with such provisions as the Secretary may from 
        time to time find necessary to assure the correctness 
        and verification of such reports;
          (7) provide--
                  (A) safeguards which restrict the use or 
                disclosure of information concerning applicants 
                and recipients to purposes directly connected 
                with--
                          (i) the administration of the plan; 
                        and
                          (ii) the exchange of information 
                        necessary to certify or verify the 
                        certification of eligibility of 
                        children for free or reduced price 
                        breakfasts under the Child Nutrition 
                        Act of 1966 and free or reduced price 
                        lunches under the Richard B. Russell 
                        National School Lunch Act, in 
                        accordance with section 9(b) of that 
                        Act, using data standards and formats 
                        established by the State agency; and
                  (B) that, notwithstanding the Express Lane 
                option under subsection (e)(13), the State may 
                enter into an agreement with the State agency 
                administering the school lunch program 
                established under the Richard B. Russell 
                National School Lunch Act under which the State 
                shall establish procedures to ensure that--
                          (i) a child receiving medical 
                        assistance under the State plan under 
                        this title whose family income does not 
                        exceed 133 percent of the poverty line 
                        (as defined in section 673(2) of the 
                        Community Services Block Grant Act, 
                        including any revision required by such 
                        section), as determined without regard 
                        to any expense, block, or other income 
                        disregard, applicable to a family of 
                        the size involved, may be certified as 
                        eligible for free lunches under the 
                        Richard B. Russell National School 
                        Lunch Act and free breakfasts under the 
                        Child Nutrition Act of 1966 without 
                        further application; and
                          (ii) the State agencies responsible 
                        for administering the State plan under 
                        this title, and for carrying out the 
                        school lunch program established under 
                        the Richard B. Russell National School 
                        Lunch Act (42 U.S.C. 1751 et seq.) or 
                        the school breakfast program 
                        established by section 4 of the Child 
                        Nutrition Act of 1966 (42 U.S.C. 1773), 
                        cooperate in carrying out paragraphs 
                        (3)(F) and (15) of section 9(b) of that 
                        Act;
          (8) provide that all individuals wishing to make 
        application for medical assistance under the plan shall 
        have opportunity to do so, and that such assistance 
        shall be furnished with reasonable promptness to all 
        eligible individuals;
          (9) provide--
                  (A) that the State health agency, or other 
                appropriate State medical agency (whichever is 
                utilized by the Secretary for the purpose 
                specified in the first sentence of section 
                1864(a)), shall be responsible for establishing 
                and maintaining health standards for private or 
                public institutions in which recipients of 
                medical assistance under the plan may receive 
                care or services,
                  (B) for the establishment or designation of a 
                State authority or authorities which shall be 
                responsible for establishing and maintaining 
                standards, other than those relating to health, 
                for such institutions,
                  (C) that any laboratory services paid for 
                under such plan must be provided by a 
                laboratory which meets the applicable 
                requirements of section 1861(e)(9) or 
                paragraphs (16) and (17) of section 1861(s), 
                or, in the case of a laboratory which is in a 
                rural health clinic, of section 1861(aa)(2)(G), 
                and
                  (D) that the State maintain a consumer-
                oriented website providing useful information 
                to consumers regarding all skilled nursing 
                facilities and all nursing facilities in the 
                State, including for each facility, Form 2567 
                State inspection reports (or a successor form), 
                complaint investigation reports, the facility's 
                plan of correction, and such other information 
                that the State or the Secretary considers 
                useful in assisting the public to assess the 
                quality of long term care options and the 
                quality of care provided by individual 
                facilities;
          (10) provide--
                  (A) for making medical assistance available, 
                including at least the care and services listed 
                in paragraphs (1) through (5), (17), (21), and 
                (28) of section 1905(a), to--
                          (i) all individuals--
                                  (I) who are receiving aid or 
                                assistance under any plan of 
                                the State approved under title 
                                I, X, XIV, or XVI, or part A or 
                                part E of title IV (including 
                                individuals eligible under this 
                                title by reason of section 
                                402(a)(37), 406(h), or 473(b), 
                                or considered by the State to 
                                be receiving such aid as 
                                authorized under section 
                                482(e)(6)),
                                  (II)(aa) with respect to whom 
                                supplemental security income 
                                benefits are being paid under 
                                title XVI (or were being paid 
                                as of the date of the enactment 
                                of section 211(a) of the 
                                Personal Responsibility and 
                                Work Opportunity Reconciliation 
                                Act of 1996 (P.L. 104-193) and 
                                would continue to be paid but 
                                for the enactment of that 
                                section), (bb) who are 
                                qualified severely impaired 
                                individuals (as defined in 
                                section 1905(q)), or (cc) who 
                                are under 21 years of age and 
                                with respect to whom 
                                supplemental security income 
                                benefits would be paid under 
                                title XVI if subparagraphs (A) 
                                and (B) of section 1611(c)(7) 
                                were applied without regard to 
                                the phrase ``the first day of 
                                the month following'',
                                  (III) who are qualified 
                                pregnant women or children as 
                                defined in section 1905(n),
                                  (IV) who are described in 
                                subparagraph (A) or (B) of 
                                subsection (l)(1) and whose 
                                family income does not exceed 
                                the minimum income level the 
                                State is required to establish 
                                under subsection (l)(2)(A) for 
                                such a family;
                                  (V) who are qualified family 
                                members as defined in section 
                                1905(m)(1),
                                  (VI) who are described in 
                                subparagraph (C) of subsection 
                                (l)(1) and whose family income 
                                does not exceed the income 
                                level the State is required to 
                                establish under subsection 
                                (l)(2)(B) for such a family,
                                  (VII) who are described in 
                                subparagraph (D) of subsection 
                                (l)(1) and whose family income 
                                does not exceed the income 
                                level the State is required to 
                                establish under subsection 
                                (l)(2)(C) for such a family;
                                  (VIII) beginning January 1, 
                                2014, at the option of a State, 
                                who are under 65 years of age, 
                                not pregnant, not entitled to, 
                                or enrolled for, benefits under 
                                part A of title XVIII, or 
                                enrolled for benefits under 
                                part B of title XVIII, and are 
                                not described in a previous 
                                subclause of this clause, and 
                                whose income (as determined 
                                under subsection (e)(14)) does 
                                not exceed 133 percent of the 
                                poverty line (as defined in 
                                section 2110(c)(5)) applicable 
                                to a family of the size 
                                involved, subject to subsection 
                                (k); or
                                  (IX) who--
                                          (aa) are under 26 
                                        years of age;
                                          (bb) are not 
                                        described in or 
                                        enrolled under any of 
                                        subclauses (I) through 
                                        (VII) of this clause or 
                                        are described in any of 
                                        such subclauses but 
                                        have income that 
                                        exceeds the level of 
                                        income applicable under 
                                        the State plan for 
                                        eligibility to enroll 
                                        for medical assistance 
                                        under such subclause;
                                          (cc) were in foster 
                                        care under the 
                                        responsibility of the 
                                        State on the date of 
                                        attaining 18 years of 
                                        age or such higher age 
                                        as the State has 
                                        elected under section 
                                        475(8)(B)(iii); and
                                          (dd) were enrolled in 
                                        the State plan under 
                                        this title or under a 
                                        waiver of the plan 
                                        while in such foster 
                                        care;
                          (ii) at the option of the State, to 
                        any group or groups of individuals 
                        described in section 1905(a) (or, in 
                        the case of individuals described in 
                        section 1905(a)(i), to any reasonable 
                        categories of such individuals) who are 
                        not individuals described in clause (i) 
                        of this subparagraph but--
                                  (I) who meet the income and 
                                resources requirements of the 
                                appropriate State plan 
                                described in clause (i) or the 
                                supplemental security income 
                                program (as the case may be),
                                  (II) who would meet the 
                                income and resources 
                                requirements of the appropriate 
                                State plan described in clause 
                                (i) if their work-related child 
                                care costs were paid from their 
                                earnings rather than by a State 
                                agency as a service 
                                expenditure,
                                  (III) who would be eligible 
                                to receive aid under the 
                                appropriate State plan 
                                described in clause (i) if 
                                coverage under such plan was as 
                                broad as allowed under Federal 
                                law,
                                  (IV) with respect to whom 
                                there is being paid, or who are 
                                eligible, or would be eligible 
                                if they were not in a medical 
                                institution, to have paid with 
                                respect to them, aid or 
                                assistance under the 
                                appropriate State plan 
                                described in clause (i), 
                                supplemental security income 
                                benefits under title XVI, or a 
                                State supplementary payment;
                                  (V) who are in a medical 
                                institution for a period of not 
                                less than 30 consecutive days 
                                (with eligibility by reason of 
                                this subclause beginning on the 
                                first day of such period), who 
                                meet the resource requirements 
                                of the appropriate State plan 
                                described in clause (i) or the 
                                supplemental security income 
                                program, and whose income does 
                                not exceed a separate income 
                                standard established by the 
                                State which is consistent with 
                                the limit established under 
                                section 1903(f)(4)(C),
                                  (VI) who would be eligible 
                                under the State plan under this 
                                title if they were in a medical 
                                institution, with respect to 
                                whom there has been a 
                                determination that but for the 
                                provision of home or community-
                                based services described in 
                                subsection (c), (d), or (e) of 
                                section 1915 they would require 
                                the level of care provided in a 
                                hospital, nursing facility or 
                                intermediate care facility for 
                                the mentally retarded the cost 
                                of which could be reimbursed 
                                under the State plan, and who 
                                will receive home or community-
                                based services pursuant to a 
                                waiver granted by the Secretary 
                                under subsection (c), (d), or 
                                (e) of section 1915,
                                  (VII) who would be eligible 
                                under the State plan under this 
                                title if they were in a medical 
                                institution, who are terminally 
                                ill, and who will receive 
                                hospice care pursuant to a 
                                voluntary election described in 
                                section 1905(o);
                                  (VIII) who is a child 
                                described in section 
                                1905(a)(i)--
                                          (aa) for whom there 
                                        is in effect an 
                                        adoption assistance 
                                        agreement (other than 
                                        an agreement under part 
                                        E of title IV) between 
                                        the State and an 
                                        adoptive parent or 
                                        parents,
                                          (bb) who the State 
                                        agency responsible for 
                                        adoption assistance has 
                                        determined cannot be 
                                        placed with adoptive 
                                        parents without medical 
                                        assistance because such 
                                        child has special needs 
                                        for medical or 
                                        rehabilitative care, 
                                        and
                                          (cc) who was eligible 
                                        for medical assistance 
                                        under the State plan 
                                        prior to the adoption 
                                        assistance agreement 
                                        being entered into, or 
                                        who would have been 
                                        eligible for medical 
                                        assistance at such time 
                                        if the eligibility 
                                        standards and 
                                        methodologies of the 
                                        State's foster care 
                                        program under part E of 
                                        title IV were applied 
                                        rather than the 
                                        eligibility standards 
                                        and methodologies of 
                                        the State's aid to 
                                        families with dependent 
                                        children program under 
                                        part A of title IV;
                                  (IX) who are described in 
                                subsection (l)(1) and are not 
                                described in clause (i)(IV), 
                                clause (i)(VI), or clause 
                                (i)(VII);
                                  (X) who are described in 
                                subsection (m)(1);
                                  (XI) who receive only an 
                                optional State supplementary 
                                payment based on need and paid 
                                on a regular basis, equal to 
                                the difference between the 
                                individual's countable income 
                                and the income standard used to 
                                determine eligibility for such 
                                supplementary payment (with 
                                countable income being the 
                                income remaining after 
                                deductions as established by 
                                the State pursuant to standards 
                                that may be more restrictive 
                                than the standards for 
                                supplementary security income 
                                benefits under title XVI), 
                                which are available to all 
                                individuals in the State (but 
                                which may be based on different 
                                income standards by political 
                                subdivision according to cost 
                                of living differences), and 
                                which are paid by a State that 
                                does not have an agreement with 
                                the Commissioner of Social 
                                Security under section 1616 or 
                                1634;
                                  (XII) who are described in 
                                subsection (z)(1) (relating to 
                                certain TB-infected 
                                individuals);
                                  (XIII) who are in families 
                                whose income is less than 250 
                                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, and who but for 
                                earnings in excess of the limit 
                                established under section 
                                1905(q)(2)(B), would be 
                                considered to be receiving 
                                supplemental security income 
                                (subject, notwithstanding 
                                section 1916, to payment of 
                                premiums or other cost-sharing 
                                charges (set on a sliding scale 
                                based on income) that the State 
                                may determine);
                                  (XIV) who are optional 
                                targeted low-income children 
                                described in section 
                                1905(u)(2)(B);
                                  (XV) who, but for earnings in 
                                excess of the limit established 
                                under section 1905(q)(2)(B), 
                                would be considered to be 
                                receiving supplemental security 
                                income, who is at least 16, but 
                                less than 65, years of age, and 
                                whose assets, resources, and 
                                earned or unearned income (or 
                                both) do not exceed such 
                                limitations (if any) as the 
                                State may establish;
                                  (XVI) who are employed 
                                individuals with a medically 
                                improved disability described 
                                in section 1905(v)(1) and whose 
                                assets, resources, and earned 
                                or unearned income (or both) do 
                                not exceed such limitations (if 
                                any) as the State may 
                                establish, but only if the 
                                State provides medical 
                                assistance to individuals 
                                described in subclause (XV);
                                  (XVII) who are independent 
                                foster care adolescents (as 
                                defined in section 1905(w)(1)), 
                                or who are within any 
                                reasonable categories of such 
                                adolescents specified by the 
                                State;
                                  (XVIII) who are described in 
                                subsection (aa) (relating to 
                                certain breast or cervical 
                                cancer patients);
                                  (XIX) who are disabled 
                                children described in 
                                subsection (cc)(1);
                                  (XX) beginning January 1, 
                                2014, and ending December 31, 
                                2019, who are under 65 years of 
                                age and are not described in or 
                                enrolled under a previous 
                                subclause of this clause, and 
                                whose income (as determined 
                                under subsection (e)(14)) 
                                exceeds 133 percent of the 
                                poverty line (as defined in 
                                section 2110(c)(5)) applicable 
                                to a family of the size 
                                involved but does not exceed 
                                the highest income eligibility 
                                level established under the 
                                State plan or under a waiver of 
                                the plan, subject to subsection 
                                (hh);
                                  (XXI) who are described in 
                                subsection (ii) (relating to 
                                individuals who meet certain 
                                income standards); or
                                  (XXII) who are eligible for 
                                home and community-based 
                                services under needs-based 
                                criteria established under 
                                paragraph (1)(A) of section 
                                1915(i), or who are eligible 
                                for home and community-based 
                                services under paragraph (6) of 
                                such section, and who will 
                                receive home and community-
                                based services pursuant to a 
                                State plan amendment under such 
                                subsection;
                  (B) that the medical assistance made 
                available to any individual described in 
                subparagraph (A)--
                          (i) shall not be less in amount, 
                        duration, or scope than the medical 
                        assistance made available to any other 
                        such individual, and
                          (ii) shall not be less in amount, 
                        duration, or scope than the medical 
                        assistance made available to 
                        individuals not described in 
                        subparagraph (A);
                  (C) that if medical assistance is included 
                for any group of individuals described in 
                section 1905(a) who are not described in 
                subparagraph (A) or (E), then--
                          (i) the plan must include a 
                        description of (I) the criteria for 
                        determining eligibility of individuals 
                        in the group for such medical 
                        assistance, (II) the amount, duration, 
                        and scope of medical assistance made 
                        available to individuals in the group, 
                        and (III) the single standard to be 
                        employed in determining income and 
                        resource eligibility for all such 
                        groups, and the methodology to be 
                        employed in determining such 
                        eligibility, which shall be no more 
                        restrictive than the methodology which 
                        would be employed under the 
                        supplemental security income program in 
                        the case of groups consisting of aged, 
                        blind, or disabled individuals in a 
                        State in which such program is in 
                        effect, and which shall be no more 
                        restrictive than the methodology which 
                        would be employed under the appropriate 
                        State plan (described in subparagraph 
                        (A)(i)) to which such group is most 
                        closely categorically related in the 
                        case of other groups;
                          (ii) the plan must make available 
                        medical assistance--
                                  (I) to individuals under the 
                                age of 18 who (but for income 
                                and resources) would be 
                                eligible for medical assistance 
                                as an individual described in 
                                subparagraph (A)(i), and
                                  (II) to pregnant women, 
                                during the course of their 
                                pregnancy, who (but for income 
                                and resources) would be 
                                eligible for medical assistance 
                                as an individual described in 
                                subparagraph (A);
                          (iii) such medical assistance must 
                        include (I) with respect to children 
                        under 18 and individuals entitled to 
                        institutional services, ambulatory 
                        services, and (II) with respect to 
                        pregnant women, prenatal care and 
                        delivery services; and
                          (iv) if such medical assistance 
                        includes services in institutions for 
                        mental diseases or in an intermediate 
                        care facility for the mentally retarded 
                        (or both) for any such group, it also 
                        must include for all groups covered at 
                        least the care and services listed in 
                        paragraphs (1) through (5) and (17) of 
                        section 1905(a) or the care and 
                        services listed in any 7 of the 
                        paragraphs numbered (1) through (24) of 
                        such section;
                  (D) for the inclusion of home health services 
                for any individual who, under the State plan, 
                is entitled to nursing facility services;
                  (E)(i) for making medical assistance 
                available for medicare cost-sharing (as defined 
                in section 1905(p)(3)) for qualified medicare 
                beneficiaries described in section 1905(p)(1);
                  (ii) for making medical assistance available 
                for payment of medicare cost-sharing described 
                in section 1905(p)(3)(A)(i) for qualified 
                disabled and working individuals described in 
                section 1905(s);
                  (iii) for making medical assistance available 
                for medicare cost sharing described in section 
                1905(p)(3)(A)(ii) subject to section 
                1905(p)(4), for individuals who would be 
                qualified medicare beneficiaries described in 
                section 1905(p)(1) but for the fact that their 
                income exceeds the income level established by 
                the State under section 1905(p)(2) but is less 
                than 110 percent in 1993 and 1994, and 120 
                percent in 1995 and years thereafter of the 
                official poverty line (referred to in such 
                section) for a family of the size involved; and
                  (iv) subject to sections 1933 and 1905(p)(4), 
                for making medical assistance available for 
                medicare cost-sharing described in section 
                1905(p)(3)(A)(ii) for individuals who would be 
                qualified medicare beneficiaries described in 
                section 1905(p)(1) but for the fact that their 
                income exceeds the income level established by 
                the State under section 1905(p)(2) and is at 
                least 120 percent, but less than 135 percent, 
                of the official poverty line (referred to in 
                such section) for a family of the size involved 
                and who are not otherwise eligible for medical 
                assistance under the State plan;
                  (F) at the option of a State, for making 
                medical assistance available for COBRA premiums 
                (as defined in subsection (u)(2)) for qualified 
                COBRA continuation beneficiaries described in 
                section 1902(u)(1); and
                  (G) that, in applying eligibility criteria of 
                the supplemental security income program under 
                title XVI for purposes of determining 
                eligibility for medical assistance under the 
                State plan of an individual who is not 
                receiving supplemental security income, the 
                State will disregard the provisions of 
                subsections (c) and (e) of section 1613;
        except that (I) the making available of the services 
        described in paragraph (4), (14), or (16) of section 
        1905(a) to individuals meeting the age requirements 
        prescribed therein shall not, by reason of this 
        paragraph (10), require the making available of any 
        such services, or the making available of such services 
        of the same amount, duration, and scope, to individuals 
        of any other ages, (II) the making available of 
        supplementary medical insurance benefits under part B 
        of title XVIII to individuals eligible therefor (either 
        pursuant to an agreement entered into under section 
        1843 or by reason of the payment of premiums under such 
        title by the State agency on behalf of such 
        individuals), or provision for meeting part or all of 
        the cost of deductibles, cost sharing, or similar 
        charges under part B of title XVIII for individuals 
        eligible for benefits under such part, shall not, by 
        reason of this paragraph (10), require the making 
        available of any such benefits, or the making available 
        of services of the same amount, duration, and scope, to 
        any other individuals, (III) the making available of 
        medical assistance equal in amount, duration, and scope 
        to the medical assistance made available to individuals 
        described in clause (A) to any classification of 
        individuals approved by the Secretary with respect to 
        whom there is being paid, or who are eligible, or would 
        be eligible if they were not in a medical institution, 
        to have paid with respect to them, a State 
        supplementary payment shall not, by reason of this 
        paragraph (10), require the making available of any 
        such assistance, or the making available of such 
        assistance of the same amount, duration, and scope, to 
        any other individuals not described in clause (A), (IV) 
        the imposition of a deductible, cost sharing, or 
        similar charge for any item or service furnished to an 
        individual not eligible for the exemption under section 
        1916(a)(2) or (b)(2) shall not require the imposition 
        of a deductible, cost sharing, or similar charge for 
        the same item or service furnished to an individual who 
        is eligible for such exemption, (V) the making 
        available to pregnant women covered under the plan of 
        services relating to pregnancy (including prenatal, 
        delivery, and postpartum services) or to any other 
        condition which may complicate pregnancy shall not, by 
        reason of this paragraph (10), require the making 
        available of such services, or the making available of 
        such services of the same amount, duration, and scope, 
        to any other individuals, provided such services are 
        made available (in the same amount, duration, and 
        scope) to all pregnant women covered under the State 
        plan, (VI) with respect to the making available of 
        medical assistance for hospice care to terminally ill 
        individuals who have made a voluntary election 
        described in section 1905(o) to receive hospice care 
        instead of medical assistance for certain other 
        services, such assistance may not be made available in 
        an amount, duration, or scope less than that provided 
        under title XVIII, and the making available of such 
        assistance shall not, by reason of this paragraph (10), 
        require the making available of medical assistance for 
        hospice care to other individuals or the making 
        available of medical assistance for services waived by 
        such terminally ill individuals, (VII) the medical 
        assistance made available to an individual described in 
        subsection (l)(1)(A) who is eligible for medical 
        assistance only because of subparagraph (A)(i)(IV) or 
        (A)(ii)(IX) shall be limited to medical assistance for 
        services related to pregnancy (including prenatal, 
        delivery, postpartum, and family planning services) and 
        to other conditions which may complicate pregnancy, 
        (VIII) the medical assistance made available to a 
        qualified medicare beneficiary described in section 
        1905(p)(1) who is only entitled to medical assistance 
        because the individual is such a beneficiary shall be 
        limited to medical assistance for medicare cost-sharing 
        (described in section 1905(p)(3)), subject to the 
        provisions of subsection (n) and section 1916(b), (IX) 
        the making available of respiratory care services in 
        accordance with subsection (e)(9) shall not, by reason 
        of this paragraph (10), require the making available of 
        such services, or the making available of such services 
        of the same amount, duration, and scope, to any 
        individuals not included under subsection (e)(9)(A), 
        provided such services are made available (in the same 
        amount, duration, and scope) to all individuals 
        described in such subsection, (X) if the plan provides 
        for any fixed durational limit on medical assistance 
        for inpatient hospital services (whether or not such a 
        limit varies by medical condition or diagnosis), the 
        plan must establish exceptions to such a limit for 
        medically necessary inpatient hospital services 
        furnished with respect to individuals under one year of 
        age in a hospital defined under the State plan, 
        pursuant to section 1923(a)(1)(A), as a 
        disproportionate share hospital and subparagraph (B) 
        (relating to comparability) shall not be construed as 
        requiring such an exception for other individuals, 
        services, or hospitals, (XI) the making available of 
        medical assistance to cover the costs of premiums, 
        deductibles, coinsurance, and other cost-sharing 
        obligations for certain individuals for private health 
        coverage as described in section 1906 shall not, by 
        reason of paragraph (10), require the making available 
        of any such benefits or the making available of 
        services of the same amount, duration, and scope of 
        such private coverage to any other individuals, (XII) 
        the medical assistance made available to an individual 
        described in subsection (u)(1) who is eligible for 
        medical assistance only because of subparagraph (F) 
        shall be limited to medical assistance for COBRA 
        continuation premiums (as defined in subsection 
        (u)(2)), (XIII) the medical assistance made available 
        to an individual described in subsection (z)(1) who is 
        eligible for medical assistance only because of 
        subparagraph (A)(ii)(XII) shall be limited to medical 
        assistance for TB-related services (described in 
        subsection (z)(2)), (XIV) the medical assistance made 
        available to an individual described in subsection (aa) 
        who is eligible for medical assistance only because of 
        subparagraph (A)(10)(ii)(XVIII) shall be limited to 
        medical assistance provided during the period in which 
        such an individual requires treatment for breast or 
        cervical cancer (XV) the medical assistance made 
        available to an individual described in subparagraph 
        (A)(i)(VIII) shall be limited to medical assistance 
        described in subsection (k)(1), (XVI) the medical 
        assistance made available to an individual described in 
        subsection (ii) shall be limited to family planning 
        services and supplies described in section 
        1905(a)(4)(C) including medical diagnosis and treatment 
        services that are provided pursuant to a family 
        planning service in a family planning setting and 
        (XVII) if an individual is described in subclause (IX) 
        of subparagraph (A)(i) and is also described in 
        subclause (VIII) of that subparagraph, the medical 
        assistance shall be made available to the individual 
        through subclause (IX) instead of through subclause 
        (VIII);
          (11)(A) provide for entering into cooperative 
        arrangements with the State agencies responsible for 
        administering or supervising the administration of 
        health services and vocational rehabilitation services 
        in the State looking toward maximum utilization of such 
        services in the provision of medical assistance under 
        the plan, (B) provide, to the extent prescribed by the 
        Secretary, for entering into agreements, with any 
        agency, institution, or organization receiving payments 
        under (or through an allotment under) title V, (i) 
        providing for utilizing such agency, institution, or 
        organization in furnishing care and services which are 
        available under such title or allotment and which are 
        included in the State plan approved under this section 
        (ii) making such provision as may be appropriate for 
        reimbursing such agency, institution, or organization 
        for the cost of any such care and services furnished 
        any individual for which payment would otherwise be 
        made to the State with respect to the individual under 
        section 1903, and (iii) providing for coordination of 
        information and education on pediatric vaccinations and 
        delivery of immunization services, and (C) provide for 
        coordination of the operations under this title, 
        including the provision of information and education on 
        pediatric vaccinations and the delivery of immunization 
        services, with the State's operations under the special 
        supplemental nutrition program for women, infants, and 
        children under section 17 of the Child Nutrition Act of 
        1966;
          (12) provide that, in determining whether an 
        individual is blind, there shall be an examination by a 
        physician skilled in the diseases of the eye or by an 
        optometrist, whichever the individual may select;
          (13) provide--
                  (A) for a public process for determination of 
                rates of payment under the plan for hospital 
                services, nursing facility services, and 
                services of intermediate care facilities for 
                the mentally retarded under which--
                          (i) proposed rates, the methodologies 
                        underlying the establishment of such 
                        rates, and justifications for the 
                        proposed rates are published,
                          (ii) providers, beneficiaries and 
                        their representatives, and other 
                        concerned State residents are given a 
                        reasonable opportunity for review and 
                        comment on the proposed rates, 
                        methodologies, and justifications,
                          (iii) final rates, the methodologies 
                        underlying the establishment of such 
                        rates, and justifications for such 
                        final rates are published, and
                          (iv) in the case of hospitals, such 
                        rates take into account (in a manner 
                        consistent with section 1923) the 
                        situation of hospitals which serve a 
                        disproportionate number of low-income 
                        patients with special needs;
                  (B) for payment for hospice care in amounts 
                no lower than the amounts, using the same 
                methodology, used under part A of title XVIII 
                and for payment of amounts under section 
                1905(o)(3); except that in the case of hospice 
                care which is furnished to an individual who is 
                a resident of a nursing facility or 
                intermediate care facility for the mentally 
                retarded, and who would be eligible under the 
                plan for nursing facility services or services 
                in an intermediate care facility for the 
                mentally retarded if he had not elected to 
                receive hospice care, there shall be paid an 
                additional amount, to take into account the 
                room and board furnished by the facility, equal 
                to at least 95 percent of the rate that would 
                have been paid by the State under the plan for 
                facility services in that facility for that 
                individual; and
                  (C) payment for primary care services (as 
                defined in subsection (jj)) furnished in 2013 
                and 2014 by a physician with a primary 
                specialty designation of family medicine, 
                general internal medicine, or pediatric 
                medicine at a rate not less than 100 percent of 
                the payment rate that applies to such services 
                and physician under part B of title XVIII (or, 
                if greater, the payment rate that would be 
                applicable under such part if the conversion 
                factor under section 1848(d) for the year 
                involved were the conversion factor under such 
                section for 2009);
          (14) provide that enrollment fees, premiums, or 
        similar charges, and deductions, cost sharing, or 
        similar charges, may be imposed only as provided in 
        section 1916;
          (15) provide for payment for services described in 
        clause (B) or (C) of section 1905(a)(2) under the plan 
        in accordance with subsection (bb);
          (16) provide for inclusion, to the extent required by 
        regulations prescribed by the Secretary, of provisions 
        (conforming to such regulations) with respect to the 
        furnishing of medical assistance under the plan to 
        individuals who are residents of the State but are 
        absent therefrom;
          (17) except as provided in subsections (e)(14), 
        [(e)(14)] (e)(15), (l)(3), (m)(3), and (m)(4), include 
        reasonable standards (which shall be comparable for all 
        groups and may, in accordance with standards prescribed 
        by the Secretary, differ with respect to income levels, 
        but only in the case of applicants or recipients of 
        assistance under the plan who are not receiving aid or 
        assistance under any plan of the State approved under 
        title I, X, XIV, or XVI, or part A of title IV, and 
        with respect to whom supplemental security income 
        benefits are not being paid under title XVI, based on 
        the variations between shelter costs in urban areas and 
        in rural areas) for determining eligibility for and the 
        extent of medical assistance under the plan which (A) 
        are consistent with the objectives of this title, (B) 
        provide for taking into account only such income and 
        resources as are, as determined in accordance with 
        standards prescribed by the Secretary, available to the 
        applicant or recipient and (in the case of any 
        applicant or recipient who would, except for income and 
        resources, be eligible for aid or assistance in the 
        form of money payments under any plan of the State 
        approved under title I, X, XIV, or XVI, or part A of 
        title IV, or to have paid with respect to him 
        supplemental security income benefits under title XVI) 
        as would not be disregarded (or set aside for future 
        needs) in determining his eligibility for such aid, 
        assistance, or benefits, (C) provide for reasonable 
        evaluation of any such income or resources, and (D) do 
        not take into account the financial responsibility of 
        any individual for any applicant or recipient of 
        assistance under the plan unless such applicant or 
        recipient is such individual's spouse or such 
        individual's child who is under age 21 or (with respect 
        to States eligible to participate in the State program 
        established under title XVI), is blind or permanently 
        and totally disabled, or is blind or disabled as 
        defined in section 1614 (with respect to States which 
        are not eligible to participate in such program); and 
        provide for flexibility in the application of such 
        standards with respect to income by taking into 
        account, except to the extent prescribed by the 
        Secretary, the costs (whether in the form of insurance 
        premiums, payments made to the State under section 
        1903(f)(2)(B), or otherwise and regardless of whether 
        such costs are reimbursed under another public program 
        of the State or political subdivision thereof) incurred 
        for medical care or for any other type of remedial care 
        recognized under State law;
          (18) comply with the provisions of section 1917 with 
        respect to liens, adjustments and recoveries of medical 
        assistance correctly paid, transfers of assets, and 
        treatment of certain trusts;
          (19) provide such safeguards as may be necessary to 
        assure that eligibility for care and services under the 
        plan will be determined, and such care and services 
        will be provided, in a manner consistent with 
        simplicity of administration and the best interests of 
        the recipients;
          (20) if the State plan includes medical assistance in 
        behalf of individuals 65 years of age or older who are 
        patients in institutions for mental diseases--
                  (A) provide for having in effect such 
                agreements or other arrangements with State 
                authorities concerned with mental diseases, 
                and, where appropriate, with such institutions, 
                as may be necessary for carrying out the State 
                plan, including arrangements for joint planning 
                and for development of alternate methods of 
                care, arrangements providing assurance of 
                immediate readmittance to institutions where 
                needed for individuals under alternate plans of 
                care, and arrangements providing for access to 
                patients and facilities, for furnishing 
                information, and for making reports;
                  (B) provide for an individual plan for each 
                such patient to assure that the institutional 
                care provided to him is in his best interests, 
                including, to that end, assurances that there 
                will be initial and periodic review of his 
                medical and other needs, that he will be given 
                appropriate medical treatment within the 
                institution, and that there will be a periodic 
                determination of his need for continued 
                treatment in the institution; and
                  (C) provide for the development of alternate 
                plans of care, making maximum utilization of 
                available resources, for recipients 65 years of 
                age or older who would otherwise need care in 
                such institutions, including appropriate 
                medical treatment and other aid or assistance; 
                for services referred to in section 
                3(a)(4)(A)(i) and (ii) or section 
                1603(a)(4)(A)(i) and (ii) which are appropriate 
                for such recipients and for such patients; and 
                for methods of administration necessary to 
                assure that the responsibilities of the State 
                agency under the State plan with respect to 
                such recipients and such patients will be 
                effectively carried out;
          (21) if the State plan includes medical assistance in 
        behalf of individuals 65 years of age or older who are 
        patients in public institutions for mental diseases, 
        show that the State is making satisfactory progress 
        toward developing and implementing a comprehensive 
        mental health program, including provision for 
        utilization of community mental health centers, nursing 
        facilities, and other alternatives to care in public 
        institutions for mental diseases;
          (22) include descriptions of (A) the kinds and 
        numbers of professional medical personnel and 
        supporting staff that will be used in the 
        administration of the plan and of the responsibilities 
        they will have, (B) the standards, for private or 
        public institutions in which recipients of medical 
        assistance under the plan may receive care or services, 
        that will be utilized by the State authority or 
        authorities responsible for establishing and 
        maintaining such standards, (C) the cooperative 
        arrangements with State health agencies and State 
        vocational rehabilitation agencies entered into with a 
        view to maximum utilization of and coordination of the 
        provision of medical assistance with the services 
        administered or supervised by such agencies, and (D) 
        other standards and methods that the State will use to 
        assure that medical or remedial care and services 
        provided to recipients of medical assistance are of 
        high quality;
          (23) provide that (A) any individual eligible for 
        medical assistance (including drugs) may obtain such 
        assistance from any institution, agency, community 
        pharmacy, or person, qualified to perform the service 
        or services required (including an organization which 
        provides such services, or arranges for their 
        availability, on a prepayment basis), who undertakes to 
        provide him such services, and (B) an enrollment of an 
        individual eligible for medical assistance in a primary 
        care case-management system (described in section 
        1915(b)(1)), a medicaid managed care organization, or a 
        similar entity shall not restrict the choice of the 
        qualified person from whom the individual may receive 
        services under section 1905(a)(4)(C), except as 
        provided in subsection (g) and in section 1915, except 
        that this paragraph shall not apply in the case of 
        Puerto Rico, the Virgin Islands, and Guam, and except 
        that nothing in this paragraph shall be construed as 
        requiring a State to provide medical assistance for 
        such services furnished by a person or entity convicted 
        of a felony under Federal or State law for an offense 
        which the State agency determines is inconsistent with 
        the best interests of beneficiaries under the State 
        plan or by a provider or supplier to which a moratorium 
        under subsection (kk)(4) is applied during the period 
        of such moratorium';
          (24) effective July 1, 1969, provide for consultative 
        services by health agencies and other appropriate 
        agencies of the State to hospitals, nursing facilities, 
        home health agencies, clinics, laboratories, and such 
        other institutions as the Secretary may specify in 
        order to assist them (A) to qualify for payments under 
        this Act, (B) to establish and maintain such fiscal 
        records as may be necessary for the proper and 
        efficient administration of this Act, and (C) to 
        provide information needed to determine payments due 
        under this Act on account of care and services 
        furnished to individuals;
          (25) provide--
                  (A) that the State or local agency 
                administering such plan will take all 
                reasonable measures to ascertain the legal 
                liability of third parties (including health 
                insurers, self-insured plans, group health 
                plans (as defined in section 607(1) of the 
                Employee Retirement Income Security Act of 
                1974), service benefit plans, managed care 
                organizations, pharmacy benefit managers, or 
                other parties that are, by statute, contract, 
                or agreement, legally responsible for payment 
                of a claim for a health care item or service) 
                to pay for care and services available under 
                the plan, including--
                          (i) the collection of sufficient 
                        information (as specified by the 
                        Secretary in regulations) to enable the 
                        State to pursue claims against such 
                        third parties, with such information 
                        being collected at the time of any 
                        determination or redetermination of 
                        eligibility for medical assistance, and
                          (ii) the submission to the Secretary 
                        of a plan (subject to approval by the 
                        Secretary) for pursuing claims against 
                        such third parties, which plan shall be 
                        integrated with, and be monitored as a 
                        part of the Secretary's review of, the 
                        State's mechanized claims processing 
                        and information retrieval systems 
                        required under section 1903(r);
                  (B) that in any case where such a legal 
                liability is found to exist after medical 
                assistance has been made available on behalf of 
                the individual and where the amount of 
                reimbursement the State can reasonably expect 
                to recover exceeds the costs of such recovery, 
                the State or local agency will seek 
                reimbursement for such assistance;
                  (C) that in the case of an individual who is 
                entitled to medical assistance under the State 
                plan with respect to a service for which a 
                third party is liable for payment, the person 
                furnishing the service may not seek to collect 
                from the individual (or any financially 
                responsible relative or representative of that 
                individual) payment of an amount for that 
                service (i) if the total of the amount of the 
                liabilities of third parties for that service 
                is at least equal to the amount payable for 
                that service under the plan (disregarding 
                section 1916), or (ii) in an amount which 
                exceeds the lesser of (I) the amount which may 
                be collected under section 1916, or (II) the 
                amount by which the amount payable for that 
                service under the plan (disregarding section 
                1916) exceeds the total of the amount of the 
                liabilities of third parties for that service;
                  (D) that a person who furnishes services and 
                is participating under the plan may not refuse 
                to furnish services to an individual (who is 
                entitled to have payment made under the plan 
                for the services the person furnishes) because 
                of a third party's potential liability for 
                payment for the service;
                  (E) that in the case of prenatal or 
                preventive pediatric care (including early and 
                periodic screening and diagnosis services under 
                section 1905(a)(4)(B)) covered under the State 
                plan, the State shall--
                          (i) make payment for such service in 
                        accordance with the usual payment 
                        schedule under such plan for such 
                        services without regard to the 
                        liability of a third party for payment 
                        for such services, except that the 
                        State may, if the State determines 
                        doing so is cost-effective and will not 
                        adversely affect access to care, only 
                        make such payment if a third party so 
                        liable has not made payment within 90 
                        days after the date the provider of 
                        such services has initially submitted a 
                        claim to such third party for payment 
                        for such services; and
                          (ii) seek reimbursement from such 
                        third party in accordance with 
                        subparagraph (B);
                  (F) that in the case of any services covered 
                under such plan which are provided to an 
                individual on whose behalf child support 
                enforcement is being carried out by the State 
                agency under part D of title IV of this Act, 
                the State shall--
                          (i) make payment for such service in 
                        accordance with the usual payment 
                        schedule under such plan for such 
                        services without regard to any third-
                        party liability for payment for such 
                        services, if such third-party liability 
                        is derived (through insurance or 
                        otherwise) from the parent whose 
                        obligation to pay support is being 
                        enforced by such agency, if payment has 
                        not been made by such third party 
                        within 90 days after the date the 
                        provider of such services has initially 
                        submitted a claim to such third party 
                        for payment for such services, except 
                        that the State may make such payment 
                        within 30 days after such date if the 
                        State determines doing so is cost-
                        effective and necessary to ensure 
                        access to care.;
                          (ii) seek reimbursement from such 
                        third party in accordance with 
                        subparagraph (B);
                  (G) that the State prohibits any health 
                insurer (including a group health plan, as 
                defined in section 607(1) of the Employee 
                Retirement Income Security Act of 1974, a self-
                insured plan, a service benefit plan, a managed 
                care organization, a pharmacy benefit manager, 
                or other party that is, by statute, contract, 
                or agreement, legally responsible for payment 
                of a claim for a health care item or service), 
                in enrolling an individual or in making any 
                payments for benefits to the individual or on 
                the individual's behalf, from taking into 
                account that the individual is eligible for or 
                is provided medical assistance under a plan 
                under this title for such State, or any other 
                State;
                  (H) that to the extent that payment has been 
                made under the State plan for medical 
                assistance in any case where a third party has 
                a legal liability to make payment for such 
                assistance, the State has in effect laws under 
                which, to the extent that payment has been made 
                under the State plan for medical assistance for 
                health care items or services furnished to an 
                individual, the State is considered to have 
                acquired the rights of such individual to any 
                payments by such third party; and
                  (I) that the State shall provide assurances 
                satisfactory to the Secretary that the State 
                has in effect laws requiring health insurers, 
                including self-insured plans, group health 
                plans (as defined in section 607(1) of the 
                Employee Retirement Income Security Act of 
                1974), service benefit plans, managed care 
                organizations, pharmacy benefit managers, or 
                other parties that are, by statute, contract, 
                or agreement, legally responsible for payment 
                of a claim for a health care item or service, 
                as a condition of doing business in the State, 
                to--
                          (i) provide, with respect to 
                        individuals who are eligible (and, at 
                        State option, individuals who apply or 
                        whose eligibility for medical 
                        assistance is being evaluated in 
                        accordance with section 1902(e)(13)(D)) 
                        for, or are provided, medical 
                        assistance under the State plan under 
                        this title (and, at State option, child 
                        health assistance under title XXI), 
                        upon the request of the State, 
                        information to determine during what 
                        period the individual or their spouses 
                        or their dependents may be (or may have 
                        been) covered by a health insurer and 
                        the nature of the coverage that is or 
                        was provided by the health insurer 
                        (including the name, address, and 
                        identifying number of the plan) in a 
                        manner prescribed by the Secretary;
                          (ii) accept the State's right of 
                        recovery and the assignment to the 
                        State of any right of an individual or 
                        other entity to payment from the party 
                        for an item or service for which 
                        payment has been made under the State 
                        plan;
                          (iii) respond to any inquiry by the 
                        State regarding a claim for payment for 
                        any health care item or service that is 
                        submitted not later than 3 years after 
                        the date of the provision of such 
                        health care item or service; and
                          (iv) agree not to deny a claim 
                        submitted by the State solely on the 
                        basis of the date of submission of the 
                        claim, the type or format of the claim 
                        form, or a failure to present proper 
                        documentation at the point-of-sale that 
                        is the basis of the claim, if--
                                  (I) the claim is submitted by 
                                the State within the 3-year 
                                period beginning on the date on 
                                which the item or service was 
                                furnished; and
                                  (II) any action by the State 
                                to enforce its rights with 
                                respect to such claim is 
                                commenced within 6 years of the 
                                State's submission of such 
                                claim;
          (26) if the State plan includes medical assistance 
        for inpatient mental hospital services, provide, with 
        respect to each patient receiving such services, for a 
        regular program of medical review (including medical 
        evaluation) of his need for such services, and for a 
        written plan of care;
          (27) provide for agreements with every person or 
        institution providing services under the State plan 
        under which such person or institution agrees (A) to 
        keep such records as are necessary fully to disclose 
        the extent of the services provided to individuals 
        receiving assistance under the State plan, and (B) to 
        furnish the State agency or the Secretary with such 
        information, regarding any payments claimed by such 
        person or institution for providing services under the 
        State plan, as the State agency or the Secretary may 
        from time to time request;
          (28) provide--
                  (A) that any nursing facility receiving 
                payments under such plan must satisfy all the 
                requirements of subsections (b) through (d) of 
                section 1919 as they apply to such facilities;
                  (B) for including in ``nursing facility 
                services'' at least the items and services 
                specified (or deemed to be specified) by the 
                Secretary under section 1919(f)(7) and making 
                available upon request a description of the 
                items and services so included;
                  (C) for procedures to make available to the 
                public the data and methodology used in 
                establishing payment rates for nursing 
                facilities under this title; and
                  (D) for compliance (by the date specified in 
                the respective sections) with the requirements 
                of--
                          (i) section 1919(e);
                          (ii) section 1919(g) (relating to 
                        responsibility for survey and 
                        certification of nursing facilities); 
                        and
                          (iii) sections 1919(h)(2)(B) and 
                        1919(h)(2)(D) (relating to 
                        establishment and application of 
                        remedies);
          (29) include a State program which meets the 
        requirements set forth in section 1908, for the 
        licensing of administrators of nursing homes;
          (30)(A) provide such methods and procedures relating 
        to the utilization of, and the payment for, care and 
        services available under the plan (including but not 
        limited to utilization review plans as provided for in 
        section 1903(i)(4)) as may be necessary to safeguard 
        against unnecessary utilization of such care and 
        services and to assure that payments are consistent 
        with efficiency, economy, and quality of care and are 
        sufficient to enlist enough providers so that care and 
        services are available under the plan at least to the 
        extent that such care and services are available to the 
        general population in the geographic area; and
          (B) provide, under the program described in 
        subparagraph (A), that--
                  (i) each admission to a hospital, 
                intermediate care facility for the mentally 
                retarded, or hospital for mental diseases is 
                reviewed or screened in accordance with 
                criteria established by medical and other 
                professional personnel who are not themselves 
                directly responsible for the care of the 
                patient involved, and who do not have a 
                significant financial interest in any such 
                institution and are not, except in the case of 
                a hospital, employed by the institution 
                providing the care involved, and
                  (ii) the information developed from such 
                review or screening, along with the data 
                obtained from prior reviews of the necessity 
                for admission and continued stay of patients by 
                such professional personnel, shall be used as 
                the basis for establishing the size and 
                composition of the sample of admissions to be 
                subject to review and evaluation by such 
                personnel, and any such sample may be of any 
                size up to 100 percent of all admissions and 
                must be of sufficient size to serve the purpose 
                of (I) identifying the patterns of care being 
                provided and the changes occurring over time in 
                such patterns so that the need for modification 
                may be ascertained, and (II) subjecting 
                admissions to early or more extensive review 
                where information indicates that such 
                consideration is warranted to a hospital, 
                intermediate care facility for the mentally 
                retarded, or hospital for mental diseases;
          (31) with respect to services in an intermediate care 
        facility for the mentally retarded (where the State 
        plan includes medical assistance for such services) 
        provide, with respect to each patient receiving such 
        services, for a written plan of care, prior to 
        admission to or authorization of benefits in such 
        facility, in accordance with regulations of the 
        Secretary, and for a regular program of independent 
        professional review (including medical evaluation) 
        which shall periodically review his need for such 
        services;
          (32) provide that no payment under the plan for any 
        care or service provided to an individual shall be made 
        to anyone other than such individual or the person or 
        institution providing such care or service, under an 
        assignment or power of attorney or otherwise; except 
        that--
                  (A) in the case of any care or service 
                provided by a physician, dentist, or other 
                individual practitioner, such payment may be 
                made (i) to the employer of such physician, 
                dentist, or other practitioner if such 
                physician, dentist, or practitioner is required 
                as a condition of his employment to turn over 
                his fee for such care or service to his 
                employer, or (ii) (where the care or service 
                was provided in a hospital, clinic, or other 
                facility) to the facility in which the care or 
                service was provided if there is a contractual 
                arrangement between such physician, dentist, or 
                practitioner and such facility under which such 
                facility submits the bill for such care or 
                service;
                  (B) nothing in this paragraph shall be 
                construed (i) to prevent the making of such a 
                payment in accordance with an assignment from 
                the person or institution providing the care or 
                service involved if such assignment is made to 
                a governmental agency or entity or is 
                established by or pursuant to the order of a 
                court of competent jurisdiction, or (ii) to 
                preclude an agent of such person or institution 
                from receiving any such payment if (but only 
                if) such agent does so pursuant to an agency 
                agreement under which the compensation to be 
                paid to the agent for his services for or in 
                connection with the billing or collection of 
                payments due such person or institution under 
                the plan is unrelated (directly or indirectly) 
                to the amount of such payments or the billings 
                therefor, and is not dependent upon the actual 
                collection of any such payment;
                  (C) in the case of services furnished (during 
                a period that does not exceed 14 continuous 
                days in the case of an informal reciprocal 
                arrangement or 90 continuous days (or such 
                longer period as the Secretary may provide) in 
                the case of an arrangement involving per diem 
                or other fee-for-time compensation) by, or 
                incident to the services of, one physician to 
                the patients of another physician who submits 
                the claim for such services, payment shall be 
                made to the physician submitting the claim (as 
                if the services were furnished by, or incident 
                to, the physician's services), but only if the 
                claim identifies (in a manner specified by the 
                Secretary) the physician who furnished the 
                services; and
                  (D) in the case of payment for a childhood 
                vaccine administered before October 1, 1994, to 
                individuals entitled to medical assistance 
                under the State plan, the State plan may make 
                payment directly to the manufacturer of the 
                vaccine under a voluntary replacement program 
                agreed to by the State pursuant to which the 
                manufacturer (i) supplies doses of the vaccine 
                to providers administering the vaccine, (ii) 
                periodically replaces the supply of the 
                vaccine, and (iii) charges the State the 
                manufacturer's price to the Centers for Disease 
                Control and Prevention for the vaccine so 
                administered (which price includes a reasonable 
                amount to cover shipping and the handling of 
                returns);
          (33) provide--
                  (A) that the State health agency, or other 
                appropriate State medical agency, shall be 
                responsible for establishing a plan, consistent 
                with regulations prescribed by the Secretary, 
                for the review by appropriate professional 
                health personnel of the appropriateness and 
                quality of care and services furnished to 
                recipients of medical assistance under the plan 
                in order to provide guidance with respect 
                thereto in the administration of the plan to 
                the State agency established or designated 
                pursuant to paragraph (5) and, where 
                applicable, to the State agency described in 
                the second sentence of this subsection; and
                  (B) that, except as provided in section 
                1919(g), the State or local agency utilized by 
                the Secretary for the purpose specified in the 
                first sentence of section 1864(a), or, if such 
                agency is not the State agency which is 
                responsible for licensing health institutions, 
                the State agency responsible for such 
                licensing, will perform for the State agency 
                administering or supervising the administration 
                of the plan approved under this title the 
                function of determining whether institutions 
                and agencies meet the requirements for 
                participation in the program under such plan, 
                except that, if the Secretary has cause to 
                question the adequacy of such determinations, 
                the Secretary is authorized to validate State 
                determinations and, on that basis, make 
                independent and binding determinations 
                concerning the extent to which individual 
                institutions and agencies meet the requirements 
                for participation;
          (34) provide that in the case of any individual who 
        has been determined to be eligible for medical 
        assistance under the plan, such assistance will be made 
        available to him for care and services included under 
        the plan and furnished [in or after the third month 
        before the month in which he made application] in or 
        after the month in which the individual made 
        application (or application was made on his behalf in 
        the case of a deceased individual) for such assistance 
        if such individual was (or upon application would have 
        been) eligible for such assistance at the time such 
        care and services were furnished;
          (35) provide that any disclosing entity (as defined 
        in section 1124(a)(2)) receiving payments under such 
        plan complies with the requirements of section 1124;
          (36) provide that within 90 days following the 
        completion of each survey of any health care facility, 
        laboratory, agency, clinic, or organization, by the 
        appropriate State agency described in paragraph (9), 
        such agency shall (in accordance with regulations of 
        the Secretary) make public in readily available form 
        and place the pertinent findings of each such survey 
        relating to the compliance of each such health care 
        facility, laboratory, clinic, agency, or organization 
        with (A) the statutory conditions of participation 
        imposed under this title, and (B) the major additional 
        conditions which the Secretary finds necessary in the 
        interest of health and safety of individuals who are 
        furnished care or services by any such facility, 
        laboratory, clinic, agency, or organization;
          (37) provide for claims payment procedures which (A) 
        ensure that 90 per centum of claims for payment (for 
        which no further written information or substantiation 
        is required in order to make payment) made for services 
        covered under the plan and furnished by health care 
        practitioners through individual or group practices or 
        through shared health facilities are paid within 30 
        days of the date of receipt of such claims and that 99 
        per centum of such claims are paid within 90 days of 
        the date of receipt of such claims, and (B) provide for 
        procedures of prepayment and postpayment claims review, 
        including review of appropriate data with respect to 
        the recipient and provider of a service and the nature 
        of the service for which payment is claimed, to ensure 
        the proper and efficient payment of claims and 
        management of the program;
          (38) require that an entity (other than an individual 
        practitioner or a group of practitioners) that 
        furnishes, or arranges for the furnishing of, items or 
        services under the plan, shall supply (within such 
        period as may be specified in regulations by the 
        Secretary or by the single State agency which 
        administers or supervises the administration of the 
        plan) upon request specifically addressed to such 
        entity by the Secretary or such State agency, the 
        information described in section 1128(b)(9);
          (39) provide that the State agency shall exclude any 
        specified individual or entity from participation in 
        the program under the State plan for the period 
        specified by the Secretary, when required by him to do 
        so pursuant to section 1128 or section 1128A, terminate 
        the participation of any individual or entity in such 
        program if (subject to such exceptions as are permitted 
        with respect to exclusion under sections 1128(c)(3)(B) 
        and 1128(d)(3)(B)) participation of such individual or 
        entity is terminated under title XVIII, any other State 
        plan under this title (or waiver of the plan), or any 
        State child health plan under title XXI (or waiver of 
        the plan) and such termination is included by the 
        Secretary in any database or similar system developed 
        pursuant to section 6401(b)(2) of the Patient 
        Protection and Affordable Care Act, and provide that no 
        payment may be made under the plan with respect to any 
        item or service furnished by such individual or entity 
        during such period;
          (40) require each health services facility or 
        organization which receives payments under the plan and 
        of a type for which a uniform reporting system has been 
        established under section 1121(a) to make reports to 
        the Secretary of information described in such section 
        in accordance with the uniform reporting system 
        (established under such section) for that type of 
        facility or organization;
          (41) provide, in accordance with subsection (kk)(8) 
        (as applicable), that whenever a provider of services 
        or any other person is terminated, suspended, or 
        otherwise sanctioned or prohibited from participating 
        under the State plan, the State agency shall promptly 
        notify the Secretary and, in the case of a physician 
        and notwithstanding paragraph (7), the State medical 
        licensing board of such action;
          (42) provide that--
                  (A) the records of any entity participating 
                in the plan and providing services reimbursable 
                on a cost-related basis will be audited as the 
                Secretary determines to be necessary to insure 
                that proper payments are made under the plan; 
                and
                  (B) not later than December 31, 2010, the 
                State shall--
                          (i) establish a program under which 
                        the State contracts (consistent with 
                        State law and in the same manner as the 
                        Secretary enters into contracts with 
                        recovery audit contractors under 
                        section 1893(h), subject to such 
                        exceptions or requirements as the 
                        Secretary may require for purposes of 
                        this title or a particular State) with 
                        1 or more recovery audit contractors 
                        for the purpose of identifying 
                        underpayments and overpayments and 
                        recouping overpayments under the State 
                        plan and under any waiver of the State 
                        plan with respect to all services for 
                        which payment is made to any entity 
                        under such plan or waiver; and
                          (ii) provide assurances satisfactory 
                        to the Secretary that--
                                  (I) under such contracts, 
                                payment shall be made to such a 
                                contractor only from amounts 
                                recovered;
                                  (II) from such amounts 
                                recovered, payment--
                                          (aa) shall be made on 
                                        a contingent basis for 
                                        collecting 
                                        overpayments; and
                                          (bb) may be made in 
                                        such amounts as the 
                                        State may specify for 
                                        identifying 
                                        underpayments;
                                  (III) the State has an 
                                adequate process for entities 
                                to appeal any adverse 
                                determination made by such 
                                contractors; and
                                  (IV) such program is carried 
                                out in accordance with such 
                                requirements as the Secretary 
                                shall specify, including--
                                          (aa) for purposes of 
                                        section 1903(a)(7), 
                                        that amounts expended 
                                        by the State to carry 
                                        out the program shall 
                                        be considered amounts 
                                        expended as necessary 
                                        for the proper and 
                                        efficient 
                                        administration of the 
                                        State plan or a waiver 
                                        of the plan;
                                          (bb) that section 
                                        1903(d) shall apply to 
                                        amounts recovered under 
                                        the program; and
                                          (cc) that the State 
                                        and any such 
                                        contractors under 
                                        contract with the State 
                                        shall coordinate such 
                                        recovery audit efforts 
                                        with other contractors 
                                        or entities performing 
                                        audits of entities 
                                        receiving payments 
                                        under the State plan or 
                                        waiver in the State, 
                                        including efforts with 
                                        Federal and State law 
                                        enforcement with 
                                        respect to the 
                                        Department of Justice, 
                                        including the Federal 
                                        Bureau of 
                                        Investigations, the 
                                        Inspector General of 
                                        the Department of 
                                        Health and Human 
                                        Services, and the State 
                                        medicaid fraud control 
                                        unit; and
          (43) provide for--
                  (A) informing all persons in the State who 
                are under the age of 21 and who have been 
                determined to be eligible for medical 
                assistance including services described in 
                section 1905(a)(4)(B), of the availability of 
                early and periodic screening, diagnostic, and 
                treatment services as described in section 
                1905(r) and the need for age-appropriate 
                immunizations against vaccine-preventable 
                diseases,
                  (B) providing or arranging for the provision 
                of such screening services in all cases where 
                they are requested,
                  (C) arranging for (directly or through 
                referral to appropriate agencies, 
                organizations, or individuals) corrective 
                treatment the need for which is disclosed by 
                such child health screening services, and
                  (D) reporting to the Secretary (in a uniform 
                form and manner established by the Secretary, 
                by age group and by basis of eligibility for 
                medical assistance, and by not later than April 
                1 after the end of each fiscal year, beginning 
                with fiscal year 1990) the following 
                information relating to early and periodic 
                screening, diagnostic, and treatment services 
                provided under the plan during each fiscal 
                year:
                          (i) the number of children provided 
                        child health screening services,
                          (ii) the number of children referred 
                        for corrective treatment (the need for 
                        which is disclosed by such child health 
                        screening services),
                          (iii) the number of children 
                        receiving dental services, and other 
                        information relating to the provision 
                        of dental services to such children 
                        described in section 2108(e) and
                          (iv) the State's results in attaining 
                        the participation goals set for the 
                        State under section 1905(r);
          (44) in each case for which payment for inpatient 
        hospital services, services in an intermediate care 
        facility for the mentally retarded, or inpatient mental 
        hospital services is made under the State plan--
                  (A) a physician (or, in the case of skilled 
                nursing facility services or intermediate care 
                facility services, a physician, or a nurse 
                practitioner or clinical nurse specialist who 
                is not an employee of the facility but is 
                working in collaboration with a physician) 
                certifies at the time of admission, or, if 
                later, the time the individual applies for 
                medical assistance under the State plan (and a 
                physician, a physician assistant under the 
                supervision of a physician, or, in the case of 
                skilled nursing facility services or 
                intermediate care facility services, a 
                physician, or a nurse practitioner or clinical 
                nurse specialist who is not an employee of the 
                facility but is working in collaboration with a 
                physician, recertifies, where such services are 
                furnished over a period of time, in such cases, 
                at least as often as required under section 
                1903(g)(6) (or, in the case of services that 
                are services provided in an intermediate care 
                facility for the mentally retarded, every 
                year), and accompanied by such supporting 
                material, appropriate to the case involved, as 
                may be provided in regulations of the 
                Secretary), that such services are or were 
                required to be given on an inpatient basis 
                because the individual needs or needed such 
                services, and
                  (B) such services were furnished under a plan 
                established and periodically reviewed and 
                evaluated by a physician, or, in the case of 
                skilled nursing facility services or 
                intermediate care facility services, a 
                physician, or a nurse practitioner or clinical 
                nurse specialist who is not an employee of the 
                facility but is working in collaboration with a 
                physician;
          (45) provide for mandatory assignment of rights of 
        payment for medical support and other medical care owed 
        to recipients, in accordance with section 1912;
          (46)(A) provide that information is requested and 
        exchanged for purposes of income and eligibility 
        verification in accordance with a State system which 
        meets the requirements of section 1137 of this Act; and
          (B) provide, with respect to an individual declaring 
        to be a citizen or national of the United States for 
        purposes of establishing eligibility under this title, 
        that the State shall satisfy the requirements of--
                  (i) section 1903(x); or
                  (ii) subsection (ee);
          (47) provide--
                  (A) at the option of the State, for making 
                ambulatory prenatal care available to pregnant 
                women during a presumptive eligibility period 
                in accordance with section 1920 and provide for 
                making medical assistance for items and 
                services described in subsection (a) of section 
                1920A available to children during a 
                presumptive eligibility period in accordance 
                with such section and provide for making 
                medical assistance available to individuals 
                described in subsection (a) of section 1920B 
                during a presumptive eligibility period in 
                accordance with such section and provide for 
                making medical assistance available to 
                individuals described in subsection (a) of 
                section 1920C during a presumptive eligibility 
                period in accordance with such section; and
                  (B) that any hospital that is a participating 
                provider under the State plan may elect to be a 
                qualified entity for purposes of determining, 
                on the basis of preliminary information, 
                whether any individual is eligible for medical 
                assistance under the State plan or under a 
                waiver of the plan for purposes of providing 
                the individual with medical assistance during a 
                presumptive eligibility period, in the same 
                manner, and subject to the same requirements, 
                as apply to the State options with respect to 
                populations described in section 1920, 1920A, 
                1920B, or 1920C (but without regard to whether 
                the State has elected to provide for a 
                presumptive eligibility period under any such 
                sections), subject to such guidance as the 
                Secretary shall establish and provided that any 
                such election shall cease to be effective on 
                January 1, 2020, and no such election shall be 
                made after that date;
          (48) provide a method of making cards evidencing 
        eligibility for medical assistance available to an 
        eligible individual who does not reside in a permanent 
        dwelling or does not have a fixed home or mailing 
        address;
          (49) provide that the State will provide information 
        and access to certain information respecting sanctions 
        taken against health care practitioners and providers 
        by State licensing authorities in accordance with 
        section 1921;
          (50) provide, in accordance with subsection (q), for 
        a monthly personal needs allowance for certain 
        institutionalized individuals and couples;
          (51) meet the requirements of section 1924 (relating 
        to protection of community spouses);
          (52) meet the requirements of section 1925 (relating 
        to extension of eligibility for medical assistance);
          (53) provide--
                  (A) for notifying in a timely manner all 
                individuals in the State who are determined to 
                be eligible for medical assistance and who are 
                pregnant women, breastfeeding or postpartum 
                women (as defined in section 17 of the Child 
                Nutrition Act of 1966), or children below the 
                age of 5, of the availability of benefits 
                furnished by the special supplemental nutrition 
                program under such section, and
                  (B) for referring any such individual to the 
                State agency responsible for administering such 
                program;
          (54) in the case of a State plan that provides 
        medical assistance for covered outpatient drugs (as 
        defined in section 1927(k)), comply with the applicable 
        requirements of section 1927;
          (55) provide for receipt and initial processing of 
        applications of individuals for medical assistance 
        under subsection (a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), 
        (a)(10)(A)(i)(VII), or (a)(10)(A)(ii)(IX)--
                  (A) at locations which are other than those 
                used for the receipt and processing of 
                applications for aid under part A of title IV 
                and which include facilities defined as 
                disproportionate share hospitals under section 
                1923(a)(1)(A) and Federally-qualified health 
                centers described in section 1905(1)(2)(B), and
                  (B) using applications which are other than 
                those used for applications for aid under such 
                part;
          (56) provide, in accordance with subsection (s), for 
        adjusted payments for certain inpatient hospital 
        services;
          (57) provide that each hospital, nursing facility, 
        provider of home health care or personal care services, 
        hospice program, or medicaid managed care organization 
        (as defined in section 1903(m)(1)(A)) receiving funds 
        under the plan shall comply with the requirements of 
        subsection (w);
          (58) provide that the State, acting through a State 
        agency, association, or other private nonprofit entity, 
        develop a written description of the law of the State 
        (whether statutory or as recognized by the courts of 
        the State) concerning advance directives that would be 
        distributed by providers or organizations under the 
        requirements of subsection (w);
          (59) maintain a list (updated not less often than 
        monthly, and containing each physician's unique 
        identifier provided under the system established under 
        subsection (x)) of all physicians who are certified to 
        participate under the State plan;
          (60) provide that the State agency shall provide 
        assurances satisfactory to the Secretary that the State 
        has in effect the laws relating to medical child 
        support required under section 1908A;
          (61) provide that the State must demonstrate that it 
        operates a medicaid fraud and abuse control unit 
        described in section 1903(q) that effectively carries 
        out the functions and requirements described in such 
        section, as determined in accordance with standards 
        established by the Secretary, unless the State 
        demonstrates to the satisfaction of the Secretary that 
        the effective operation of such a unit in the State 
        would not be cost-effective because minimal fraud 
        exists in connection with the provision of covered 
        services to eligible individuals under the State plan, 
        and that beneficiaries under the plan will be protected 
        from abuse and neglect in connection with the provision 
        of medical assistance under the plan without the 
        existence of such a unit;
          (62) provide for a program for the distribution of 
        pediatric vaccines to program-registered providers for 
        the immunization of vaccine-eligible children in 
        accordance with section 1928;
          (63) provide for administration and determinations of 
        eligibility with respect to individuals who are (or 
        seek to be) eligible for medical assistance based on 
        the application of section 1931;
          (64) provide, not later than 1 year after the date of 
        the enactment of this paragraph, a mechanism to receive 
        reports from beneficiaries and others and compile data 
        concerning alleged instances of waste, fraud, and abuse 
        relating to the operation of this title;
          (65) provide that the State shall issue provider 
        numbers for all suppliers of medical assistance 
        consisting of durable medical equipment, as defined in 
        section 1861(n), and the State shall not issue or renew 
        such a supplier number for any such supplier unless--
                  (A)(i) full and complete information as to 
                the identity of each person with an ownership 
                or control interest (as defined in section 
                1124(a)(3)) in the supplier or in any 
                subcontractor (as defined by the Secretary in 
                regulations) in which the supplier directly or 
                indirectly has a 5 percent or more ownership 
                interest; and
                  (ii) to the extent determined to be feasible 
                under regulations of the Secretary, the name of 
                any disclosing entity (as defined in section 
                1124(a)(2)) with respect to which a person with 
                such an ownership or control interest in the 
                supplier is a person with such an ownership or 
                control interest in the disclosing entity; and
                  (B) a surety bond in a form specified by the 
                Secretary under section 1834(a)(16)(B) and in 
                an amount that is not less than $50,000 or such 
                comparable surety bond as the Secretary may 
                permit under the second sentence of such 
                section;
          (66) provide for making eligibility determinations 
        under section 1935(a);
          (67) provide, with respect to services covered under 
        the State plan (but not under title XVIII) that are 
        furnished to a PACE program eligible individual 
        enrolled with a PACE provider by a provider 
        participating under the State plan that does not have a 
        contract or other agreement with the PACE provider that 
        establishes payment amounts for such services, that 
        such participating provider may not require the PACE 
        provider to pay the participating provider an amount 
        greater than the amount that would otherwise be payable 
        for the service to the participating provider under the 
        State plan for the State where the PACE provider is 
        located (in accordance with regulations issued by the 
        Secretary);
          (68) provide that any entity that receives or makes 
        annual payments under the State plan of at least 
        $5,000,000, as a condition of receiving such payments, 
        shall--
                  (A) establish written policies for all 
                employees of the entity (including management), 
                and of any contractor or agent of the entity, 
                that provide detailed information about the 
                False Claims Act established under sections 
                3729 through 3733 of title 31, United States 
                Code, administrative remedies for false claims 
                and statements established under chapter 38 of 
                title 31, United States Code, any State laws 
                pertaining to civil or criminal penalties for 
                false claims and statements, and whistleblower 
                protections under such laws, with respect to 
                the role of such laws in preventing and 
                detecting fraud, waste, and abuse in Federal 
                health care programs (as defined in section 
                1128B(f));
                  (B) include as part of such written policies, 
                detailed provisions regarding the entity's 
                policies and procedures for detecting and 
                preventing fraud, waste, and abuse; and
                  (C) include in any employee handbook for the 
                entity, a specific discussion of the laws 
                described in subparagraph (A), the rights of 
                employees to be protected as whistleblowers, 
                and the entity's policies and procedures for 
                detecting and preventing fraud, waste, and 
                abuse;
          (69) provide that the State must comply with any 
        requirements determined by the Secretary to be 
        necessary for carrying out the Medicaid Integrity 
        Program established under section 1936;
          (70) at the option of the State and notwithstanding 
        paragraphs (1), (10)(B), and (23), provide for the 
        establishment of a non-emergency medical transportation 
        brokerage program in order to more cost-effectively 
        provide transportation for individuals eligible for 
        medical assistance under the State plan who need access 
        to medical care or services and have no other means of 
        transportation which--
                  (A) may include a wheelchair van, taxi, 
                stretcher car, bus passes and tickets, secured 
                transportation, and such other transportation 
                as the Secretary determines appropriate; and
                  (B) may be conducted under contract with a 
                broker who--
                          (i) is selected through a competitive 
                        bidding process based on the State's 
                        evaluation of the broker's experience, 
                        performance, references, resources, 
                        qualifications, and costs;
                          (ii) has oversight procedures to 
                        monitor beneficiary access and 
                        complaints and ensure that transport 
                        personnel are licensed, qualified, 
                        competent, and courteous;
                          (iii) is subject to regular auditing 
                        and oversight by the State in order to 
                        ensure the quality of the 
                        transportation services provided and 
                        the adequacy of beneficiary access to 
                        medical care and services; and
                          (iv) complies with such requirements 
                        related to prohibitions on referrals 
                        and conflict of interest as the 
                        Secretary shall establish (based on the 
                        prohibitions on physician referrals 
                        under section 1877 and such other 
                        prohibitions and requirements as the 
                        Secretary determines to be 
                        appropriate);
          (71) provide that the State will implement an asset 
        verification program as required under section 1940;
          (72) provide that the State will not prevent a 
        Federally-qualified health center from entering into 
        contractual relationships with private practice dental 
        providers in the provision of Federally-qualified 
        health center services;
          (73) in the case of any State in which 1 or more 
        Indian Health Programs or Urban Indian Organizations 
        furnishes health care services, provide for a process 
        under which the State seeks advice on a regular, 
        ongoing basis from designees of such Indian Health 
        Programs and Urban Indian Organizations on matters 
        relating to the application of this title that are 
        likely to have a direct effect on such Indian Health 
        Programs and Urban Indian Organizations and that--
                  (A) shall include solicitation of advice 
                prior to submission of any plan amendments, 
                waiver requests, and proposals for 
                demonstration projects likely to have a direct 
                effect on Indians, Indian Health Programs, or 
                Urban Indian Organizations; and
                  (B) may include appointment of an advisory 
                committee and of a designee of such Indian 
                Health Programs and Urban Indian Organizations 
                to the medical care advisory committee advising 
                the State on its State plan under this title;
          (74) provide for maintenance of effort under the 
        State plan or under any waiver of the plan in 
        accordance with subsection (gg); and
          (75) provide that, beginning January 2015, and 
        annually thereafter, the State shall submit a report to 
        the Secretary that contains--
                  (A) the total number of enrolled and newly 
                enrolled individuals in the State plan or under 
                a waiver of the plan for the fiscal year ending 
                on September 30 of the preceding calendar year, 
                disaggregated by population, including 
                children, parents, nonpregnant childless 
                adults, disabled individuals, elderly 
                individuals, and such other categories or sub-
                categories of individuals eligible for medical 
                assistance under the State plan or under a 
                waiver of the plan as the Secretary may 
                require;
                  (B) a description, which may be specified by 
                population, of the outreach and enrollment 
                processes used by the State during such fiscal 
                year; and
                  (C) any other data reporting determined 
                necessary by the Secretary to monitor 
                enrollment and retention of individuals 
                eligible for medical assistance under the State 
                plan or under a waiver of the plan;
          (76) provide that any data collected under the State 
        plan meets the requirements of section 3101 of the 
        Public Health Service Act;
          (77) provide that the State shall comply with 
        provider and supplier screening, oversight, and 
        reporting requirements in accordance with subsection 
        (kk);
          (78) provide that, not later than January 1, 2017, in 
        the case of a State that pursuant to its State plan or 
        waiver of the plan for medical assistance pays for 
        medical assistance on a fee-for-service basis, the 
        State shall require each provider furnishing items and 
        services to, or ordering, prescribing, referring, or 
        certifying eligibility for, services for individuals 
        eligible to receive medical assistance under such plan 
        to enroll with the State agency and provide to the 
        State agency the provider's identifying information, 
        including the name, specialty, date of birth, Social 
        Security number, national provider identifier (if 
        applicable), Federal taxpayer identification number, 
        and the State license or certification number of the 
        provider (if applicable);
          (79) provide that any agent, clearinghouse, or other 
        alternate payee (as defined by the Secretary) that 
        submits claims on behalf of a health care provider must 
        register with the State and the Secretary in a form and 
        manner specified by the Secretary;
          (80) provide that the State shall not provide any 
        payments for items or services provided under the State 
        plan or under a waiver to any financial institution or 
        entity located outside of the United States;
          (81) provide for implementation of the payment models 
        specified by the Secretary under section 1115A(c) for 
        implementation on a nationwide basis unless the State 
        demonstrates to the satisfaction of the Secretary that 
        implementation would not be administratively feasible 
        or appropriate to the health care delivery system of 
        the State;
          (82) provide that the State agency responsible for 
        administering the State plan under this title provides 
        assurances to the Secretary that the State agency is in 
        compliance with subparagraphs (A), (B), and (C) of 
        section 1128K(b)(2); and
          (83) provide that, not later than January 1, 2017, in 
        the case of a State plan (or waiver of the plan) that 
        provides medical assistance on a fee-for-service basis 
        or through a primary care case-management system 
        described in section 1915(b)(1) (other than a primary 
        care case management entity (as defined by the 
        Secretary)), the State shall publish (and update on at 
        least an annual basis) on the public website of the 
        State agency administering the State plan, a directory 
        of the physicians described in subsection (mm) and, at 
        State option, other providers described in such 
        subsection that--
                  (A) includes--
                          (i) with respect to each such 
                        physician or provider--
                                  (I) the name of the physician 
                                or provider;
                                  (II) the specialty of the 
                                physician or provider;
                                  (III) the address at which 
                                the physician or provider 
                                provides services; and
                                  (IV) the telephone number of 
                                the physician or provider; and
                          (ii) with respect to any such 
                        physician or provider participating in 
                        such a primary care case-management 
                        system, information regarding--
                                  (I) whether the physician or 
                                provider is accepting as new 
                                patients individuals who 
                                receive medical assistance 
                                under this title; and
                                  (II) the physician's or 
                                provider's cultural and 
                                linguistic capabilities, 
                                including the languages spoken 
                                by the physician or provider or 
                                by the skilled medical 
                                interpreter providing 
                                interpretation services at the 
                                physician's or provider's 
                                office; and
                  (B) may include, at State option, with 
                respect to each such physician or provider--
                          (i) the Internet website of such 
                        physician or provider; or
                          (ii) whether the physician or 
                        provider is accepting as new patients 
                        individuals who receive medical 
                        assistance under this title.
Notwithstanding paragraph (5), if on January 1, 1965, and on 
the date on which a State submits its plan for approval under 
this title, the State agency which administered or supervised 
the administration of the plan of such State approved under 
title X (or title XVI, insofar as it relates to the blind) was 
different from the State agency which administered or 
supervised the administration of the State plan approved under 
title I (or title XVI, insofar as it relates to the aged), the 
State agency which administered or supervised the 
administration of such plan approved under title X (or title 
XVI, insofar as it relates to the blind) may be designated to 
administer or supervise the administration of the portion of 
the State plan for medical assistance which relates to blind 
individuals and a different State agency may be established or 
designated to administer or supervise the administration of the 
rest of the State plan for medical assistance; and in such case 
the part of the plan which each such agency administers, or the 
administration of which each such agency supervises, shall be 
regarded as a separate plan for purposes of this title (except 
for purposes of paragraph (10)). The provisions of paragraphs 
(9)(A), (31), and (33) and of section 1903(i)(4) shall not 
apply to a religious nonmedical health care institution (as 
defined in section 1861(ss)(1)).
For purposes of paragraph (10) any individual who, for the 
month of August 1972, was eligible for or receiving aid or 
assistance under a State plan approved under title I, X, XIV, 
or XVI, or part A of title IV and who for such month was 
entitled to monthly insurance benefits under title II shall for 
purposes of this title only be deemed to be eligible for 
financial aid or assistance for any month thereafter if such 
individual would have been eligible for financial aid or 
assistance for such month had the increase in monthly insurance 
benefits under title II resulting from enactment of Public Law 
92-336 not been applicable to such individual.
The requirement of clause (A) of paragraph (37) with respect to 
a State plan may be waived by the Secretary if he finds that 
the State has exercised good faith in trying to meet such 
requirement. For purposes of this title, any child who meets 
the requirements of paragraph (1) or (2) of section 473(b) 
shall be deemed to be a dependent child as defined in section 
406 and shall be deemed to be a recipient of aid to families 
with dependent children under part A of title IV in the State 
where such child resides. Notwithstanding paragraph (10)(B) or 
any other provision of this subsection, a State plan shall 
provide medical assistance with respect to an alien who is not 
lawfully admitted for permanent residence or otherwise 
permanently residing in the United States under color of law 
only in accordance with section 1903(v).
  (b) The Secretary shall approve any plan which fulfills the 
conditions specified in subsection (a) of this section, except 
that he shall not approve any plan which imposes, as a 
condition of eligibility for medical assistance under the 
plan--
          (1) an age requirement of more than 65 years; or
          (2) any residence requirement which excludes any 
        individual who resides in the State, regardless of 
        whether or not the residence is maintained permanently 
        or at a fixed address; or
          (3) any citizenship requirement which excludes any 
        citizen of the United States.
  (c) Notwithstanding subsection (b), the Secretary shall not 
approve any State plan for medical assistance if the State 
requires individuals described in subsection (l)(1) to apply 
for assistance under the State program funded under part A of 
title IV as a condition of applying for or receiving medical 
assistance under this title.
  (d) If a State contracts with an entity which meets the 
requirements of section 1152, as determined by the Secretary, 
or a utilization and quality control peer review organization 
having a contract with the Secretary under part B of title XI 
for the performance of medical or utilization review functions 
(including quality review functions described in subsection 
(a)(30)(C)) required under this title of a State plan with 
respect to specific services or providers (or services or 
providers in a geographic area of the State), such requirements 
shall be deemed to be met for those services or providers (or 
services or providers in that area) by delegation to such an 
entity or organization under the contract of the State's 
authority to conduct such review activities if the contract 
provides for the performance of activities not inconsistent 
with part B of title XI and provides for such assurances of 
satisfactory performance by such an entity or organization as 
the Secretary may prescribe.
  (e)(1) Beginning April 1, 1990, for provisions relating to 
the extension of eligibility for medical assistance for certain 
families who have received aid pursuant to a State plan 
approved under part A of title IV and have earned income, see 
section 1925.
  (2)(A) In the case of an individual who is enrolled with a 
medicaid managed care organization (as defined in section 
1903(m)(1)(A)), with a primary care case manager (as defined in 
section 1905(t)), or with an eligible organization with a 
contract under section 1876 and who would (but for this 
paragraph) lose eligibility for benefits under this title 
before the end of the minimum enrollment period (defined in 
subparagraph (B)), the State plan may provide, notwithstanding 
any other provision of this title, that the individual shall be 
deemed to continue to be eligible for such benefits until the 
end of such minimum period, but, except for benefits furnished 
under section 1905(a)(4)(C), only with respect to such benefits 
provided to the individual as an enrollee of such organization 
or entity or by or through the case manager.
  (B) For purposes of subparagraph (A), the term ``minimum 
enrollment period'' means, with respect to an individual's 
enrollment with an organization or entity under a State plan, a 
period, established by the State, of not more than six months 
beginning on the date the individual's enrollment with the 
organization or entity becomes effective.
  (3) At the option of the State, any individual who--
          (A) is 18 years of age or younger and qualifies as a 
        disabled individual under section 1614(a);
          (B) with respect to whom there has been a 
        determination by the State that--
                  (i) the individual requires a level of care 
                provided in a hospital, nursing facility, or 
                intermediate care facility for the mentally 
                retarded,
                  (ii) it is appropriate to provide such care 
                for the individual outside such an institution, 
                and
                  (iii) the estimated amount which would be 
                expended for medical assistance for the 
                individual for such care outside an institution 
                is not greater than the estimated amount which 
                would otherwise be expended for medical 
                assistance for the individual within an 
                appropriate institution; and
          (C) if the individual were in a medical institution, 
        would be eligible for medical assistance under the 
        State plan under this title,
        shall be deemed, for purposes of this title only, to be 
        an individual with respect to whom a supplemental 
        security income payment, or State supplemental payment, 
        respectively, is being paid under title XVI.
  (4) A child born to a woman eligible for and receiving 
medical assistance under a State plan on the date of the 
child's birth shall be deemed to have applied for medical 
assistance and to have been found eligible for such assistance 
under such plan on the date of such birth and to remain 
eligible for such assistance for a period of one year. During 
the period in which a child is deemed under the preceding 
sentence to be eligible for medical assistance, the medical 
assistance eligibility identification number of the mother 
shall also serve as the identification number of the child, and 
all claims shall be submitted and paid under such number 
(unless the State issues a separate identification number for 
the child before such period expires). Notwithstanding the 
preceding sentence, in the case of a child who is born in the 
United States to an alien mother for whom medical assistance 
for the delivery of the child is made available pursuant to 
section 1903(v), the State immediately shall issue a separate 
identification number for the child upon notification by the 
facility at which such delivery occurred of the child's birth.
  (5) A woman who, while pregnant, is eligible for, has applied 
for, and has received medical assistance under the State plan, 
shall continue to be eligible under the plan, as though she 
were pregnant, for all pregnancy-related and postpartum medical 
assistance under the plan, through the end of the month in 
which the 60-day period (beginning on the last day of her 
pregnancy) ends.
  (6) In the case of a pregnant woman described in subsection 
(a)(10) who, because of a change in income of the family of 
which she is a member, would not otherwise continue to be 
described in such subsection, the woman shall be deemed to 
continue to be an individual described in subsection 
(a)(10)(A)(i)(IV) and subsection (l)(1)(A) without regard to 
such change of income through the end of the month in which the 
60-day period (beginning on the last day of her pregnancy) 
ends. The preceding sentence shall not apply in the case of a 
woman who has been provided ambulatory prenatal care pursuant 
to section 1920 during a presumptive eligibility period and is 
then, in accordance with such section, determined to be 
ineligible for medical assistance under the State plan.
  (7) In the case of an infant or child described in 
subparagraph (B), (C), or (D) of subsection (l)(1) or paragraph 
(2) of section 1905(n)--
          (A) who is receiving inpatient services for which 
        medical assistance is provided on the date the infant 
        or child attains the maximum age with respect to which 
        coverage is provided under the State plan for such 
        individuals, and
          (B) who, but for attaining such age, would remain 
        eligible for medical assistance under such subsection,
the infant or child shall continue to be treated as an 
individual described in such respective provision until the end 
of the stay for which the inpatient services are furnished.
  (8) If an individual is determined to be a qualified medicare 
beneficiary (as defined in section 1905(p)(1)), such 
determination shall apply to services furnished after the end 
of the month in which the determination first occurs. For 
purposes of payment to a State under section 1903(a), such 
determination shall be considered to be valid for an individual 
for a period of 12 months, except that a State may provide for 
such determinations more frequently, but not more frequently 
than once every 6 months for an individual.
  (9)(A) At the option of the State, the plan may include as 
medical assistance respiratory care services for any individual 
who--
          (i) is medically dependent on a ventilator for life 
        support at least six hours per day;
          (ii) has been so dependent for at least 30 
        consecutive days (or the maximum number of days 
        authorized under the State plan, whichever is less) as 
        an inpatient;
          (iii) but for the availability of respiratory care 
        services, would require respiratory care as an 
        inpatient in a hospital, nursing facility, or 
        intermediate care facility for the mentally retarded 
        and would be eligible to have payment made for such 
        inpatient care under the State plan;
          (iv) has adequate social support services to be cared 
        for at home; and
          (v) wishes to be cared for at home.
  (B) The requirements of subparagraph (A)(ii) may be satisfied 
by a continuous stay in one or more hospitals, nursing 
facilities, or intermediate care facilities for the mentally 
retarded.
  (C) For purposes of this paragraph, respiratory care services 
means services provided on a part-time basis in the home of the 
individual by a respiratory therapist or other health care 
professional trained in respiratory therapy (as determined by 
the State), payment for which is not otherwise included within 
other items and services furnished to such individual as 
medical assistance under the plan.
  (10)(A) The fact that an individual, child, or pregnant woman 
may be denied aid under part A of title IV pursuant to section 
402(a)(43) shall not be construed as denying (or permitting a 
State to deny) medical assistance under this title to such 
individual, child, or woman who is eligible for assistance 
under this title on a basis other than the receipt of aid under 
such part.
  (B) If an individual, child, or pregnant woman is receiving 
aid under part A of title IV and such aid is terminated 
pursuant to section 402(a)(43), the State may not discontinue 
medical assistance under this title for the individual, child, 
or woman until the State has determined that the individual, 
child, or woman is not eligible for assistance under this title 
on a basis other than the receipt of aid under such part.
  (11)(A) In the case of an individual who is enrolled with a 
group health plan under section 1906 and who would (but for 
this paragraph) lose eligibility for benefits under this title 
before the end of the minimum enrollment period (defined in 
subparagraph (B)), the State plan may provide, notwithstanding 
any other provision of this title, that the individual shall be 
deemed to continue to be eligible for such benefits until the 
end of such minimum period, but only with respect to such 
benefits provided to the individual as an enrollee of such 
plan.
  (B) For purposes of subparagraph (A), the term ``minimum 
enrollment period'' means, with respect to an individual's 
enrollment with a group health plan, a period established by 
the State, of not more than 6 months beginning on the date the 
individual's enrollment under the plan becomes effective.
  (12) At the option of the State, the plan may provide that an 
individual who is under an age specified by the State (not to 
exceed 19 years of age) and who is determined to be eligible 
for benefits under a State plan approved under this title under 
subsection (a)(10)(A) shall remain eligible for those benefits 
until the earlier of--
          (A) the end of a period (not to exceed 12 months) 
        following the determination; or
          (B) the time that the individual exceeds that age.
  (13) Express Lane Option.--
          (A) In general.--
                  (i) Option to use a finding from an express 
                lane agency.--At the option of the State, the 
                State plan may provide that in determining 
                eligibility under this title for a child (as 
                defined in subparagraph (G)), the State may 
                rely on a finding made within a reasonable 
                period (as determined by the State) from an 
                Express Lane agency (as defined in subparagraph 
                (F)) when it determines whether a child 
                satisfies one or more components of eligibility 
                for medical assistance under this title. The 
                State may rely on a finding from an Express 
                Lane agency notwithstanding sections 
                1902(a)(46)(B) and 1137(d) or any differences 
                in budget unit, disregard, deeming or other 
                methodology, if the following requirements are 
                met:
                          (I) Prohibition on determining 
                        children ineligible for coverage.--If a 
                        finding from an Express Lane agency 
                        would result in a determination that a 
                        child does not satisfy an eligibility 
                        requirement for medical assistance 
                        under this title and for child health 
                        assistance under title XXI, the State 
                        shall determine eligibility for 
                        assistance using its regular 
                        procedures.
                          (II) Notice requirement.--For any 
                        child who is found eligible for medical 
                        assistance under the State plan under 
                        this title or child health assistance 
                        under title XXI and who is subject to 
                        premiums based on an Express Lane 
                        agency's finding of such child's income 
                        level, the State shall provide notice 
                        that the child may qualify for lower 
                        premium payments if evaluated by the 
                        State using its regular policies and of 
                        the procedures for requesting such an 
                        evaluation.
                          (III) Compliance with screen and 
                        enroll requirement.--The State shall 
                        satisfy the requirements under 
                        subparagraphs (A) and (B) of section 
                        2102(b)(3) (relating to screen and 
                        enroll) before enrolling a child in 
                        child health assistance under title 
                        XXI. At its option, the State may 
                        fulfill such requirements in accordance 
                        with either option provided under 
                        subparagraph (C) of this paragraph.
                          (IV) Verification of citizenship or 
                        nationality status.--The State shall 
                        satisfy the requirements of section 
                        1902(a)(46)(B) or 2105(c)(9), as 
                        applicable for verifications of 
                        citizenship or nationality status.
                          (V) Coding.--The State meets the 
                        requirements of subparagraph (E).
                  (ii) Option to apply to renewals and 
                redeterminations.--The State may apply the 
                provisions of this paragraph when conducting 
                initial determinations of eligibility, 
                redeterminations of eligibility, or both, as 
                described in the State plan.
          (B) Rules of construction.--Nothing in this paragraph 
        shall be construed--
                  (i) to limit or prohibit a State from taking 
                any actions otherwise permitted under this 
                title or title XXI in determining eligibility 
                for or enrolling children into medical 
                assistance under this title or child health 
                assistance under title XXI; or
                  (ii) to modify the limitations in section 
                1902(a)(5) concerning the agencies that may 
                make a determination of eligibility for medical 
                assistance under this title.
          (C) Options for satisfying the screen and enroll 
        requirement.--
                  (i) In general.--With respect to a child 
                whose eligibility for medical assistance under 
                this title or for child health assistance under 
                title XXI has been evaluated by a State agency 
                using an income finding from an Express Lane 
                agency, a State may carry out its duties under 
                subparagraphs (A) and (B) of section 2102(b)(3) 
                (relating to screen and enroll) in accordance 
                with either clause (ii) or clause (iii).
                  (ii) Establishing a screening threshold.--
                          (I) In general.--Under this clause, 
                        the State establishes a screening 
                        threshold set as a percentage of the 
                        Federal poverty level that exceeds the 
                        highest income threshold applicable 
                        under this title to the child by a 
                        minimum of 30 percentage points or, at 
                        State option, a higher number of 
                        percentage points that reflects the 
                        value (as determined by the State and 
                        described in the State plan) of any 
                        differences between income 
                        methodologies used by the program 
                        administered by the Express Lane agency 
                        and the methodologies used by the State 
                        in determining eligibility for medical 
                        assistance under this title.
                          (II) Children with income not above 
                        threshold.--If the income of a child 
                        does not exceed the screening 
                        threshold, the child is deemed to 
                        satisfy the income eligibility criteria 
                        for medical assistance under this title 
                        regardless of whether such child would 
                        otherwise satisfy such criteria.
                          (III) Children with income above 
                        threshold.--If the income of a child 
                        exceeds the screening threshold, the 
                        child shall be considered to have an 
                        income above the Medicaid applicable 
                        income level described in section 
                        2110(b)(4) and to satisfy the 
                        requirement under section 2110(b)(1)(C) 
                        (relating to the requirement that CHIP 
                        matching funds be used only for 
                        children not eligible for Medicaid). If 
                        such a child is enrolled in child 
                        health assistance under title XXI, the 
                        State shall provide the parent, 
                        guardian, or custodial relative with 
                        the following:
                                  (aa) Notice that the child 
                                may be eligible to receive 
                                medical assistance under the 
                                State plan under this title if 
                                evaluated for such assistance 
                                under the State's regular 
                                procedures and notice of the 
                                process through which a parent, 
                                guardian, or custodial relative 
                                can request that the State 
                                evaluate the child's 
                                eligibility for medical 
                                assistance under this title 
                                using such regular procedures.
                                  (bb) A description of 
                                differences between the medical 
                                assistance provided under this 
                                title and child health 
                                assistance under title XXI, 
                                including differences in cost-
                                sharing requirements and 
                                covered benefits.
                  (iii) Temporary enrollment in chip pending 
                screen and enroll.--
                          (I) In general.--Under this clause, a 
                        State enrolls a child in child health 
                        assistance under title XXI for a 
                        temporary period if the child appears 
                        eligible for such assistance based on 
                        an income finding by an Express Lane 
                        agency.
                          (II) Determination of eligibility.--
                        During such temporary enrollment 
                        period, the State shall determine the 
                        child's eligibility for child health 
                        assistance under title XXI or for 
                        medical assistance under this title in 
                        accordance with this clause.
                          (III) Prompt follow up.--In making 
                        such a determination, the State shall 
                        take prompt action to determine whether 
                        the child should be enrolled in medical 
                        assistance under this title or child 
                        health assistance under title XXI 
                        pursuant to subparagraphs (A) and (B) 
                        of section 2102(b)(3) (relating to 
                        screen and enroll).
                          (IV) Requirement for simplified 
                        determination.--In making such a 
                        determination, the State shall use 
                        procedures that, to the maximum 
                        feasible extent, reduce the burden 
                        imposed on the individual of such 
                        determination. Such procedures may not 
                        require the child's parent, guardian, 
                        or custodial relative to provide or 
                        verify information that already has 
                        been provided to the State agency by an 
                        Express Lane agency or another source 
                        of information unless the State agency 
                        has reason to believe the information 
                        is erroneous.
                          (V) Availability of chip matching 
                        funds during temporary enrollment 
                        period.--Medical assistance for items 
                        and services that are provided to a 
                        child enrolled in title XXI during a 
                        temporary enrollment period under this 
                        clause shall be treated as child health 
                        assistance under such title.
          (D) Option for automatic enrollment.--
                  (i) In general.--The State may initiate and 
                determine eligibility for medical assistance 
                under the State Medicaid plan or for child 
                health assistance under the State CHIP plan 
                without a program application from, or on 
                behalf of, the child based on data obtained 
                from sources other than the child (or the 
                child's family), but a child can only be 
                automatically enrolled in the State Medicaid 
                plan or the State CHIP plan if the child or the 
                family affirmatively consents to being enrolled 
                through affirmation in writing, by telephone, 
                orally, through electronic signature, or 
                through any other means specified by the 
                Secretary or by signature on an Express Lane 
                agency application, if the requirement of 
                clause (ii) is met.
                  (ii) Information requirement.--The 
                requirement of this clause is that the State 
                informs the parent, guardian, or custodial 
                relative of the child of the services that will 
                be covered, appropriate methods for using such 
                services, premium or other cost sharing charges 
                (if any) that apply, medical support 
                obligations (under section 1912(a)) created by 
                enrollment (if applicable), and the actions the 
                parent, guardian, or relative must take to 
                maintain enrollment and renew coverage.
          (E) Coding; application to enrollment error rates.--
                  (i) In general.--For purposes of subparagraph 
                (A)(iv), the requirement of this subparagraph 
                for a State is that the State agrees to--
                          (I) assign such codes as the 
                        Secretary shall require to the children 
                        who are enrolled in the State Medicaid 
                        plan or the State CHIP plan through 
                        reliance on a finding made by an 
                        Express Lane agency for the duration of 
                        the State's election under this 
                        paragraph;
                          (II) annually provide the Secretary 
                        with a statistically valid sample (that 
                        is approved by Secretary) of the 
                        children enrolled in such plans through 
                        reliance on such a finding by 
                        conducting a full Medicaid eligibility 
                        review of the children identified for 
                        such sample for purposes of determining 
                        an eligibility error rate (as described 
                        in clause (iv)) with respect to the 
                        enrollment of such children (and shall 
                        not include such children in any data 
                        or samples used for purposes of 
                        complying with a Medicaid Eligibility 
                        Quality Control (MEQC) review or a 
                        payment error rate measurement (PERM) 
                        requirement);
                          (III) submit the error rate 
                        determined under subclause (II) to the 
                        Secretary;
                          (IV) if such error rate exceeds 3 
                        percent for either of the first 2 
                        fiscal years in which the State elects 
                        to apply this paragraph, demonstrate to 
                        the satisfaction of the Secretary the 
                        specific corrective actions implemented 
                        by the State to improve upon such error 
                        rate; and
                          (V) if such error rate exceeds 3 
                        percent for any fiscal year in which 
                        the State elects to apply this 
                        paragraph, a reduction in the amount 
                        otherwise payable to the State under 
                        section 1903(a) for quarters for that 
                        fiscal year, equal to the total amount 
                        of erroneous excess payments determined 
                        for the fiscal year only with respect 
                        to the children included in the sample 
                        for the fiscal year that are in excess 
                        of a 3 percent error rate with respect 
                        to such children.
                  (ii) No punitive action based on error 
                rate.--The Secretary shall not apply the error 
                rate derived from the sample under clause (i) 
                to the entire population of children enrolled 
                in the State Medicaid plan or the State CHIP 
                plan through reliance on a finding made by an 
                Express Lane agency, or to the population of 
                children enrolled in such plans on the basis of 
                the State's regular procedures for determining 
                eligibility, or penalize the State on the basis 
                of such error rate in any manner other than the 
                reduction of payments provided for under clause 
                (i)(V).
                  (iii) Rule of construction.--Nothing in this 
                paragraph shall be construed as relieving a 
                State that elects to apply this paragraph from 
                being subject to a penalty under section 
                1903(u), for payments made under the State 
                Medicaid plan with respect to ineligible 
                individuals and families that are determined to 
                exceed the error rate permitted under that 
                section (as determined without regard to the 
                error rate determined under clause (i)(II)).
                  (iv) Error rate defined.--In this 
                subparagraph, the term ``error rate'' means the 
                rate of erroneous excess payments for medical 
                assistance (as defined in section 
                1903(u)(1)(D)) for the period involved, except 
                that such payments shall be limited to 
                individuals for which eligibility 
                determinations are made under this paragraph 
                and except that in applying this paragraph 
                under title XXI, there shall be substituted for 
                references to provisions of this title 
                corresponding provisions within title XXI.
          (F) Express lane agency.--
                  (i) In general.--In this paragraph, the term 
                ``Express Lane agency'' means a public agency 
                that--
                          (I) is determined by the State 
                        Medicaid agency or the State CHIP 
                        agency (as applicable) to be capable of 
                        making the determinations of one or 
                        more eligibility requirements described 
                        in subparagraph (A)(i);
                          (II) is identified in the State 
                        Medicaid plan or the State CHIP plan; 
                        and
                          (III) notifies the child's family--
                                  (aa) of the information which 
                                shall be disclosed in 
                                accordance with this paragraph;
                                  (bb) that the information 
                                disclosed will be used solely 
                                for purposes of determining 
                                eligibility for medical 
                                assistance under the State 
                                Medicaid plan or for child 
                                health assistance under the 
                                State CHIP plan; and
                                  (cc) that the family may 
                                elect to not have the 
                                information disclosed for such 
                                purposes; and
                          (IV) enters into, or is subject to, 
                        an interagency agreement to limit the 
                        disclosure and use of the information 
                        disclosed.
                  (ii) Inclusion of specific public agencies 
                and indian tribes and tribal organizations.--
                Such term includes the following:
                          (I) A public agency that determines 
                        eligibility for assistance under any of 
                        the following:
                                  (aa) The temporary assistance 
                                for needy families program 
                                funded under part A of title 
                                IV.
                                  (bb) A State program funded 
                                under part D of title IV.
                                  (cc) The State Medicaid plan.
                                  (dd) The State CHIP plan.
                                  (ee) The Food and Nutrition 
                                Act of 2008 (7 U.S.C. 2011 et 
                                seq.).
                                  (ff) The Head Start Act (42 
                                U.S.C. 9801 et seq.).
                                  (gg) The Richard B. Russell 
                                National School Lunch Act (42 
                                U.S.C. 1751 et seq.).
                                  (hh) The Child Nutrition Act 
                                of 1966 (42 U.S.C. 1771 et 
                                seq.).
                                  (ii) The Child Care and 
                                Development Block Grant Act of 
                                1990 (42 U.S.C. 9858 et seq.).
                                  (jj) The Stewart B. McKinney 
                                Homeless Assistance Act (42 
                                U.S.C. 11301 et seq.).
                                  (kk) The United States 
                                Housing Act of 1937 (42 U.S.C. 
                                1437 et seq.).
                                  (ll) The Native American 
                                Housing Assistance and Self-
                                Determination Act of 1996 (25 
                                U.S.C. 4101 et seq.).
                          (II) A State-specified governmental 
                        agency that has fiscal liability or 
                        legal responsibility for the accuracy 
                        of the eligibility determination 
                        findings relied on by the State.
                          (III) A public agency that is subject 
                        to an interagency agreement limiting 
                        the disclosure and use of the 
                        information disclosed for purposes of 
                        determining eligibility under the State 
                        Medicaid plan or the State CHIP plan.
                          (IV) The Indian Health Service, an 
                        Indian Tribe, Tribal Organization, or 
                        Urban Indian Organization (as defined 
                        in section 1139(c)).
                  (iii) Exclusions.--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.
                  (iv) Rules of construction.--Nothing in this 
                paragraph shall be construed as--
                          (I) exempting a State Medicaid agency 
                        from complying with the requirements of 
                        section 1902(a)(4) relating to merit-
                        based personnel standards for employees 
                        of the State Medicaid agency and 
                        safeguards against conflicts of 
                        interest); or
                          (II) authorizing a State Medicaid 
                        agency that elects to use Express Lane 
                        agencies under this subparagraph to use 
                        the Express Lane option to avoid 
                        complying with such requirements for 
                        purposes of making eligibility 
                        determinations under the State Medicaid 
                        plan.
                  (v) Additional definitions.--In this 
                paragraph:
                          (I) State.--The term ``State'' means 
                        1 of the 50 States or the District of 
                        Columbia.
                          (II) State chip agency.--The term 
                        ``State CHIP agency'' means the State 
                        agency responsible for administering 
                        the State CHIP plan.
                          (III) State chip plan.--The term 
                        ``State CHIP plan'' means the State 
                        child health plan established under 
                        title XXI and includes any waiver of 
                        such plan.
                          (IV) State medicaid agency.--The term 
                        ``State Medicaid agency'' means the 
                        State agency responsible for 
                        administering the State Medicaid plan.
                          (V) State medicaid plan.--The term 
                        ``State Medicaid plan'' means the State 
                        plan established under title XIX and 
                        includes any waiver of such plan.
          (G) Child defined.--For purposes of this paragraph, 
        the term ``child'' means an individual under 19 years 
        of age, or, at the option of a State, such higher age, 
        not to exceed 21 years of age, as the State may elect.
          (H) State option to rely on state income tax data or 
        return.--At the option of the State, a finding from an 
        Express Lane agency may include gross income or 
        adjusted gross income shown by State income tax records 
        or returns.
          (I) Application.--This paragraph shall not apply with 
        respect to eligibility determinations made after 
        September 30, 2017.
          (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.
                  (B) No income or expense disregards.--Subject 
                to subparagraph (I), no type of expense, block, 
                or other income disregard shall be applied by a 
                State to determine income eligibility for 
                medical assistance under the State plan or 
                under any waiver of such plan or for any other 
                purpose applicable under the plan or waiver for 
                which a determination of income is required.
                  (C) No assets test.--A State shall not apply 
                any assets or resources test for purposes of 
                determining eligibility for medical assistance 
                under the State plan or under a waiver of the 
                plan.
                  (D) Exceptions.--
                          (i) Individuals eligible because of 
                        other aid or assistance, elderly 
                        individuals, medically needy 
                        individuals, and individuals eligible 
                        for medicare cost-sharing.--
                        Subparagraphs (A), (B), and (C) shall 
                        not apply to the determination of 
                        eligibility under the State plan or 
                        under a waiver for medical assistance 
                        for the following:
                                  (I) Individuals who are 
                                eligible for medical assistance 
                                under the State plan or under a 
                                waiver of the plan on a basis 
                                that does not require a 
                                determination of income by the 
                                State agency administering the 
                                State plan or waiver, including 
                                as a result of eligibility for, 
                                or receipt of, other Federal or 
                                State aid or assistance, 
                                individuals who are eligible on 
                                the basis of receiving (or 
                                being treated as if receiving) 
                                supplemental security income 
                                benefits under title XVI, and 
                                individuals who are eligible as 
                                a result of being or being 
                                deemed to be a child in foster 
                                care under the responsibility 
                                of the State.
                                  (II) Individuals who have 
                                attained age 65.
                                  (III) Individuals who qualify 
                                for medical assistance under 
                                the State plan or under any 
                                waiver of such plan on the 
                                basis of being blind or 
                                disabled (or being treated as 
                                being blind or disabled) 
                                without regard to whether the 
                                individual is eligible for 
                                supplemental security income 
                                benefits under title XVI on the 
                                basis of being blind or 
                                disabled and including an 
                                individual who is eligible for 
                                medical assistance on the basis 
                                of section 1902(e)(3).
                                  (IV) Individuals described in 
                                subsection (a)(10)(C).
                                  (V) Individuals described in 
                                any clause of subsection 
                                (a)(10)(E).
                          (ii) Express lane agency findings.--
                        In the case of a State that elects the 
                        Express Lane option under paragraph 
                        (13), notwithstanding subparagraphs 
                        (A), (B), and (C), the State may rely 
                        on a finding made by an Express Lane 
                        agency in accordance with that 
                        paragraph relating to the income of an 
                        individual for purposes of determining 
                        the individual's eligibility for 
                        medical assistance under the State plan 
                        or under a waiver of the plan.
                          (iii) Medicare prescription drug 
                        subsidies determinations.--
                        Subparagraphs (A), (B), and (C) shall 
                        not apply to any determinations of 
                        eligibility for premium and cost-
                        sharing subsidies under and in 
                        accordance with section 1860D-14 made 
                        by the State pursuant to section 
                        1935(a)(2).
                          (iv) Long-term care.--Subparagraphs 
                        (A), (B), and (C) shall not apply to 
                        any determinations of eligibility of 
                        individuals for purposes of medical 
                        assistance for nursing facility 
                        services, a level of care in any 
                        institution equivalent to that of 
                        nursing facility services, home or 
                        community-based services furnished 
                        under a waiver or State plan amendment 
                        under section 1915 or a waiver under 
                        section 1115, and services described in 
                        section 1917(c)(1)(C)(ii).
                          (v) Grandfather of current enrollees 
                        until date of next regular 
                        redetermination.--An individual who, on 
                        January 1, 2014, is enrolled in the 
                        State plan or under a waiver of the 
                        plan and who would be determined 
                        ineligible for medical assistance 
                        solely because of the application of 
                        the modified adjusted gross income or 
                        household income standard described in 
                        subparagraph (A), shall remain eligible 
                        for medical assistance under the State 
                        plan or waiver (and subject to the same 
                        premiums and cost-sharing as applied to 
                        the individual on that date) through 
                        March 31, 2014, or the date on which 
                        the individual's next regularly 
                        scheduled redetermination of 
                        eligibility is to occur, whichever is 
                        later.
                  (E) Transition planning and oversight.--Each 
                State shall submit to the Secretary for the 
                Secretary's approval the income eligibility 
                thresholds proposed to be established using 
                modified adjusted gross income and household 
                income, the methodologies and procedures to be 
                used to determine income eligibility using 
                modified adjusted gross income and household 
                income and, if applicable, a State plan 
                amendment establishing an optional eligibility 
                category under subsection (a)(10)(A)(ii)(XX). 
                To the extent practicable, the State shall use 
                the same methodologies and procedures for 
                purposes of making such determinations as the 
                State used on the date of enactment of the 
                Patient Protection and Affordable Care Act. The 
                Secretary shall ensure that the income 
                eligibility thresholds proposed to be 
                established using modified adjusted gross 
                income and household income, including under 
                the eligibility category established under 
                subsection (a)(10)(A)(ii)(XX), and the 
                methodologies and procedures proposed to be 
                used to determine income eligibility, will not 
                result in children who would have been 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 no longer being eligible 
                for such assistance.
                  (F) Limitation on secretarial authority.--The 
                Secretary shall not waive compliance with the 
                requirements of this paragraph except to the 
                extent necessary to permit a State to 
                coordinate eligibility requirements for dual 
                eligible individuals (as defined in section 
                1915(h)(2)(B)) under the State plan or under a 
                waiver of the plan and under title XVIII and 
                individuals who require the level of care 
                provided in a hospital, a nursing facility, or 
                an intermediate care facility for the mentally 
                retarded.
                  (G) Definitions of modified adjusted gross 
                income and household income.--In this 
                paragraph, the terms ``modified adjusted gross 
                income'' and ``household income'' have the 
                meanings given such terms in section 36B(d)(2) 
                of the Internal Revenue Code of 1986.
                  (H) Continued application of medicaid rules 
                regarding point-in-time income and sources of 
                income.--The requirement under this paragraph 
                for States to use modified adjusted gross 
                income and household income to determine 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 shall not be construed as affecting 
                or limiting the application of--
                          (i) the requirement under this title 
                        and under the State plan or a waiver of 
                        the plan to determine an individual's 
                        income as of the point in time at which 
                        an application for medical assistance 
                        under the State plan or a waiver of the 
                        plan is processed; or
                          (ii) any rules established under this 
                        title or under the State plan or a 
                        waiver of the plan regarding sources of 
                        countable income.
                  (I) Treatment of portion of modified adjusted 
                gross income.--For purposes of determining the 
                income eligibility of an individual for medical 
                assistance whose eligibility is determined 
                based on the application of modified adjusted 
                gross income under subparagraph (A), the State 
                shall--
                          (i) determine the dollar equivalent 
                        of the difference between the upper 
                        income limit on eligibility for such an 
                        individual (expressed as a percentage 
                        of the poverty line) and such upper 
                        income limit increased by 5 percentage 
                        points; and
                          (ii) notwithstanding the requirement 
                        in subparagraph (A) with respect to use 
                        of modified adjusted gross income, 
                        utilize as the applicable income of 
                        such individual, in determining such 
                        income eligibility, an amount equal to 
                        the modified adjusted gross income 
                        applicable to such individual reduced 
                        by such dollar equivalent amount.
                  (J) Treatment of certain lottery winnings and 
                income received as a lump sum.--
                          (i) In general.--In the case of an 
                        individual who is the recipient of 
                        qualified lottery winnings (pursuant to 
                        lotteries occurring on or after January 
                        1, 2020) or qualified lump sum income 
                        (received on or after such date) and 
                        whose eligibility for medical 
                        assistance is determined based on the 
                        application of modified adjusted gross 
                        income under subparagraph (A), a State 
                        shall, in determining such eligibility, 
                        include such winnings or income (as 
                        applicable) as income received--
                                  (I) in the month in which 
                                such winnings or income (as 
                                applicable) is received if the 
                                amount of such winnings or 
                                income is less than $80,000;
                                  (II) over a period of 2 
                                months if the amount of such 
                                winnings or income (as 
                                applicable) is greater than or 
                                equal to $80,000 but less than 
                                $90,000;
                                  (III) over a period of 3 
                                months if the amount of such 
                                winnings or income (as 
                                applicable) is greater than or 
                                equal to $90,000 but less than 
                                $100,000; and
                                  (IV) over a period of 3 
                                months plus 1 additional month 
                                for each increment of $10,000 
                                of such winnings or income (as 
                                applicable) received, not to 
                                exceed a period of 120 months 
                                (for winnings or income of 
                                $1,260,000 or more), if the 
                                amount of such winnings or 
                                income is greater than or equal 
                                to $100,000.
                          (ii) Counting in equal 
                        installments.--For purposes of 
                        subclauses (II), (III), and (IV) of 
                        clause (i), winnings or income to which 
                        such subclause applies shall be counted 
                        in equal monthly installments over the 
                        period of months specified under such 
                        subclause.
                          (iii) Hardship exemption.--An 
                        individual whose income, by application 
                        of clause (i), exceeds the applicable 
                        eligibility threshold established by 
                        the State, may continue to be eligible 
                        for medical assistance to the extent 
                        that the State determines, under 
                        procedures established by the State 
                        under the State plan (or in the case of 
                        a waiver of the plan under section 
                        1115, incorporated in such waiver), or 
                        as otherwise established by such State 
                        in accordance with such standards as 
                        may be specified by the Secretary, that 
                        the denial of eligibility of the 
                        individual would cause an undue medical 
                        or financial hardship as determined on 
                        the basis of criteria established by 
                        the Secretary.
                          (iv) Notifications and assistance 
                        required in case of loss of 
                        eligibility.--A State shall, with 
                        respect to an individual who loses 
                        eligibility for medical assistance 
                        under the State plan (or a waiver of 
                        such plan) by reason of clause (i), 
                        before the date on which the individual 
                        loses such eligibility, inform the 
                        individual of the date on which the 
                        individual would no longer be 
                        considered ineligible by reason of such 
                        clause to receive medical assistance 
                        under the State plan or under any 
                        waiver of such plan and the date on 
                        which the individual would be eligible 
                        to reapply to receive such medical 
                        assistance.
                          (v) Qualified lottery winnings 
                        defined.--In this subparagraph, the 
                        term ``qualified lottery winnings'' 
                        means winnings from a sweepstakes, 
                        lottery, or pool described in paragraph 
                        (3) of section 4402 of the Internal 
                        Revenue Code of 1986 or a lottery 
                        operated by a multistate or 
                        multijurisdictional lottery 
                        association, including amounts awarded 
                        as a lump sum payment.
                          (vi) Qualified lump sum income 
                        defined.--In this subparagraph, the 
                        term ``qualified lump sum income'' 
                        means income that is received as a lump 
                        sum from one of the following sources:
                                  (I) Monetary winnings from 
                                gambling (as defined by the 
                                Secretary and including 
                                monetary winnings from gambling 
                                activities described in section 
                                1955(b)(4) of title 18, United 
                                States Code).
                                  (II) Income received as 
                                liquid assets from the estate 
                                (as defined in section 
                                1917(b)(4)) of a deceased 
                                individual.
                  (K) Frequency of eligibility 
                redeterminations.--Beginning on October 1, 
                2017, and notwithstanding subparagraph (H), in 
                the case of an individual whose eligibility for 
                medical assistance under the State plan under 
                this title (or a waiver of such plan) is 
                determined based on the application of modified 
                adjusted gross income under subparagraph (A) 
                and who is so eligible on the basis of clause 
                (i)(VIII) or clause (ii)(XX) of subsection 
                (a)(10)(A), a State shall redetermine such 
                individual's eligibility for such medical 
                assistance no less frequently than once every 6 
                months.
          [(14)] (15) Exclusion of compensation for 
        participation in a clinical trial for testing of 
        treatments for a rare disease or condition.--The first 
        $2,000 received by an individual (who has attained 19 
        years of age) as compensation for participation in a 
        clinical trial meeting the requirements of section 
        1612(b)(26) shall be disregarded for purposes of 
        determining the income eligibility of such individual 
        for medical assistance under the State plan or any 
        waiver of such plan.
  (f) Notwithstanding any other provision of this title, except 
as provided in subsection (e) and section 1619(b)(3) and 
section 1924, except with respect to qualified disabled and 
working individuals (described in section 1905(s)), and except 
with respect to qualified medicare beneficiaries, qualified 
severely impaired individuals, and individuals described in 
subsection (m)(1), no State not eligible to participate in the 
State plan program established under title XVI shall be 
required to provide medical assistance to any aged, blind, or 
disabled individual (within the meaning of title XVI) for any 
month unless such State would be (or would have been) required 
to provide medical assistance to such individual for such month 
had its plan for medical assistance approved under this title 
and in effect on January 1, 1972, been in effect in such month, 
except that for this purpose any such individual shall be 
deemed eligible for medical assistance under such State plan if 
(in addition to meeting such other requirements as are or may 
be imposed under the State plan) the income of any such 
individual as determined in accordance with section 1903(f) 
(after deducting any supplemental security income payment and 
State supplementary payment made with respect to such 
individual, and incurred expenses for medical care as 
recognized under State law regardless of whether such expenses 
are reimbursed under another public program of the State or 
political subdivision thereof) is not in excess of the standard 
for medical assistance established under the State plan as in 
effect on January 1, 1972. In States which provide medical 
assistance to individuals pursuant to paragraph (10)(C) of 
subsection (a) of this section, an individual who is eligible 
for medical assistance by reason of the requirements of this 
section concerning the deduction of incurred medical expenses 
from income shall be considered an individual eligible for 
medical assistance under paragraph (10)(A) of that subsection 
if that individual is, or is eligible to be (1) an individual 
with respect to whom there is payable a State supplementary 
payment on the basis of which similarly situated individuals 
are eligible to receive medical assistance equal in amount, 
duration, and scope to that provided to individuals eligible 
under paragraph (10)(A), or (2) an eligible individual or 
eligible spouse, as defined in title XVI, with respect to whom 
supplemental security income benefits are payable; otherwise 
that individual shall be considered to be an individual 
eligible for medical assistance under paragraph (10)(C) of that 
subsection. In States which do not provide medical assistance 
to individuals pursuant to paragraph (10)(C) of that 
subsection, an individual who is eligible for medical 
assistance by reason of the requirements of this section 
concerning the deduction of incurred medical expenses from 
income shall be considered an individual eligible for medical 
assistance under paragraph (10)(A) of that subsection.
  (g) In addition to any other sanction available to a State, a 
State may provide for a reduction of any payment amount 
otherwise due with respect to a person who furnishes services 
under the plan in an amount equal to up to three times the 
amount of any payment sought to be collected by that person in 
violation of subsection (a)(25)(C).
  (h) Nothing in this title (including subsections (a)(13) and 
(a)(30) of this section) shall be construed as authorizing the 
Secretary to limit the amount of payment that may be made under 
a plan under this title for home and community care.
  (i)(1) In addition to any other authority under State law, 
where a State determines that a intermediate care facility for 
the mentally retarded which is certified for participation 
under its plan no longer substantially meets the requirements 
for such a facility under this title and further determines 
that the facility's deficiencies--
          (A) immediately jeopardize the health and safety of 
        its patients, the State shall provide for the 
        termination of the facility's certification for 
        participation under the plan and may provide, or
          (B) do not immediately jeopardize the health and 
        safety of its patients, the State may, in lieu of 
        providing for terminating the facility's certification 
        for participation under the plan, establish alternative 
        remedies if the State demonstrates to the Secretary's 
        satisfaction that the alternative remedies are 
        effective in deterring noncompliance and correcting 
        deficiencies, and may provide
that no payment will be made under the State plan with respect 
to any individual admitted to such facility after a date 
specified by the State.
  (2) The State shall not make such a decision with respect to 
a facility until the facility has had a reasonable opportunity, 
following the initial determination that it no longer 
substantially meets the requirements for such a facility under 
this title, to correct its deficiencies, and, following this 
period, has been given reasonable notice and opportunity for a 
hearing.
  (3) The State's decision to deny payment may be made 
effective only after such notice to the public and to the 
facility as may be provided for by the State, and its 
effectiveness shall terminate (A) when the State finds that the 
facility is in substantial compliance (or is making good faith 
efforts to achieve substantial compliance) with the 
requirements for such a facility under this title, or (B) in 
the case described in paragraph (1)(B), with the end of the 
eleventh month following the month such decision is made 
effective, whichever occurs first. If a facility to which 
clause (B) of the previous sentence applies still fails to 
substantially meet the provisions of the respective section on 
the date specified in such clause, the State shall terminate 
such facility's certification for participation under the plan 
effective with the first day of the first month following the 
month specified in such clause.
  (j) Notwithstanding any other requirement of this title, the 
Secretary may waive or modify any requirement of this title 
with respect to the medical assistance program in American 
Samoa and the Northern Mariana Islands, other than a waiver of 
the Federal medical assistance percentage, the limitation in 
section 1108(f), or the requirement that payment may be made 
for medical assistance only with respect to amounts expended by 
American Samoa or the Northern Mariana Islands for care and 
services described in a numbered paragraph of section 1905(a).
  (k)(1) The medical assistance provided to an individual 
described in subclause (VIII) of subsection (a)(10)(A)(i) shall 
consist of benchmark coverage described in section 1937(b)(1) 
or benchmark equivalent coverage described in section 
1937(b)(2). Such medical assistance shall be provided subject 
to the requirements of section 1937, without regard to whether 
a State otherwise has elected the option to provide medical 
assistance through coverage under that section, unless an 
individual described in subclause (VIII) of subsection 
(a)(10)(A)(i) is also an individual for whom, under 
subparagraph (B) of section 1937(a)(2), the State may not 
require enrollment in benchmark coverage described in 
subsection (b)(1) of section 1937 or benchmark equivalent 
coverage described in subsection (b)(2) of that section.
  (2) Beginning with the first day of any fiscal year quarter 
that begins on or after April 1, 2010, and before January 1, 
2014, a State may elect through a State plan amendment to 
provide medical assistance to individuals who would be 
described in subclause (VIII) of subsection (a)(10)(A)(i) if 
that subclause were effective before January 1, 2014. A State 
may elect to phase-in the extension of eligibility for medical 
assistance to such individuals based on income, so long as the 
State does not extend such eligibility to individuals described 
in such subclause with higher income before making individuals 
described in such subclause with lower income eligible for 
medical assistance.
  (3) If an individual described in subclause (VIII) of 
subsection (a)(10)(A)(i) is the parent of a child who is under 
19 years of age (or such higher age as the State may have 
elected) who is eligible for medical assistance under the State 
plan or under a waiver of such plan (under that subclause or 
under a State plan amendment under paragraph (2), the 
individual may not be enrolled under the State plan unless the 
individual's child is enrolled under the State plan or under a 
waiver of the plan or is enrolled in other health insurance 
coverage. For purposes of the preceding sentence, the term 
``parent'' includes an individual treated as a caretaker 
relative for purposes of carrying out section 1931.
  (l)(1) Individuals described in this paragraph are--
          (A) women during pregnancy (and during the 60-day 
        period beginning on the last day of the pregnancy),
          (B) infants under one year of age,
          (C) children who have attained one year of age but 
        have not attained 6 years of age, and
          (D) children born after September 30, 1983 (or, at 
        the option of a State, after any earlier date), who 
        have attained 6 years of age but have not attained 19 
        years of age,
who are not described in any of subclauses (I) through (III) of 
subsection (a)(10)(A)(i) and whose family income does not 
exceed the income level established by the State under 
paragraph (2) for a family size equal to the size of the 
family, including the woman, infant, or child.
  (2)(A)(i) For purposes of paragraph (1) with respect to 
individuals described in subparagraph (A) or (B) of that 
paragraph, the State shall establish an income level which is a 
percentage (not less than the percentage provided under clause 
(ii) and not more than 185 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.
  (ii) The percentage provided under this clause, with respect 
to eligibility for medical assistance on or after--
          (I) July 1, 1989, is 75 percent, or, if greater, the 
        percentage provided under clause (iii), and
          (II) April 1, 1990, 133 percent, or, if greater, the 
        percentage provided under clause (iv).
  (iii) In the case of a State which, as of the date of the 
enactment of this clause, has elected to provide, and provides, 
medical assistance to individuals described in this subsection 
or has enacted legislation authorizing, or appropriating funds, 
to provide such assistance to such individuals before July 1, 
1989, the percentage provided under clause (ii)(I) shall not be 
less than--
          (I) the percentage specified by the State in an 
        amendment to its State plan (whether approved or not) 
        as of the date of the enactment of this clause, or
          (II) if no such percentage is specified as of the 
        date of the enactment of this clause, the percentage 
        established under the State's authorizing legislation 
        or provided for under the State's appropriations;
but in no case shall this clause require the percentage 
provided under clause (ii)(I) to exceed 100 percent.
  (iv) In the case of a State which, as of the date of the 
enactment of this clause, has established under clause (i), or 
has enacted legislation authorizing, or appropriating funds, to 
provide for, a percentage (of the income official poverty line) 
that is greater than 133 percent, the percentage provided under 
clause (ii) for medical assistance on or after April 1, 1990, 
shall not be less than--
          (I) the percentage specified by the State in an 
        amendment to its State plan (whether approved or not) 
        as of the date of the enactment of this clause, or
          (II) if no such percentage is specified as of the 
        date of the enactment of this clause, the percentage 
        established under the State's authorizing legislation 
        or provided for under the State's appropriations.
  (B) For purposes of paragraph (1) with respect to individuals 
described in subparagraph (C) of such paragraph, the State 
shall establish an income level which is equal to 133 percent 
of the income official poverty line described in subparagraph 
(A) applicable to a family of the size involved.
  (C) For purposes of paragraph (1) with respect to individuals 
described in subparagraph (D) of that paragraph, the State 
shall establish an income level which is equal to 100 percent 
(or, beginning January 1, 2014, and ending December 31, 2019, 
133 percent) of the income official poverty line described in 
subparagraph (A) applicable to a family of the size involved.
  (3) Notwithstanding subsection (a)(17), for individuals who 
are eligible for medical assistance because of subsection 
(a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), (a)(10)(A)(i)(VII), or 
(a)(10)(A)(ii)(IX)--
          (A) application of a resource standard shall be at 
        the option of the State;
          (B) any resource standard or methodology that is 
        applied with respect to an individual described in 
        subparagraph (A) of paragraph (1) may not be more 
        restrictive than the resource standard or methodology 
        that is applied under title XVI;
          (C) any resource standard or methodology that is 
        applied with respect to an individual described in 
        subparagraph (B), (C), or (D) of paragraph (1) may not 
        be more restrictive than the corresponding methodology 
        that is applied under the State plan under part A of 
        title IV;
          (D) the income standard to be applied is the 
        appropriate income standard established under paragraph 
        (2); and
          (E) family income shall be determined in accordance 
        with the methodology employed under the State plan 
        under part A or E of title IV (except to the extent 
        such methodology is inconsistent with clause (D) of 
        subsection (a)(17)), and costs incurred for medical 
        care or for any other type of remedial care shall not 
        be taken into account.
Any different treatment provided under this paragraph for such 
individuals shall not, because of subsection (a)(17), require 
or permit such treatment for other individuals.
  (4)(A) In the case of any State which is providing medical 
assistance to its residents under a waiver granted under 
section 1115, the Secretary shall require the State to provide 
medical assistance for pregnant women and infants under age 1 
described in subsection (a)(10)(A)(i)(IV) and for children 
described in subsection (a)(10)(A)(i)(VI) or subsection 
(a)(10)(A)(i)(VII) in the same manner as the State would be 
required to provide such assistance for such individuals if the 
State had in effect a plan approved under this title.
  (B) In the case of a State which is not one of the 50 States 
or the District of Columbia, the State need not meet the 
requirement of subsection (a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), 
or (a)(10)(A)(i)(VII) and, for purposes of paragraph (2)(A), 
the State may substitute for the percentage provided under 
clause (ii) of such paragraph any percentage.
  (m)(1) Individuals described in this paragraph are 
individuals--
          (A) who are 65 years of age or older or are disabled 
        individuals (as determined under section 1614(a)(3)),
          (B) whose income (as determined under section 1612 
        for purposes of the supplemental security income 
        program, except as provided in paragraph (2)(C)) does 
        not exceed an income level established by the State 
        consistent with paragraph (2)(A), and
          (C) whose resources (as determined under section 1613 
        for purposes of the supplemental security income 
        program) do not exceed (except as provided in paragraph 
        (2)(B)) the maximum amount of resources that an 
        individual may have and obtain benefits under that 
        program.
  (2)(A) The income level established under paragraph (1)(B) 
may not exceed a percentage (not more than 100 percent) of the 
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.
  (B) In the case of a State that provides medical assistance 
to individuals not described in subsection (a)(10)(A) and at 
the State's option, the State may use under paragraph (1)(C) 
such resource level (which is higher than the level described 
in that paragraph) as may be applicable with respect to 
individuals described in paragraph (1)(A) who are not described 
in subsection (a)(10)(A).
  (C) The provisions of section 1905(p)(2)(D) shall apply to 
determinations of income under this subsection in the same 
manner as they apply to determinations of income under section 
1905(p).
  (3) Notwithstanding subsection (a)(17), for individuals 
described in paragraph (1) who are covered under the State plan 
by virtue of subsection (a)(10)(A)(ii)(X)--
          (A) the income standard to be applied is the income 
        standard described in paragraph (1)(B), and
          (B) except as provided in section 1612(b)(4)(B)(ii), 
        costs incurred for medical care or for any other type 
        of remedial care shall not be taken into account in 
        determining income.
Any different treatment provided under this paragraph for such 
individuals shall not, because of subsection (a)(17), require 
or permit such treatment for other individuals.
  (4) Notwithstanding subsection (a)(17), for qualified 
medicare beneficiaries described in section 1905(p)(1)--
          (A) the income standard to be applied is the income 
        standard described in section 1905(p)(1)(B), and
          (B) except as provided in section 1612(b)(4)(B)(ii), 
        costs incurred for medical care or for any other type 
        of remedial care shall not be taken into account in 
        determining income.
Any different treatment provided under this paragraph for such 
individuals shall not, because of subsection (a)(17), require 
or permit such treatment for other individuals.
  (n)(1) In the case of medical assistance furnished under this 
title for medicare cost-sharing respecting the furnishing of a 
service or item to a qualified medicare beneficiary, the State 
plan may provide payment in an amount with respect to the 
service or item that results in the sum of such payment amount 
and any amount of payment made under title XVIII with respect 
to the service or item exceeding the amount that is otherwise 
payable under the State plan for the item or service for 
eligible individuals who are not qualified medicare 
beneficiaries.
  (2) In carrying out paragraph (1), a State is not required to 
provide any payment for any expenses incurred relating to 
payment for deductibles, coinsurance, or copayments for 
medicare cost-sharing to the extent that payment under title 
XVIII for the service would exceed the payment amount that 
otherwise would be made under the State plan under this title 
for such service if provided to an eligible recipient other 
than a medicare beneficiary.
  (3) In the case in which a State's payment for medicare cost-
sharing for a qualified medicare beneficiary with respect to an 
item or service is reduced or eliminated through the 
application of paragraph (2)--
          (A) for purposes of applying any limitation under 
        title XVIII on the amount that the beneficiary may be 
        billed or charged for the service, the amount of 
        payment made under title XVIII plus the amount of 
        payment (if any) under the State plan shall be 
        considered to be payment in full for the service;
          (B) the beneficiary shall not have any legal 
        liability to make payment to a provider or to an 
        organization described in section 1903(m)(1)(A) for the 
        service; and
          (C) any lawful sanction that may be imposed upon a 
        provider or such an organization for excess charges 
        under this title or title XVIII shall apply to the 
        imposition of any charge imposed upon the individual in 
        such case.
This paragraph shall not be construed as preventing payment of 
any medicare cost-sharing by a medicare supplemental policy or 
an employer retiree health plan on behalf of an individual.
  (o) Notwithstanding any provision of subsection (a) to the 
contrary, a State plan under this title shall provide that any 
supplemental security income benefits paid by reason of 
subparagraph (E) or (G) of section 1611(e)(1) to an individual 
who--
          (1) is eligible for medical assistance under the 
        plan, and
          (2) is in a hospital, skilled nursing facility, or 
        intermediate care facility at the time such benefits 
        are paid,
will be disregarded for purposes of determining the amount of 
any post-eligibility contribution by the individual to the cost 
of the care and services provided by the hospital, skilled 
nursing facility, or intermediate care facility.
  (p)(1) In addition to any other authority, a State may 
exclude any individual or entity for purposes of participating 
under the State plan under this title for any reason for which 
the Secretary could exclude the individual or entity from 
participation in a program under title XVIII under section 
1128, 1128A, or 1866(b)(2).
  (2) In order for a State to receive payments for medical 
assistance under section 1903(a), with respect to payments the 
State makes to a medicaid managed care organization (as defined 
in section 1903(m)) or to an entity furnishing services under a 
waiver approved under section 1915(b)(1), the State must 
provide that it will exclude from participation, as such an 
organization or entity, any organization or entity that--
          (A) could be excluded under section 1128(b)(8) 
        (relating to owners and managing employees who have 
        been convicted of certain crimes or received other 
        sanctions),
          (B) has, directly or indirectly, a substantial 
        contractual relationship (as defined by the Secretary) 
        with an individual or entity that is described in 
        section 1128(b)(8)(B), or
          (C) employs or contracts with any individual or 
        entity that is excluded from participation under this 
        title under section 1128 or 1128A for the provision of 
        health care, utilization review, medical social work, 
        or administrative services or employs or contracts with 
        any entity for the provision (directly or indirectly) 
        through such an excluded individual or entity of such 
        services.
  (3) As used in this subsection, the term ``exclude'' includes 
the refusal to enter into or renew a participation agreement or 
the termination of such an agreement.
  (q)(1)(A) In order to meet the requirement of subsection 
(a)(50), the State plan must provide that, in the case of an 
institutionalized individual or couple described in 
subparagraph (B), in determining the amount of the individual's 
or couple's income to be applied monthly to payment for the 
cost of care in an institution, there shall be deducted from 
the monthly income (in addition to other allowances otherwise 
provided under the State plan) a monthly personal needs 
allowance--
          (i) which is reasonable in amount for clothing and 
        other personal needs of the individual (or couple) 
        while in an institution, and
          (ii) which is not less (and may be greater) than the 
        minimum monthly personal needs allowance described in 
        paragraph (2).
  (B) In this subsection, the term ``institutionalized 
individual or couple'' means an individual or married couple--
          (i) who is an inpatient (or who are inpatients) in a 
        medical institution or nursing facility for which 
        payments are made under this title throughout a month, 
        and
          (ii) who is or are determined to be eligible for 
        medical assistance under the State plan.
  (2) The minimum monthly personal needs allowance described in 
this paragraph is $30 for an institutionalized individual and 
$60 for an institutionalized couple (if both are aged, blind, 
or disabled, and their incomes are considered available to each 
other in determining eligibility).
  (r)(1)(A) For purposes of sections 1902(a)(17) and 
1924(d)(1)(D) and for purposes of a waiver under section 1915, 
with respect to the post-eligibility treatment of income of 
individuals who are institutionalized or receiving home or 
community-based services under such a waiver, the treatment 
described in subparagraph (B) shall apply, there shall be 
disregarded reparation payments made by the Federal Republic of 
Germany, and there shall be taken into account amounts for 
incurred expenses for medical or remedial care that are not 
subject to payment by a third party, including--
          (i) medicare and other health insurance premiums, 
        deductibles, or coinsurance, and
          (ii) necessary medical or remedial care recognized 
        under State law but not covered under the State plan 
        under this title, subject to reasonable limits the 
        State may establish on the amount of these expenses.
  (B)(i) In the case of a veteran who does not have a spouse or 
a child, if the veteran--
          (I) receives, after the veteran has been determined 
        to be eligible for medical assistance under the State 
        plan under this title, a veteran's pension in excess of 
        $90 per month, and
          (II) resides in a State veterans home with respect to 
        which the Secretary of Veterans Affairs makes per diem 
        payments for nursing home care pursuant to section 
        1741(a) of title 38, United States Code,
any such pension payment, including any payment made due to the 
need for aid and attendance, or for unreimbursed medical 
expenses, that is in excess of $90 per month shall be counted 
as income only for the purpose of applying such excess payment 
to the State veterans home's cost of providing nursing home 
care to the veteran.
  (ii) The provisions of clause (i) shall apply with respect to 
a surviving spouse of a veteran who does not have a child in 
the same manner as they apply to a veteran described in such 
clause.
  (2)(A) The methodology to be employed in determining income 
and resource eligibility for individuals under subsection 
(a)(10)(A)(i)(III), (a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), 
(a)(10)(A)(i)(VII), (a)(10)(A)(ii), (a)(10)(C)(i)(III), or (f) 
or under section 1905(p) may be less restrictive, and shall be 
no more restrictive, than the methodology--
          (i) in the case of groups consisting of aged, blind, 
        or disabled individuals, under the supplemental 
        security income program under title XVI, or
          (ii) in the case of other groups, under the State 
        plan most closely categorically related.
  (B) For purposes of this subsection and subsection (a)(10), 
methodology is considered to be ``no more restrictive'' if, 
using the methodology, additional individuals may be eligible 
for medical assistance and no individuals who are otherwise 
eligible are made ineligible for such assistance.
  (s) In order to meet the requirements of subsection (a)(55), 
the State plan must provide that payments to hospitals under 
the plan for inpatient hospital services furnished to infants 
who have not attained the age of 1 year, and to children who 
have not attained the age of 6 years and who receive such 
services in a disproportionate share hospital described in 
section 1923(b)(1), shall--
          (1) if made on a prospective basis (whether per diem, 
        per case, or otherwise) provide for an outlier 
        adjustment in payment amounts for medically necessary 
        inpatient hospital services involving exceptionally 
        high costs or exceptionally long lengths of stay,
          (2) not be limited by the imposition of day limits 
        with respect to the delivery of such services to such 
        individuals, and
          (3) not be limited by the imposition of dollar limits 
        (other than such limits resulting from prospective 
        payments as adjusted pursuant to paragraph (1)) with 
        respect to the delivery of such services to any such 
        individual who has not attained their first birthday 
        (or in the case of such an individual who is an 
        inpatient on his first birthday until such individual 
        is discharged).
  (t) Nothing in this title (including sections 1903(a) and 
1905(a)) shall be construed as authorizing the Secretary to 
deny or limit payments to a State for expenditures, for medical 
assistance for items or services, attributable to taxes of 
general applicability imposed with respect to the provision of 
such items or services.
  (u)(1) Individuals described in this paragraph are 
individuals--
          (A) who are entitled to elect COBRA continuation 
        coverage (as defined in paragraph (3)),
          (B) whose income (as determined under section 1612 
        for purposes of the supplemental security income 
        program) does not exceed 100 percent of the 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,
          (C) whose resources (as determined under section 1613 
        for purposes of the supplemental security income 
        program) do not exceed twice the maximum amount of 
        resources that an individual may have and obtain 
        benefits under that program, and
          (D) with respect to whose enrollment for COBRA 
        continuation coverage the State has determined that the 
        savings in expenditures under this title resulting from 
        such enrollment is likely to exceed the amount of 
        payments for COBRA premiums made.
  (2) For purposes of subsection (a)(10)(F) and this 
subsection, the term ``COBRA premiums'' means the applicable 
premium imposed with respect to COBRA continuation coverage.
  (3) In this subsection, the term ``COBRA continuation 
coverage'' means coverage under a group health plan provided by 
an employer with 75 or more employees provided pursuant to 
title XXII of the Public Health Service Act, section 4980B of 
the Internal Revenue Code of 1986, or title VI of the Employee 
Retirement Income Security Act of 1974.
  (4) Notwithstanding subsection (a)(17), for individuals 
described in paragraph (1) who are covered under the State plan 
by virtue of subsection (a)(10)(A)(ii)(XI)--
          (A) the income standard to be applied is the income 
        standard described in paragraph (1)(B), and
          (B) except as provided in section 1612(b)(4)(B)(ii), 
        costs incurred for medical care or for any other type 
        of remedial care shall not be taken into account in 
        determining income.
Any different treatment provided under this paragraph for such 
individuals shall not, because of subsection (a)(10)(B) or 
(a)(17), require or permit such treatment for other 
individuals.
  (v) A State plan may provide for the making of determinations 
of disability or blindness for the purpose of determining 
eligibility for medical assistance under the State plan by the 
single State agency or its designee, and make medical 
assistance available to individuals whom it finds to be blind 
or disabled and who are determined otherwise eligible for such 
assistance during the period of time prior to which a final 
determination of disability or blindness is made by the Social 
Security Administration with respect to such an individual. In 
making such determinations, the State must apply the 
definitions of disability and blindness found in section 
1614(a) of the Social Security Act.
  (w)(1) For purposes of subsection (a)(57) and sections 
1903(m)(1)(A) and 1919(c)(2)(E), the requirement of this 
subsection is that a provider or organization (as the case may 
be) maintain written policies and procedures with respect to 
all adult individuals receiving medical care by or through the 
provider or organization--
          (A) to provide written information to each such 
        individual concerning--
                  (i) an individual's rights under State law 
                (whether statutory or as recognized by the 
                courts of the State) to make decisions 
                concerning such medical care, including the 
                right to accept or refuse medical or surgical 
                treatment and the right to formulate advance 
                directives (as defined in paragraph (3)), and
                  (ii) the provider's or organization's written 
                policies respecting the implementation of such 
                rights;
          (B) to document in the individual's medical record 
        whether or not the individual has executed an advance 
        directive;
          (C) not to condition the provision of care or 
        otherwise discriminate against an individual based on 
        whether or not the individual has executed an advance 
        directive;
          (D) to ensure compliance with requirements of State 
        law (whether statutory or as recognized by the courts 
        of the State) respecting advance directives; and
          (E) to provide (individually or with others) for 
        education for staff and the community on issues 
        concerning advance directives.
Subparagraph (C) shall not be construed as requiring the 
provision of care which conflicts with an advance directive.
  (2) The written information described in paragraph (1)(A) 
shall be provided to an adult individual--
          (A) in the case of a hospital, at the time of the 
        individual's admission as an inpatient,
          (B) in the case of a nursing facility, at the time of 
        the individual's admission as a resident,
          (C) in the case of a provider of home health care or 
        personal care services, in advance of the individual 
        coming under the care of the provider,
          (D) in the case of a hospice program, at the time of 
        initial receipt of hospice care by the individual from 
        the program, and
          (E) in the case of a medicaid managed care 
        organization, at the time of enrollment of the 
        individual with the organization.
  (3) Nothing in this section shall be construed to prohibit 
the application of a State law which allows for an objection on 
the basis of conscience for any health care provider or any 
agent of such provider which as a matter of conscience cannot 
implement an advance directive.
  (4) In this subsection, the term ``advance directive'' means 
a written instruction, such as a living will or durable power 
of attorney for health care, recognized under State law 
(whether statutory or as recognized by the courts of the State) 
and relating to the provision of such care when the individual 
is incapacitated.
  (5) For construction relating to this subsection, see section 
7 of the Assisted Suicide Funding Restriction Act of 1997 
(relating to clarification respecting assisted suicide, 
euthanasia, and mercy killing).
  (x) The Secretary shall establish a system, for 
implementation by not later than July 1, 1991, which provides 
for a unique identifier for each physician who furnishes 
services for which payment may be made under a State plan 
approved under this title.
  (y)(1) In addition to any other authority under State law, 
where a State determines that a psychiatric hospital which is 
certified for participation under its plan no longer meets the 
requirements for a psychiatric hospital (referred to in section 
1905(h)) and further finds that the hospital's deficiencies--
          (A) immediately jeopardize the health and safety of 
        its patients, the State shall terminate the hospital's 
        participation under the State plan; or
          (B) do not immediately jeopardize the health and 
        safety of its patients, the State may terminate the 
        hospital's participation under the State plan, or 
        provide that no payment will be made under the State 
        plan with respect to any individual admitted to such 
        hospital after the effective date of the finding, or 
        both.
  (2) Except as provided in paragraph (3), if a psychiatric 
hospital described in paragraph (1)(B) has not complied with 
the requirements for a psychiatric hospital under this title--
          (A) within 3 months after the date the hospital is 
        found to be out of compliance with such requirements, 
        the State shall provide that no payment will be made 
        under the State plan with respect to any individual 
        admitted to such hospital after the end of such 3-month 
        period, or
          (B) within 6 months after the date the hospital is 
        found to be out of compliance with such requirements, 
        no Federal financial participation shall be provided 
        under section 1903(a) with respect to further services 
        provided in the hospital until the State finds that the 
        hospital is in compliance with the requirements of this 
        title.
  (3) The Secretary may continue payments, over a period of not 
longer than 6 months from the date the hospital is found to be 
out of compliance with such requirements, if--
          (A) the State finds that it is more appropriate to 
        take alternative action to assure compliance of the 
        hospital with the requirements than to terminate the 
        certification of the hospital,
          (B) the State has submitted a plan and timetable for 
        corrective action to the Secretary for approval and the 
        Secretary approves the plan of corrective action, and
          (C) the State agrees to repay to the Federal 
        Government payments received under this paragraph if 
        the corrective action is not taken in accordance with 
        the approved plan and timetable.
  (z)(1) Individuals described in this paragraph are 
individuals not described in subsection (a)(10)(A)(i)--
          (A) who are infected with tuberculosis;
          (B) whose income (as determined under the State plan 
        under this title with respect to disabled individuals) 
        does not exceed the maximum amount of income a disabled 
        individual described in subsection (a)(10)(A)(i) may 
        have and obtain medical assistance under the plan; and
          (C) whose resources (as determined under the State 
        plan under this title with respect to disabled 
        individuals) do not exceed the maximum amount of 
        resources a disabled individual described in subsection 
        (a)(10)(A)(i) may have and obtain medical assistance 
        under the plan.
  (2) For purposes of subsection (a)(10), the term ``TB-related 
services'' means each of the following services relating to 
treatment of infection with tuberculosis:
          (A) Prescribed drugs.
          (B) Physicians' services and services described in 
        section 1905(a)(2).
          (C) Laboratory and X-ray services (including services 
        to confirm the presence of infection).
          (D) Clinic services and Federally-qualified health 
        center services.
          (E) Case management services (as defined in section 
        1915(g)(2)).
          (F) Services (other than room and board) designed to 
        encourage completion of regimens of prescribed drugs by 
        outpatients, including services to observe directly the 
        intake of prescribed drugs.
  (aa) Individuals described in this subsection are individuals 
who--
          (1) are not described in subsection (a)(10)(A)(i);
          (2) have not attained age 65;
          (3) have been screened for breast and cervical cancer 
        under the Centers for Disease Control and Prevention 
        breast and cervical cancer early detection program 
        established under title XV of the Public Health Service 
        Act (42 U.S.C. 300k et seq.) in accordance with the 
        requirements of section 1504 of that Act (42 U.S.C. 
        300n) and need treatment for breast or cervical cancer; 
        and
          (4) are not otherwise covered under creditable 
        coverage, as defined in section 2701(c) of the Public 
        Health Service Act (42 U.S.C. 300gg(c)), but applied 
        without regard to paragraph (1)(F) of such section.
  (bb) Payment for Services Provided by Federally-Qualified 
Health Centers and Rural Health Clinics.--
          (1) In general.--Beginning with fiscal year 2001 with 
        respect to services furnished on or after January 1, 
        2001, and each succeeding fiscal year, the State plan 
        shall provide for payment for services described in 
        section 1905(a)(2)(C) furnished by a Federally-
        qualified health center and services described in 
        section 1905(a)(2)(B) furnished by a rural health 
        clinic in accordance with the provisions of this 
        subsection.
          (2) Fiscal year 2001.--Subject to paragraph (4), for 
        services furnished on and after January 1, 2001, during 
        fiscal year 2001, the State plan shall provide for 
        payment for such services in an amount (calculated on a 
        per visit basis) that is equal to 100 percent of the 
        average of the costs of the center or clinic of 
        furnishing such services during fiscal years 1999 and 
        2000 which are reasonable and related to the cost of 
        furnishing such services, or based on such other tests 
        of reasonableness as the Secretary prescribes in 
        regulations under section 1833(a)(3), or, in the case 
        of services to which such regulations do not apply, the 
        same methodology used under section 1833(a)(3), 
        adjusted to take into account any increase or decrease 
        in the scope of such services furnished by the center 
        or clinic during fiscal year 2001.
          (3) Fiscal year 2002 and succeeding fiscal years.--
        Subject to paragraph (4), for services furnished during 
        fiscal year 2002 or a succeeding fiscal year, the State 
        plan shall provide for payment for such services in an 
        amount (calculated on a per visit basis) that is equal 
        to the amount calculated for such services under this 
        subsection for the preceding fiscal year--
                  (A) increased by the percentage increase in 
                the MEI (as defined in section 1842(i)(3)) 
                applicable to primary care services (as defined 
                in section 1842(i)(4)) for that fiscal year; 
                and
                  (B) adjusted to take into account any 
                increase or decrease in the scope of such 
                services furnished by the center or clinic 
                during that fiscal year.
          (4) Establishment of initial year payment amount for 
        new centers or clinics.--In any case in which an entity 
        first qualifies as a Federally-qualified health center 
        or rural health clinic after fiscal year 2000, the 
        State plan shall provide for payment for services 
        described in section 1905(a)(2)(C) furnished by the 
        center or services described in section 1905(a)(2)(B) 
        furnished by the clinic in the first fiscal year in 
        which the center or clinic so qualifies in an amount 
        (calculated on a per visit basis) that is equal to 100 
        percent of the costs of furnishing such services during 
        such fiscal year based on the rates established under 
        this subsection for the fiscal year for other such 
        centers or clinics located in the same or adjacent area 
        with a similar case load or, in the absence of such a 
        center or clinic, in accordance with the regulations 
        and methodology referred to in paragraph (2) or based 
        on such other tests of reasonableness as the Secretary 
        may specify. For each fiscal year following the fiscal 
        year in which the entity first qualifies as a 
        Federally-qualified health center or rural health 
        clinic, the State plan shall provide for the payment 
        amount to be calculated in accordance with paragraph 
        (3).
          (5) Administration in the case of managed care.--
                  (A) In general.--In the case of services 
                furnished by a Federally-qualified health 
                center or rural health clinic pursuant to a 
                contract between the center or clinic and a 
                managed care entity (as defined in section 
                1932(a)(1)(B)), the State plan shall provide 
                for payment to the center or clinic by the 
                State of a supplemental payment equal to the 
                amount (if any) by which the amount determined 
                under paragraphs (2), (3), and (4) of this 
                subsection exceeds the amount of the payments 
                provided under the contract.
                  (B) Payment schedule.--The supplemental 
                payment required under subparagraph (A) shall 
                be made pursuant to a payment schedule agreed 
                to by the State and the Federally-qualified 
                health center or rural health clinic, but in no 
                case less frequently than every 4 months.
          (6) Alternative payment methodologies.--
        Notwithstanding any other provision of this section, 
        the State plan may provide for payment in any fiscal 
        year to a Federally-qualified health center for 
        services described in section 1905(a)(2)(C) or to a 
        rural health clinic for services described in section 
        1905(a)(2)(B) in an amount which is determined under an 
        alternative payment methodology that--
                  (A) is agreed to by the State and the center 
                or clinic; and
                  (B) results in payment to the center or 
                clinic of an amount which is at least equal to 
                the amount otherwise required to be paid to the 
                center or clinic under this section.
  (cc)(1) Individuals described in this paragraph are 
individuals--
          (A) who are children who have not attained 19 years 
        of age and are born--
                  (i) on or after January 1, 2001 (or, at the 
                option of a State, on or after an earlier 
                date), in the case of the second, third, and 
                fourth quarters of fiscal year 2007;
                  (ii) on or after October 1, 1995 (or, at the 
                option of a State, on or after an earlier 
                date), in the case of each quarter of fiscal 
                year 2008; and
                  (iii) after October 1, 1989, in the case of 
                each quarter of fiscal year 2009 and each 
                quarter of any fiscal year thereafter;
          (B) who would be considered disabled under section 
        1614(a)(3)(C) (as determined under title XVI for 
        children but without regard to any income or asset 
        eligibility requirements that apply under such title 
        with respect to children); and
          (C) whose family income does not exceed such income 
        level as the State establishes and does not exceed--
                  (i) 300 percent of the poverty line (as 
                defined in section 2110(c)(5)) applicable to a 
                family of the size involved; or
                  (ii) such higher percent of such poverty line 
                as a State may establish, except that--
                          (I) any medical assistance provided 
                        to an individual whose family income 
                        exceeds 300 percent of such poverty 
                        line may only be provided with State 
                        funds; and
                          (II) no Federal financial 
                        participation shall be provided under 
                        section 1903(a) for any medical 
                        assistance provided to such an 
                        individual.
  (2)(A) If an employer of a parent of an individual described 
in paragraph (1) offers family coverage under a group health 
plan (as defined in section 2791(a) of the Public Health 
Service Act), the State shall--
          (i) notwithstanding section 1906, require such parent 
        to apply for, enroll in, and pay premiums for such 
        coverage as a condition of such parent's child being or 
        remaining eligible for medical assistance under 
        subsection (a)(10)(A)(ii)(XIX) if the parent is 
        determined eligible for such coverage and the employer 
        contributes at least 50 percent of the total cost of 
        annual premiums for such coverage; and
          (ii) if such coverage is obtained--
                  (I) subject to paragraph (2) of section 
                1916(h), reduce the premium imposed by the 
                State under that section in an amount that 
                reasonably reflects the premium contribution 
                made by the parent for private coverage on 
                behalf of a child with a disability; and
                  (II) treat such coverage as a third party 
                liability under subsection (a)(25).
  (B) In the case of a parent to which subparagraph (A) 
applies, a State, notwithstanding section 1906 but subject to 
paragraph (1)(C)(ii), may provide for payment of any portion of 
the annual premium for such family coverage that the parent is 
required to pay. Any payments made by the State under this 
subparagraph shall be considered, for purposes of section 
1903(a), to be payments for medical assistance.
  (dd) Electronic Transmission of Information.--If the State 
agency determining eligibility for medical assistance under 
this title or child health assistance under title XXI verifies 
an element of eligibility based on information from an Express 
Lane Agency (as defined in subsection (e)(13)(F)), or from 
another public agency, then the applicant's signature under 
penalty of perjury shall not be required as to such element. 
Any signature requirement for an application for medical 
assistance may be satisfied through an electronic signature, as 
defined in section 1710(1) of the Government Paperwork 
Elimination Act (44 U.S.C. 3504 note). The requirements of 
subparagraphs (A) and (B) of section 1137(d)(2) may be met 
through evidence in digital or electronic form.
  (ee)(1) For purposes of subsection (a)(46)(B)(ii), the 
requirements of this subsection with respect to an individual 
declaring to be a citizen or national of the United States for 
purposes of establishing eligibility under this title, are, in 
lieu of requiring the individual to present satisfactory 
documentary evidence of citizenship or nationality under 
section 1903(x) (if the individual is not described in 
paragraph (2) of that section), as follows:
          (A) The State submits the name and social security 
        number of the individual to the Commissioner of Social 
        Security as part of the program established under 
        paragraph (2).
          (B) If the State receives notice from the 
        Commissioner of Social Security that the name or social 
        security number, or the declaration of citizenship or 
        nationality, of the individual is inconsistent with 
        information in the records maintained by the 
        Commissioner--
                  (i) the State makes a reasonable effort to 
                identify and address the causes of such 
                inconsistency, including through typographical 
                or other clerical errors, by contacting the 
                individual to confirm the accuracy of the name 
                or social security number submitted or 
                declaration of citizenship or nationality and 
                by taking such additional actions as the 
                Secretary, through regulation or other 
                guidance, or the State may identify, and 
                continues to provide the individual with 
                medical assistance while making such effort; 
                and
                  (ii) in the case such inconsistency is not 
                resolved under clause (i), the State--
                          (I) notifies the individual of such 
                        fact;
                          (II) provides the individual with a 
                        period of 90 days from the date on 
                        which the notice required under 
                        subclause (I) is received by the 
                        individual to either present 
                        satisfactory documentary evidence of 
                        citizenship or nationality (as defined 
                        in section 1903(x)(3)) or resolve the 
                        inconsistency with the Commissioner of 
                        Social Security (and continues to 
                        provide the individual with medical 
                        assistance during such 90-day period); 
                        and
                          (III) disenrolls the individual from 
                        the State plan under this title within 
                        30 days after the end of such 90-day 
                        period if no such documentary evidence 
                        is presented or if such inconsistency 
                        is not resolved.
  (2)(A) Each State electing to satisfy the requirements of 
this subsection for purposes of section 1902(a)(46)(B) shall 
establish a program under which the State submits at least 
monthly to the Commissioner of Social Security for comparison 
of the name and social security number, of each individual 
newly enrolled in the State plan under this title that month 
who is not described in section 1903(x)(2) and who declares to 
be a United States citizen or national, with information in 
records maintained by the Commissioner.
  (B) In establishing the State program under this paragraph, 
the State may enter into an agreement with the Commissioner of 
Social Security--
          (i) to provide, through an on-line system or 
        otherwise, for the electronic submission of, and 
        response to, the information submitted under 
        subparagraph (A) for an individual enrolled in the 
        State plan under this title who declares to be citizen 
        or national on at least a monthly basis; or
          (ii) to provide for a determination of the 
        consistency of the information submitted with the 
        information maintained in the records of the 
        Commissioner through such other method as agreed to by 
        the State and the Commissioner and approved by the 
        Secretary, provided that such method is no more 
        burdensome for individuals to comply with than any 
        burdens that may apply under a method described in 
        clause (i).
  (C) The program established under this paragraph shall 
provide that, in the case of any individual who is required to 
submit a social security number to the State under subparagraph 
(A) and who is unable to provide the State with such number, 
shall be provided with at least the reasonable opportunity to 
present satisfactory documentary evidence of citizenship or 
nationality (as defined in section 1903(x)(3)) as is provided 
under clauses (i) and (ii) of section 1137(d)(4)(A) to an 
individual for the submittal to the State of evidence 
indicating a satisfactory immigration status.
  (3)(A) The State agency implementing the plan approved under 
this title shall, at such times and in such form as the 
Secretary may specify, provide information on the percentage 
each month that the inconsistent submissions bears to the total 
submissions made for comparison for such month. For purposes of 
this subparagraph, a name, social security number, or 
declaration of citizenship or nationality of an individual 
shall be treated as inconsistent and included in the 
determination of such percentage only if--
          (i) the information submitted by the individual is 
        not consistent with information in records maintained 
        by the Commissioner of Social Security;
          (ii) the inconsistency is not resolved by the State;
          (iii) the individual was provided with a reasonable 
        period of time to resolve the inconsistency with the 
        Commissioner of Social Security or provide satisfactory 
        documentation of citizenship status and did not 
        successfully resolve such inconsistency; and
          (iv) payment has been made for an item or service 
        furnished to the individual under this title.
  (B) If, for any fiscal year, the average monthly percentage 
determined under subparagraph (A) is greater than 3 percent--
          (i) the State shall develop and adopt a corrective 
        plan to review its procedures for verifying the 
        identities of individuals seeking to enroll in the 
        State plan under this title and to identify and 
        implement changes in such procedures to improve their 
        accuracy; and
          (ii) pay to the Secretary an amount equal to the 
        amount which bears the same ratio to the total payments 
        under the State plan for the fiscal year for providing 
        medical assistance to individuals who provided 
        inconsistent information as the number of individuals 
        with inconsistent information in excess of 3 percent of 
        such total submitted bears to the total number of 
        individuals with inconsistent information.
  (C) The Secretary may waive, in certain limited cases, all or 
part of the payment under subparagraph (B)(ii) if the State is 
unable to reach the allowable error rate despite a good faith 
effort by such State.
  (D) Subparagraphs (A) and (B) shall not apply to a State for 
a fiscal year if there is an agreement described in paragraph 
(2)(B) in effect as of the close of the fiscal year that 
provides for the submission on a real-time basis of the 
information described in such paragraph.
  (4) Nothing in this subsection shall affect the rights of any 
individual under this title to appeal any disenrollment from a 
State plan.
  (ff) Notwithstanding any other requirement of this title or 
any other provision of Federal or State law, a State shall 
disregard the following property from resources for purposes of 
determining the eligibility of an individual who is an Indian 
for medical assistance under this title:
          (1) Property, including real property and 
        improvements, that is held in trust, subject to Federal 
        restrictions, or otherwise under the supervision of the 
        Secretary of the Interior, located on a reservation, 
        including any federally recognized Indian Tribe's 
        reservation, pueblo, or colony, including former 
        reservations in Oklahoma, Alaska Native regions 
        established by the Alaska Native Claims Settlement Act, 
        and Indian allotments on or near a reservation as 
        designated and approved by the Bureau of Indian Affairs 
        of the Department of the Interior.
          (2) For any federally recognized Tribe not described 
        in paragraph (1), property located within the most 
        recent boundaries of a prior Federal reservation.
          (3) Ownership interests in rents, leases, royalties, 
        or usage rights related to natural resources (including 
        extraction of natural resources or harvesting of 
        timber, other plants and plant products, animals, fish, 
        and shellfish) resulting from the exercise of federally 
        protected rights.
          (4) Ownership interests in or usage rights to items 
        not covered by paragraphs (1) through (3) that have 
        unique religious, spiritual, traditional, or cultural 
        significance or rights that support subsistence or a 
        traditional lifestyle according to applicable tribal 
        law or custom.
  (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).
  (hh)(1) A State may elect to phase-in the extension of 
eligibility for medical assistance to individuals described in 
subclause (XX) of subsection (a)(10)(A)(ii) based on the 
categorical group (including nonpregnant childless adults) or 
income, so long as the State does not extend such eligibility 
to individuals described in such subclause with higher income 
before making individuals described in such subclause with 
lower income eligible for medical assistance.
  (2) If an individual described in subclause (XX) of 
subsection (a)(10)(A)(ii) is the parent of a child who is under 
19 years of age (or such higher age as the State may have 
elected) who is eligible for medical assistance under the State 
plan or under a waiver of such plan, the individual may not be 
enrolled under the State plan unless the individual's child is 
enrolled under the State plan or under a waiver of the plan or 
is enrolled in other health insurance coverage. For purposes of 
the preceding sentence, the term ``parent'' includes an 
individual treated as a caretaker relative for purposes of 
carrying out section 1931.
  (ii)(1) Individuals described in this subsection are 
individuals--
                  (A) whose income does not exceed an income 
                eligibility level established by the State that 
                does not exceed the highest income eligibility 
                level established under the State plan under 
                this title (or under its State child health 
                plan under title XXI) for pregnant women; and
                  (B) who are not pregnant.
          (2) At the option of a State, individuals described 
        in this subsection may include individuals who, had 
        individuals applied on or before January 1, 2007, would 
        have been made eligible pursuant to the standards and 
        processes imposed by that State for benefits described 
        in clause (XVI) of the matter following subparagraph 
        (G) of section subsection (a)(10) pursuant to a waiver 
        granted under section 1115.
          (3) At the option of a State, for purposes of 
        subsection (a)(17)(B), in determining eligibility for 
        services under this subsection, the State may consider 
        only the income of the applicant or recipient.
  (jj) Primary Care Services Defined.--For purposes of 
subsection (a)(13)(C), the term ``primary care services'' 
means--
          (1) evaluation and management services that are 
        procedure codes (for services covered under title 
        XVIII) for services in the category designated 
        Evaluation and Management in the Healthcare Common 
        Procedure Coding System (established by the Secretary 
        under section 1848(c)(5) as of December 31, 2009, and 
        as subsequently modified); and
          (2) services related to immunization administration 
        for vaccines and toxoids for which CPT codes 90465, 
        90466, 90467, 90468, 90471, 90472, 90473, or 90474 (as 
        subsequently modified) apply under such System.
  (kk) Provider and Supplier Screening, Oversight, and 
Reporting Requirements.--For purposes of subsection (a)(77), 
the requirements of this subsection are the following:
          (1) Screening.--The State complies with the process 
        for screening providers and suppliers under this title, 
        as established by the Secretary under section 
        1866(j)(2).
          (2) Provisional period of enhanced oversight for new 
        providers and suppliers.--The State complies with 
        procedures to provide for a provisional period of 
        enhanced oversight for new providers and suppliers 
        under this title, as established by the Secretary under 
        section 1866(j)(3).
          (3) Disclosure requirements.--The State requires 
        providers and suppliers under the State plan or under a 
        waiver of the plan to comply with the disclosure 
        requirements established by the Secretary under section 
        1866(j)(5).
          (4) Temporary moratorium on enrollment of new 
        providers or suppliers.--
                  (A) Temporary moratorium imposed by the 
                secretary.--
                          (i) In general.--Subject to clause 
                        (ii), the State complies with any 
                        temporary moratorium on the enrollment 
                        of new providers or suppliers imposed 
                        by the Secretary under section 
                        1866(j)(7).
                          (ii) Exceptions.--
                                  (I) Compliance with 
                                moratorium.--A State shall not 
                                be required to comply with a 
                                temporary moratorium described 
                                in clause (i) if the State 
                                determines that the imposition 
                                of such temporary moratorium 
                                would adversely impact 
                                beneficiaries' access to 
                                medical assistance.
                                  (II) FFP available.--
                                Notwithstanding section 
                                1903(i)(2)(E), payment may be 
                                made to a State under this 
                                title with respect to amounts 
                                expended for items and services 
                                described in such section if 
                                the Secretary, in consultation 
                                with the State agency 
                                administering the State plan 
                                under this title (or a waiver 
                                of the plan), determines that 
                                denying payment to the State 
                                pursuant to such section would 
                                adversely impact beneficiaries' 
                                access to medical assistance. 
                          (iii) Limitation on charges to 
                        beneficiaries.--With respect to any 
                        amount expended for items or services 
                        furnished during calendar quarters 
                        beginning on or after October 1, 2017, 
                        the State prohibits, during the period 
                        of a temporary moratorium described in 
                        clause (i), a provider meeting the 
                        requirements specified in subparagraph 
                        (C)(iii) of section 1866(j)(7) from 
                        charging an individual or other person 
                        eligible to receive medical assistance 
                        under the State plan under this title 
                        (or a waiver of the plan) for an item 
                        or service described in section 
                        1903(i)(2)(E) furnished to such an 
                        individual.
                  (B) Moratorium on enrollment of providers and 
                suppliers.--At the option of the State, the 
                State imposes, for purposes of entering into 
                participation agreements with providers or 
                suppliers under the State plan or under a 
                waiver of the plan, periods of enrollment 
                moratoria, or numerical caps or other limits, 
                for providers or suppliers identified by the 
                Secretary as being at high-risk for fraud, 
                waste, or abuse as necessary to combat fraud, 
                waste, or abuse, but only if the State 
                determines that the imposition of any such 
                period, cap, or other limits would not 
                adversely impact beneficiaries' access to 
                medical assistance.
          (5) Compliance programs.--The State requires 
        providers and suppliers under the State plan or under a 
        waiver of the plan to establish, in accordance with the 
        requirements of section 1866(j)(7), a compliance 
        program that contains the core elements established 
        under subparagraph (B) of that section 1866(j)(7) for 
        providers or suppliers within a particular industry or 
        category.
          (6) Reporting of adverse provider actions.--The State 
        complies with the national system for reporting 
        criminal and civil convictions, sanctions, negative 
        licensure actions, and other adverse provider actions 
        to the Secretary, through the Administrator of the 
        Centers for Medicare & Medicaid Services, in accordance 
        with regulations of the Secretary.
          (7) Enrollment and npi of ordering or referring 
        providers.--The State requires--
                  (A) all ordering or referring physicians or 
                other professionals to be enrolled under the 
                State plan or under a waiver of the plan as a 
                participating provider; and
                  (B) the national provider identifier of any 
                ordering or referring physician or other 
                professional to be specified on any claim for 
                payment that is based on an order or referral 
                of the physician or other professional.
          (8) Provider terminations.--
                  (A) In general.--Beginning on July 1, 2018, 
                in the case of a notification under subsection 
                (a)(41) with respect to a termination for a 
                reason specified in section 455.101 of title 
                42, Code of Federal Regulations (as in effect 
                on November 1, 2015) or for any other reason 
                specified by the Secretary, of the 
                participation of a provider of services or any 
                other person under the State plan (or under a 
                waiver of the plan), the State, not later than 
                30 days after the effective date of such 
                termination, submits to the Secretary with 
                respect to any such provider or person, as 
                appropriate--
                          (i) the name of such provider or 
                        person;
                          (ii) the provider type of such 
                        provider or person;
                          (iii) the specialty of such 
                        provider's or person's practice;
                          (iv) the date of birth, Social 
                        Security number, national provider 
                        identifier (if applicable), Federal 
                        taxpayer identification number, and the 
                        State license or certification number 
                        of such provider or person (if 
                        applicable);
                          (v) the reason for the termination;
                          (vi) a copy of the notice of 
                        termination sent to the provider or 
                        person;
                          (vii) the date on which such 
                        termination is effective, as specified 
                        in the notice; and
                          (viii) any other information required 
                        by the Secretary.
                  (B) Effective date defined.--For purposes of 
                this paragraph, the term ``effective date'' 
                means, with respect to a termination described 
                in subparagraph (A), the later of--
                          (i) the date on which such 
                        termination is effective, as specified 
                        in the notice of such termination; or
                          (ii) the date on which all appeal 
                        rights applicable to such termination 
                        have been exhausted or the timeline for 
                        any such appeal has expired.
          (9) Other state oversight.--Nothing in this 
        subsection shall be interpreted to preclude or limit 
        the ability of a State to engage in provider and 
        supplier screening or enhanced provider and supplier 
        oversight activities beyond those required by the 
        Secretary.
  (ll) Termination Notification Database.--In the case of a 
provider of services or any other person whose participation 
under this title or title XXI is terminated (as described in 
subsection (kk)(8)), the Secretary shall, not later than 30 
days after the date on which the Secretary is notified of such 
termination under subsection (a)(41) (as applicable), review 
such termination and, if the Secretary determines appropriate, 
include such termination in any database or similar system 
developed pursuant to section 6401(b)(2) of the Patient 
Protection and Affordable Care Act (42 U.S.C. 1395cc note; 
Public Law 111-148).
  (mm) Directory Physician or Provider Described.--A physician 
or provider described in this subsection is--
          (1) in the case of a physician or provider of a 
        provider type for which the State agency, as a 
        condition on receiving payment for items and services 
        furnished by the physician or provider to individuals 
        eligible to receive medical assistance under the State 
        plan, requires the enrollment of the physician or 
        provider with the State agency, a physician or a 
        provider that--
                  (A) is enrolled with the agency as of the 
                date on which the directory is published or 
                updated (as applicable) under subsection 
                (a)(83); and
                  (B) received payment under the State plan in 
                the 12-month period preceding such date; and
          (2) in the case of a physician or provider of a 
        provider type for which the State agency does not 
        require such enrollment, a physician or provider that 
        received payment under the State plan (or a waiver of 
        the plan) in the 12-month period preceding the date on 
        which the directory is published or updated (as 
        applicable) under subsection (a)(83).

                           PAYMENT TO STATES

  Sec. 1903. (a) From the sums appropriated therefor, the 
Secretary (except as otherwise provided in this section and 
section 1903A(a)) shall pay to each State which has a plan 
approved under this title, for each quarter, beginning with the 
quarter commencing January 1, 1966--
          (1) an amount equal to the Federal medical assistance 
        percentage (as defined in section 1905(b), subject to 
        subsections (g) and (j) of this section and subsection 
        1923(f)) of the total amount expended during such 
        quarter as medical assistance under the State plan; 
        plus
          (2)(A) an amount equal to 75 per centum of so much of 
        the sums expended during such quarter (as found 
        necessary by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable 
        to compensation or training of skilled professional 
        medical personnel, and staff directly supporting such 
        personnel, of the State agency or any other public 
        agency; plus
          (B) notwithstanding paragraph (1) or subparagraph 
        (A), with respect to amounts expended for nursing aide 
        training and competency evaluation programs, and 
        competency evaluation programs, described in section 
        1919(e)(1) (including the costs for nurse aides to 
        complete such competency evaluation programs), 
        regardless of whether the programs are provided in or 
        outside nursing facilities or of the skill of the 
        personnel involved in such programs, an amount equal to 
        50 percent (or, for calendar quarters beginning on or 
        after July 1, 1988, and before October 1, 1990, the 
        lesser of 90 percent or the Federal medical assistance 
        percentage plus 25 percentage points) of so much of the 
        sums expended during such quarter (as found necessary 
        by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable 
        to such programs; plus
          (C) an amount equal to 75 percent of so much of the 
        sums expended during such quarter (as found necessary 
        by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable 
        to preadmission screening and resident review 
        activities conducted by the State under section 
        1919(e)(7); plus
          (D) for each calendar quarter during--
                  (i) fiscal year 1991, an amount equal to 90 
                percent,
                  (ii) fiscal year 1992, an amount equal to 85 
                percent,
                  (iii) fiscal year 1993, an amount equal to 80 
                percent, and
                  (iv) fiscal year 1994 and thereafter, an 
                amount equal to 75 percent,
        of so much of the sums expended during such quarter (as 
        found necessary by the Secretary for the proper and 
        efficient administration of the State plan) as are 
        attributable to State activities under section 1919(g); 
        plus
          (E) an amount equal to 75 percent of so much of the 
        sums expended during such quarter (as found necessary 
        by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable 
        to translation or interpretation services in connection 
        with the enrollment of, retention of, and use of 
        services under this title by, children of families for 
        whom English is not the primary language; plus
          (3) an amount equal to--
                  (A)(i) 90 per centum of so much of the sums 
                expended during such quarter as are 
                attributable to the design, development, or 
                installation of such mechanized claims 
                processing and information retrieval systems as 
                the Secretary determines are likely to provide 
                more efficient, economical, and effective 
                administration of the plan and to be compatible 
                with the claims processing and information 
                retrieval systems utilized in the 
                administration of title XVIII, including the 
                State's share of the cost of installing such a 
                system to be used jointly in the administration 
                of such State's plan and the plan of any other 
                State approved under this title,
                  (ii) 90 per centum of so much of the sums 
                expended during any such quarter in the fiscal 
                year ending June 30, 1972, or the fiscal year 
                ending June 30, 1973, as are attributable to 
                the design, development, or installation of 
                cost determination systems for State-owned 
                general hospitals (except that the total amount 
                paid to all States under this clause for either 
                such fiscal year shall not exceed $150,000), 
                and
                  (iii) an amount equal to the Federal medical 
                assistance percentage (as defined in section 
                1905(b)) of so much of the sums expended during 
                such quarter (as found necessary by the 
                Secretary for the proper and efficient 
                administration of the State plan) as are 
                attributable to such developments or 
                modifications of systems of the type described 
                in clause (i) as are necessary for the 
                efficient collection and reporting on child 
                health measures; and
                  (B) 75 per centum of so much of the sums 
                expended during such quarter as are 
                attributable to the operation of systems 
                (whether such systems are operated directly by 
                the State or by another person under a contract 
                with the State) of the type described in 
                subparagraph (A)(i) (whether or not designed, 
                developed, or installed with assistance under 
                such subparagraph) which are approved by the 
                Secretary and which include provision for 
                prompt written notice to each individual who is 
                furnished services covered by the plan, or to 
                each individual in a sample group of 
                individuals who are furnished such services, of 
                the specific services (other than confidential 
                services) so covered, the name of the person or 
                persons furnishing the services, the date or 
                dates on which the services were furnished, and 
                the amount of the payment or payments made 
                under the plan on account of the services; and
                  (C)(i) 75 per centum of the sums expended 
                with respect to costs incurred during such 
                quarter (as found necessary by the Secretary 
                for the proper and efficient administration of 
                the State plan) as are attributable to the 
                performance of medical and utilization review 
                by a utilization and quality control peer 
                review organization or by an entity which meets 
                the requirements of section 1152, as determined 
                by the Secretary, under a contract entered into 
                under section 1902(d); and
                  (ii) 75 percent of the sums expended with 
                respect to costs incurred during such quarter 
                (as found necessary by the Secretary for the 
                proper and efficient administration of the 
                State plan) as are attributable to the 
                performance of independent external reviews 
                conducted under section 1932(c)(2); and
                  (D) 75 percent of so much of the sums 
                expended by the State plan during a quarter in 
                1991, 1992, or 1993, as the Secretary 
                determines is attributable to the statewide 
                adoption of a drug use review program which 
                conforms to the requirements of section 
                1927(g);
                  (E) 50 percent of the sums expended with 
                respect to costs incurred during such quarter 
                as are attributable to providing--
                          (i) services to identify and educate 
                        individuals who are likely to be 
                        eligible for medical assistance under 
                        this title and who have Sickle Cell 
                        Disease or who are carriers of the 
                        sickle cell gene, including education 
                        regarding how to identify such 
                        individuals; or
                          (ii) education regarding the risks of 
                        stroke and other complications, as well 
                        as the prevention of stroke and other 
                        complications, in individuals who are 
                        likely to be eligible for medical 
                        assistance under this title and who 
                        have Sickle Cell Disease; and
                  (F)(i) 100 percent of so much of the sums 
                expended during such quarter as are 
                attributable to payments to Medicaid providers 
                described in subsection (t)(1) to encourage the 
                adoption and use of certified EHR technology; 
                and
                  (ii) 90 percent of so much of the sums 
                expended during such quarter as are 
                attributable to payments for reasonable 
                administrative expenses related to the 
                administration of payments described in clause 
                (i) if the State meets the condition described 
                in subsection (t)(9); plus
                  (H)(i) 90 percent of the sums expended during 
                the quarter as are attributable to the design, 
                development, or installation of such mechanized 
                verification and information retrieval systems 
                as the Secretary determines are necessary to 
                implement section 1902(ee) (including a system 
                described in paragraph (2)(B) thereof), and
                  (ii) 75 percent of the sums expended during 
                the quarter as are attributable to the 
                operation of systems to which clause (i) 
                applies, plus
          (4) an amount equal to 100 percent of the sums 
        expended during the quarter which are attributable to 
        the costs of the implementation and operation of the 
        immigration status verification system described in 
        section 1137(d); plus
          (5) an amount equal to 90 per centum of the sums 
        expended during such quarter which are attributable to 
        the offering, arranging, and furnishing (directly or on 
        a contract basis) of family planning services and 
        supplies;
          (6) subject to subsection (b)(3), an amount equal 
        to--
                  (A) 90 per centum of the sums expended during 
                such a quarter within the twelve-quarter period 
                beginning with the first quarter in which a 
                payment is made to the State pursuant to this 
                paragraph, and
                  (B) 75 per centum of the sums expended during 
                each succeeding calendar quarter,
        with respect to costs incurred during such quarter (as 
        found necessary by the Secretary for the elimination of 
        fraud in the provision and administration of medical 
        assistance provided under the State plan) which are 
        attributable to the establishment and operation of 
        (including the training of personnel employed by) a 
        State medicaid fraud control unit (described in 
        subsection (q)); plus
          (7) subject to section 1919(g)(3)(B), an amount equal 
        to 50 per centum of the remainder of the amounts 
        expended during such quarter as found necessary by the 
        Secretary for the proper and efficient administration 
        of the State plan.
  (b)(1) Notwithstanding the preceding provisions of this 
section, the amount determined under subsection (a)(1) for any 
State for any quarter beginning after December 31, 1969, shall 
not take into account any amounts expended as medical 
assistance with respect to individuals aged 65 or over and 
disabled individuals entitled to hospital insurance benefits 
under title XVIII which would not have been so expended if the 
individuals involved had been enrolled in the insurance program 
established by part B of title XVIII, other than amounts 
expended under provisions of the plan of such State required by 
section 1902(a)(34).
  (2) For limitation on Federal participation for capital 
expenditures which are out of conformity with a comprehensive 
plan of a State or areawide planning agency, see section 1122.
  (3) The amount of funds which the Secretary is otherwise 
obligated to pay a State during a quarter under subsection 
(a)(6) may not exceed the higher of--
          (A) $125,000, or
          (B) one-quarter of 1 per centum of the sums expended 
        by the Federal, State, and local governments during the 
        previous quarter in carrying out the State's plan under 
        this title.
  (4) Amounts expended by a State for the use of an enrollment 
broker in marketing medicaid managed care organizations and 
other managed care entities to eligible individuals under this 
title shall be considered, for purposes of subsection (a)(7), 
to be necessary for the proper and efficient administration of 
the State plan but only if the following conditions are met 
with respect to the broker:
          (A) The broker is independent of any such entity and 
        of any health care providers (whether or not any such 
        provider participates in the State plan under this 
        title) that provide coverage of services in the same 
        State in which the broker is conducting enrollment 
        activities.
          (B) No person who is an owner, employee, consultant, 
        or has a contract with the broker either has any direct 
        or indirect financial interest with such an entity or 
        health care provider or has been excluded from 
        participation in the program under this title or title 
        XVIII or debarred by any Federal agency, or subject to 
        a civil money penalty under this Act.
  (5) Notwithstanding the preceding provisions of this section, 
the amount determined under subsection (a)(1) for any State 
shall be decreased in a quarter by the amount of any health 
care related taxes (described in section 1902(w)(3)(A)) that 
are imposed on a hospital described in subsection (w)(3)(F) in 
that quarter.
  (c) Nothing in this title shall be construed as prohibiting 
or restricting, or authorizing the Secretary to prohibit or 
restrict, payment under subsection (a) for medical assistance 
for covered services furnished to a child with a disability 
because such services are included in the child's 
individualized education program established pursuant to part B 
of the Individuals with Disabilities Education Act or furnished 
to an infant or toddler with a disability because such services 
are included in the child's individualized family service plan 
adopted pursuant to part C of such Act.
  (d)(1) Prior to the beginning of each quarter, the Secretary 
shall estimate the amount [to which] to which, subject to 
section 1903A(a), a State will be entitled under subsections 
(a) and (b) for such quarter, such estimates to be based on (A) 
a report filed by the State containing its estimate of the 
total sum to be expended in such quarter in accordance with the 
provisions of such subsections, and stating the amount 
appropriated or made available by the State and its political 
subdivisions for such expenditures in such quarter, and if such 
amount is less than the State's proportionate share of the 
total sum of such estimated expenditures, the source or sources 
from which the difference is expected to be derived, and (B) 
such other investigation as the Secretary may find necessary.
  (2)(A) The Secretary shall then pay to the State, in such 
installments as he may determine, the amount so estimated, 
reduced or increased to the extent of any overpayment or 
underpayment which the Secretary determines was made under this 
section to such State for any prior quarter and with respect to 
which adjustment has not already been made under this 
subsection.
  (B) Expenditures for which payments were made to the State 
under subsection (a) shall be treated as an overpayment to the 
extent that the State or local agency administering such plan 
has been reimbursed for such expenditures by a third party 
pursuant to the provisions of its plan in compliance with 
section 1902(a)(25).
  (C) For purposes of this subsection, when an overpayment is 
discovered, which was made by a State to a person or other 
entity, the State shall have a period of 1 year in which to 
recover or attempt to recover such overpayment before 
adjustment is made in the Federal payment to such State on 
account of such overpayment. Except as otherwise provided in 
subparagraph (D), the adjustment in the Federal payment shall 
be made at the end of the 1-year period, whether or not 
recovery was made.
  (D)(i) In any case where the State is unable to recover a 
debt which represents an overpayment (or any portion thereof) 
made to a person or other entity on account of such debt having 
been discharged in bankruptcy or otherwise being uncollectable, 
no adjustment shall be made in the Federal payment to such 
State on account of such overpayment (or portion thereof).
  (ii) In any case where the State is unable to recover a debt 
which represents an overpayment (or any portion thereof) made 
to a person or other entity due to fraud within 1 year of 
discovery because there is not a final determination of the 
amount of the overpayment under an administrative or judicial 
process (as applicable), including as a result of a judgment 
being under appeal, no adjustment shall be made in the Federal 
payment to such State on account of such overpayment (or 
portion thereof) before the date that is 30 days after the date 
on which a final judgment (including, if applicable, a final 
determination on an appeal) is made.
  (3)(A) The pro rata share to which the United States is 
equitably entitled, as determined by the Secretary, of the net 
amount recovered during any quarter by the State or any 
political subdivision thereof with respect to medical 
assistance furnished under the State plan shall be considered 
an overpayment to be adjusted under this subsection.
  (B)(i) Subparagraph (A) and paragraph (2)(B) shall not apply 
to any amount recovered or paid to a State as part of the 
comprehensive settlement of November 1998 between manufacturers 
of tobacco products, as defined in section 5702(d) of the 
Internal Revenue Code of 1986, and State Attorneys General, or 
as part of any individual State settlement or judgment reached 
in litigation initiated or pursued by a State against one or 
more such manufacturers.
  (ii) Except as provided in subsection (i)(19), a State may 
use amounts recovered or paid to the State as part of a 
comprehensive or individual settlement, or a judgment, 
described in clause (i) for any expenditures determined 
appropriate by the State.
  (4) Upon the making of any estimate by the Secretary under 
this subsection, any appropriations available for payments 
under this section shall be deemed obligated.
  (5) In any case in which the Secretary estimates that there 
has been an overpayment under this section to a State on the 
basis of a claim by such State that has been disallowed by the 
Secretary under section 1116(d), and such State disputes such 
disallowance, the amount of the Federal payment in controversy 
shall, at the option of the State, be retained by such State or 
recovered by the Secretary pending a final determination with 
respect to such payment amount. If such final determination is 
to the effect that any amount was properly disallowed, and the 
State chose to retain payment of the amount in controversy, the 
Secretary shall offset, from any subsequent payments made to 
such State under this title, an amount equal to the proper 
amount of the disallowance plus interest on such amount 
disallowed for the period beginning on the date such amount was 
disallowed and ending on the date of such final determination 
at a rate (determined by the Secretary) based on the average of 
the bond equivalent of the weekly 90-day treasury bill auction 
rates during such period.
  (6)(A) Each State (as defined in subsection (w)(7)(D)) shall 
include, in the first report submitted under paragraph (1) 
after the end of each fiscal year, information related to--
          (i) provider-related donations made to the State or 
        units of local government during such fiscal year, and
          (ii) health care related taxes collected by the State 
        or such units during such fiscal year.
  (B) Each State shall include, in the first report submitted 
under paragraph (1) after the end of each fiscal year, 
information related to the total amount of payment adjustments 
made, and the amount of payment adjustments made to individual 
providers (by provider), under section 1923(c) during such 
fiscal year.
  (e) A State plan approved under this title may include, as a 
cost with respect to hospital services under the plan under 
this title, periodic expenditures made to reflect transitional 
allowances established with respect to a hospital closure or 
conversion under section 1884.
  (f)(1)(A) Except as provided in paragraph (4), payment under 
the preceding provisions of this section shall not be made with 
respect to any amount expended as medical assistance in a 
calendar quarter, in any State, for any member of a family the 
annual income of which exceeds the applicable income limitation 
determined under this paragraph.
  (B)(i) Except as provided in clause (ii) of this 
subparagraph, the applicable income limitation with respect to 
any family is the amount determined, in accordance with 
standards prescribed by the Secretary, to be equivalent to 
133\1/3\ percent of the highest amount which would ordinarily 
be paid to a family of the same size without any income or 
resources, in the form of money payments, under the plan of the 
State approved under part A of title IV of this Act.
  (ii) If the Secretary finds that the operation of a uniform 
maximum limits payments to families of more than one size, he 
may adjust the amount otherwise determined under clause (i) to 
take account of families of different sizes.
  (C) The total amount of any applicable income limitation 
determined under subparagraph (B) shall, if it is not a 
multiple of $100 or such other amount as the Secretary may 
prescribe, be rounded to the next higher multiple of $100 or 
such other amount, as the case may be.
  (2)(A) In computing a family's income for purposes of 
paragraph (1), there shall be excluded any costs (whether in 
the form of insurance premiums or otherwise and regardless of 
whether such costs are reimbursed under another public program 
of the State or political subdivision thereof) incurred by such 
family for medical care or for any other type of remedial care 
recognized under State law or, (B) notwithstanding section 1916 
at State option, an amount paid by such family, at the family's 
option, to the State, provided that the amount, when combined 
with costs incurred in prior months, is sufficient when 
excluded from the family's income to reduce such family's 
income below the applicable income limitation described in 
paragraph (1). The amount of State expenditures for which 
medical assistance is available under subsection (a)(1) will be 
reduced by amounts paid to the State pursuant to this 
subparagraph.
  (3) For purposes of paragraph (1)(B), in the case of a family 
consisting of only one individual, the ``highest amount which 
would ordinarily be paid'' to such family under the State's 
plan approved under part A of title IV of this Act shall be the 
amount determined by the State agency (on the basis of 
reasonable relationship to the amounts payable under such plan 
to families consisting of two or more persons) to be the amount 
of the aid which would ordinarily be payable under such plan to 
a family (without any income or resources) consisting of one 
person if such plan provided for aid to such a family.
  (4) The limitations on payment imposed by the preceding 
provisions of this subsection shall not apply with respect to 
any amount expended by a State as medical assistance for any 
individual described in section 1902(a)(10)(A)(i)(III), 
1902(a)(10)(A)(i)(IV), 1902(a)(10)(A)(i)(V), 
1902(a)(10)(A)(i)(VI), 1902(a)(10)(A)(i)(VII), 
1902(a)(10)(A)(i)(VIII),1902(a)(10)(A)(i)(IX), 
1902(a)(10)(A)(ii)(IX), 1902(a)(10)(A)(ii)(X), 
1902(a)(10)(A)(ii)(XIII), 1902(a)(10)(A)(ii)(XIV), or 
1902(a)(10)(A)(ii)(XV), 1902(a)(10)(A)(ii)(XVI), 
1902(a)(10)(A)(ii)(XVII), 1902(a)(10)(A)(ii)(XVIII), 
1902(a)(10)(A)(ii)(XIX), 1902(a)(10)(A)(ii)(XX), 
1902(a)(10)(A)(ii)(XXI), 1902(a)(10)(A)(ii)(XXII), 1905(p)(1) 
or for any individual--
          (A) who is receiving aid or assistance under any plan 
        of the State approved under title I, X, XIV or XVI, or 
        part A of title IV, or with respect to whom 
        supplemental security income benefits are being paid 
        under title XVI, or
          (B) who is not receiving such aid or assistance, and 
        with respect to whom such benefits are not being paid, 
        but (i) is eligible to receive such aid or assistance, 
        or to have such benefits paid with respect to him, or 
        (ii) would be eligible to receive such aid or 
        assistance, or to have such benefits paid with respect 
        to him if he were not in a medical institution, or
          (C) with respect to whom there is being paid, or who 
        is eligible, or would be eligible if he were not in a 
        medical institution, to have paid with respect to him, 
        a State supplementary payment and is eligible for 
        medical assistance equal in amount, duration, and scope 
        to the medical assistance made available to individuals 
        described in section 1902(a)(10)(A), or who is a PACE 
        program eligible individual enrolled in a PACE program 
        under section 1934, but only if the income of such 
        individual (as determined under section 1612, but 
        without regard to subsection (b) thereof) does not 
        exceed 300 percent of the supplemental security income 
        benefit rate established by section 1611(b)(1),
at the time of the provision of the medical assistance giving 
rise to such expenditure.
  (g)(1) Subject to paragraph (3), with respect to amounts paid 
for the following services furnished under the State plan after 
June 30, 1973 (other than services furnished pursuant to a 
contract with a health maintenance organization as defined in 
section 1876 or which is a qualified health maintenance 
organization (as defined in section 1310(d) of the Public 
Health Service Act)), the Federal medical assistance percentage 
shall be decreased as follows: After an individual has received 
inpatient hospital services or services in an intermediate care 
facility for the mentally retarded for 60 days or inpatient 
mental hospital services for 90 days (whether or not such days 
are consecutive), during any fiscal year, the Federal medical 
assistance percentage with respect to amounts paid for any such 
care furnished thereafter to such individual shall be decreased 
by a per centum thereof (determined under paragraph (5)) unless 
the State agency responsible for the administration of the plan 
makes a showing satisfactory to the Secretary that, with 
respect to each calendar quarter for which the State submits a 
request for payment at the full Federal medical assistance 
percentage for amounts paid for inpatient hospital services or 
services in an intermediate care facility for the mentally 
retarded furnished beyond 60 days (or inpatient mental hospital 
services furnished beyond 90 days), such State has an effective 
program of medical review of the care of patients in mental 
hospitals and intermediate care facilities for the mentally 
retarded pursuant to paragraphs (26) and (31) of section 
1902(a) whereby the professional management of each case is 
reviewed and evaluated at least annually by independent 
professional review teams. In determining the number of days on 
which an individual has received services described in this 
subsection, there shall not be counted any days with respect to 
which such individual is entitled to have payments made (in 
whole or in part) on his behalf under section 1812.
  (2) The Secretary shall, as part of his validation procedures 
under this subsection, conduct timely sample onsite surveys of 
private and public institutions in which recipients of medical 
assistance may receive care and services under a State plan 
approved under this title, and his findings with respect to 
such surveys (as well as the showings of the State agency 
required under this subsection) shall be made available for 
public inspection.
  (3)(A) No reduction in the Federal medical assistance 
percentage of a State otherwise required to be imposed under 
this subsection shall take effect--
          (i) if such reduction is due to the State's 
        unsatisfactory or invalid showing made with respect to 
        a calendar quarter beginning before January 1, 1977;
          (ii) before January 1, 1978;
          (iii) unless a notice of such reduction has been 
        provided to the State at least 30 days before the date 
        such reduction takes effect; or
          (iv) due to the State's unsatisfactory or invalid 
        showing made with respect to a calendar quarter 
        beginning after September 30, 1977, unless notice of 
        such reduction has been provided to the State no later 
        than the first day of the fourth calendar quarter 
        following the calendar quarter with respect to which 
        such showing was made.
  (B) The Secretary shall waive application of any reduction in 
the Federal medical assistance percentage of a State otherwise 
required to be imposed under paragraph (1) because a showing by 
the State, made under such paragraph with respect to a calendar 
quarter ending after January 1, 1977, and before January 1, 
1978, is determined to be either unsatisfactory under such 
paragraph or invalid under paragraph (2), if the Secretary 
determines that the State's showing made under paragraph (1) 
with respect to any calendar quarter ending on or before 
December 31, 1978, is satisfactory under such paragraph and is 
valid under paragraph (2).
  (4)(A) The Secretary may not find the showing of a State, 
with respect to a calendar quarter under paragraph (1), to be 
satisfactory if the showing is submitted to the Secretary later 
than the 30th day after the last day of the calendar quarter, 
unless the State demonstrates to the satisfaction of the 
Secretary good cause for not meeting such deadline.
  (B) The Secretary shall find a showing of a State, with 
respect to a calendar quarter under paragraph (1), to be 
satisfactory under such paragraph with respect to the 
requirement that the State conduct annual onsite inspections in 
mental hospitals and intermediate care facilities for the 
mentally retarded under paragraphs (26) and (31) of section 
1902(a), if the showing demonstrates that the State has 
conducted such an onsite inspection during the 12-month period 
ending on the last date of the calendar quarter--
          (i) in each of not less than 98 per centum of the 
        number of such hospitals and facilities requiring such 
        inspection, and
          (ii) in every such hospital or facility which has 200 
        or more beds,
and that, with respect to such hospitals and facilities not 
inspected within such period, the State has exercised good 
faith and due diligence in attempting to conduct such 
inspection, or if the State demonstrates to the satisfaction of 
the Secretary that it would have made such a showing but for 
failings of a technical nature only.
  (5) In the case of a State's unsatisfactory or invalid 
showing made with respect to a type of facility or 
institutional services in a calendar quarter, the per centum 
amount of the reduction of the State's Federal medical 
assistance percentage for that type of services under paragraph 
(1) is equal to 33\1/3\ per centum multiplied by a fraction, 
the denominator of which is equal to the total number of 
patients receiving that type of services in that quarter under 
the State plan in facilities or institutions for which a 
showing was required to be made under this subsection, and the 
numerator of which is equal to the number of such patients 
receiving such type of services in that quarter in those 
facilities or institutions for which a satisfactory and valid 
showing was not made for that calendar quarter.
  (6)(A) Recertifications required under section 1902(a)(44) 
shall be conducted at least every 60 days in the case of 
inpatient hospital services.
  (B) Such recertifications in the case of services in an 
intermediate care facility for the mentally retarded shall be 
conducted at least--
          (i) 60 days after the date of the initial 
        certification,
          (ii) 180 days after the date of the initial 
        certification,
          (iii) 12 months after the date of the initial 
        certification,
          (iv) 18 months after the date of the initial 
        certification,
          (v) 24 months after the date of the initial 
        certification, and
          (vi) every 12 months thereafter.
  (C) For purposes of determining compliance with the schedule 
established by this paragraph, a recertification shall be 
considered to have been done on a timely basis if it was 
performed not later than 10 days after the date the 
recertification was otherwise required and the State 
establishes good cause why the physician or other person making 
such recertification did not meet such schedule.
  (i) Payment under the preceding provisions of this section 
shall not be made--
          (1) for organ transplant procedures unless the State 
        plan provides for written standards respecting the 
        coverage of such procedures and unless such standards 
        provide that--
                  (A) similarly situated individuals are 
                treated alike; and
                  (B) any restriction, on the facilities or 
                practitioners which may provide such 
                procedures, is consistent with the 
                accessibility of high quality care to 
                individuals eligible for the procedures under 
                the State plan; or
          (2) with respect to any amount expended for an item 
        or service (other than an emergency item or service, 
        not including items or services furnished in an 
        emergency room of a hospital) furnished--
                  (A) under the plan by any individual or 
                entity during any period when the individual or 
                entity is excluded from participation under 
                title V, XVIII, or XX or under this title 
                pursuant to section 1128, 1128A, 1156, or 
                1842(j)(2);
                  (B) at the medical direction or on the 
                prescription of a physician, during the period 
                when such physician is excluded from 
                participation under title V, XVIII, or XX or 
                under this title 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);
                  (C) by any individual or entity to whom the 
                State has failed to suspend payments under the 
                plan during any period when there is pending an 
                investigation of a credible allegation of fraud 
                against the individual or entity, as determined 
                by the State in accordance with regulations 
                promulgated by the Secretary for purposes of 
                section 1862(o) and this subparagraph, unless 
                the State determines in accordance with such 
                regulations there is good cause not to suspend 
                such payments;
                  (D) beginning on July 1, 2018, under the plan 
                by any provider of services or person whose 
                participation in the State plan is terminated 
                (as described in section 1902(kk)(8)) after the 
                date that is 60 days after the date on which 
                such termination is included in the database or 
                other system under section 1902(ll); or
                  (E) with respect to any amount expended for 
                such an item or service furnished during 
                calendar quarters beginning on or after October 
                1, 2017, subject to section 
                1902(kk)(4)(A)(ii)(II), within a geographic 
                area that is subject to a moratorium imposed 
                under section 1866(j)(7) by a provider or 
                supplier that meets the requirements specified 
                in subparagraph (C)(iii) of such section, 
                during the period of such moratorium; or
          (3) with respect to any amount expended for inpatient 
        hospital services furnished under the plan (other than 
        amounts attributable to the special situation of a 
        hospital which serves a disproportionate number of low 
        income patients with special needs) to the extent that 
        such amount exceeds the hospital's customary charges 
        with respect to such services or (if such services are 
        furnished under the plan by a public institution free 
        of charge or at nominal charges to the public) exceeds 
        an amount determined on the basis of those items 
        (specified in regulations prescribed by the Secretary) 
        included in the determination of such payment which the 
        Secretary finds will provide fair compensation to such 
        institution for such services; or
          (4) with respect to any amount expended for care or 
        services furnished under the plan by a hospital unless 
        such hospital has in effect a utilization review plan 
        which meets the requirements imposed by section 1861(k) 
        for purposes of title XVIII; and if such hospital has 
        in effect such a utilization review plan for purposes 
        of title XVIII, such plan shall serve as the plan 
        required by this subsection (with the same standards 
        and procedures and the same review committee or group) 
        as a condition of payment under this title; the 
        Secretary is authorized to waive the requirements of 
        this paragraph if the State agency demonstrates to his 
        satisfaction that it has in operation utilization 
        review procedures which are superior in their 
        effectiveness to the procedures required under section 
        1861(k); or
          (5) with respect to any amount expended for any drug 
        product for which payment may not be made under part B 
        of title XVIII because of section 1862(c); or
          (6) with respect to any amount expended for inpatient 
        hospital tests (other than in emergency situations) not 
        specifically ordered by the attending physician or 
        other responsible practitioner; or
          (7) with respect to any amount expended for clinical 
        diagnostic laboratory tests performed by a physician, 
        independent laboratory, or hospital, to the extent such 
        amount exceeds the amount that would be recognized 
        under section 1833(h) for such tests performed for an 
        individual enrolled under part B of title XVIII; or
          (8) with respect to any amount expended for medical 
        assistance (A) for nursing facility services to 
        reimburse (or otherwise compensate) a nursing facility 
        for payment of a civil money penalty imposed under 
        section 1919(h) or (B) for home and community care to 
        reimburse (or otherwise compensate) a provider of such 
        care for payment of a civil money penalty imposed under 
        this title or title XI or for legal expenses in defense 
        of an exclusion or civil money penalty under this title 
        or title XI if there is no reasonable legal ground for 
        the provider's case; or
          (10)(A) with respect to covered outpatient drugs 
        unless there is a rebate agreement in effect under 
        section 1927 with respect to such drugs or unless 
        section 1927(a)(3) applies,
          (B) with respect to any amount expended for an 
        innovator multiple source drug (as defined in section 
        1927(k)) dispensed on or after July 1, 1991, if, under 
        applicable State law, a less expensive multiple source 
        drug could have been dispensed, but only to the extent 
        that such amount exceeds the upper payment limit for 
        such multiple source drug;
                  (C) with respect to covered outpatient drugs 
                described in section 1927(a)(7), unless 
                information respecting utilization data and 
                coding on such drugs that is required to be 
                submitted under such section is submitted in 
                accordance with such section, and
          (D) with respect to any amount expended for 
        reimbursement to a pharmacy under this title for the 
        ingredient cost of a covered outpatient drug for which 
        the pharmacy has already received payment under this 
        title (other than with respect to a reasonable 
        restocking fee for such drug); or
          (11) with respect to any amount expended for 
        physicians' services furnished on or after the first 
        day of the first quarter beginning more than 60 days 
        after the date of establishment of the physician 
        identifier system under section 1902(x), unless the 
        claim for the services includes the unique physician 
        identifier provided under such system; or
          (13) with respect to any amount expended to reimburse 
        (or otherwise compensate) a nursing facility for 
        payment of legal expenses associated with any action 
        initiated by the facility that is dismissed on the 
        basis that no reasonable legal ground existed for the 
        institution of such action; or
          (14) with respect to any amount expended on 
        administrative costs to carry out the program under 
        section 1928; or
          (15) with respect to any amount expended for a 
        single-antigen vaccine and its administration in any 
        case in which the administration of a combined-antigen 
        vaccine was medically appropriate (as determined by the 
        Secretary); or
          (16) with respect to any amount expended for which 
        funds may not be used under the Assisted Suicide 
        Funding Restriction Act of 1997; or
          (17) with respect to any amount expended for roads, 
        bridges, stadiums, or any other item or service not 
        covered under a State plan under this title; or
          (18) with respect to any amount expended for home 
        health care services provided by an agency or 
        organization unless the agency or organization provides 
        the State agency on a continuing basis a surety bond in 
        a form specified by the Secretary under paragraph (7) 
        of section 1861(o) and in an amount that is not less 
        than $50,000 or such comparable surety bond as the 
        Secretary may permit under the last sentence of such 
        section; or
          (19) with respect to any amount expended on 
        administrative costs to initiate or pursue litigation 
        described in subsection (d)(3)(B);
          (20) with respect to amounts expended for medical 
        assistance provided to an individual described in 
        subclause (XV) or (XVI) of section 1902(a)(10)(A)(ii) 
        for a fiscal year unless the State demonstrates to the 
        satisfaction of the Secretary that the level of State 
        funds expended for such fiscal year for programs to 
        enable working individuals with disabilities to work 
        (other than for such medical assistance) is not less 
        than the level expended for such programs during the 
        most recent State fiscal year ending before the date of 
        the enactment of this paragraph;
          (21) with respect to amounts expended for covered 
        outpatient drugs described in section 1927(d)(2)(C) 
        (relating to drugs when used for cosmetic purposes or 
        hair growth), except where medically necessary, and 
        section 1927(d)(2)(K) (relating to drugs when used for 
        treatment of sexual or erectile dysfunction);
          (22) [with respect to amounts expended] (A) with 
        respect to amounts expended for medical assistance for 
        an individual who declares under section 1137(d)(1)(A) 
        to be a citizen or national of the United States for 
        purposes of establishing eligibility for benefits under 
        this title, unless the requirement of section 
        1902(a)(46)(B) is met; and
          (B) in the case of a State that elects to provide a 
        reasonable period to present satisfactory documentary 
        evidence of such citizenship or nationality pursuant to 
        paragraph (2)(C) of section 1902(ee) or paragraph (4) 
        of subsection (x) of this section, for amounts expended 
        for medical assistance for such an individual (other 
        than an individual described in paragraph (2) of such 
        subsection (x)) during such period;
          (23) with respect to amounts expended for medical 
        assistance for covered outpatient drugs (as defined in 
        section 1927(k)(2)) for which the prescription was 
        executed in written (and non-electronic) form unless 
        the prescription was executed on a tamper-resistant 
        pad;
          (24) if a State is required to implement an asset 
        verification program under section 1940 and fails to 
        implement such program in accordance with such section, 
        with respect to amounts expended by such State for 
        medical assistance for individuals subject to asset 
        verification under such section, unless--
                  (A) the State demonstrates to the Secretary's 
                satisfaction that the State made a good faith 
                effort to comply;
                  (B) not later than 60 days after the date of 
                a finding that the State is in noncompliance, 
                the State submits to the Secretary (and the 
                Secretary approves) a corrective action plan to 
                remedy such noncompliance; and
                  (C) not later than 12 months after the date 
                of such submission (and approval), the State 
                fulfills the terms of such corrective action 
                plan;
          (25) with respect to any amounts expended for medical 
        assistance for individuals for whom the State does not 
        report enrollee encounter data (as defined by the 
        Secretary) to the Medicaid Statistical Information 
        System (MSIS) in a timely manner (as determined by the 
        Secretary);
          (26) with respect to any amounts expended for medical 
        assistance for individuals described in subclause 
        (VIII) of subsection (a)(10)(A)(i) other than medical 
        assistance provided through benchmark coverage 
        described in section 1937(b)(1) or benchmark equivalent 
        coverage described in section 1937(b)(2); or
          (27) with respect to any amounts expended by the 
        State on the basis of a fee schedule for items 
        described in section 1861(n) and furnished on or after 
        January 1, 2018, as determined in the aggregate with 
        respect to each class of such items as defined by the 
        Secretary, in excess of the aggregate amount, if any, 
        that would be paid for such items within such class on 
        a fee-for-service basis under the program under part B 
        of title XVIII, including, as applicable, under a 
        competitive acquisition program under section 1847 in 
        an area of the State.
Nothing in paragraph (1) shall be construed as permitting a 
State to provide services under its plan under this title that 
are not reasonable in amount, duration, and scope to achieve 
their purpose. Paragraphs (1), (2), (16), (17), and (18) shall 
apply with respect to items or services furnished and amounts 
expended by or through a managed care entity (as defined in 
section 1932(a)(1)(B)) in the same manner as such paragraphs 
apply to items or services furnished and amounts expended 
directly by the State.
  (j) Notwithstanding the preceding provisions of this section, 
the amount determined under subsection (a)(1) for any State for 
any quarter shall be adjusted in accordance with section 1914.
  (k) The Secretary is authorized to provide at the request of 
any State (and without cost to such State) such technical and 
actuarial assistance as may be necessary to assist such State 
to contract with any medicaid managed care organization which 
meets the requirements of subsection (m) of this section for 
the purpose of providing medical care and services to 
individuals who are entitled to medical assistance under this 
title.
  (l)(1) Subject to paragraphs (3) and (4), with respect to any 
amount expended for personal care services or home health care 
services requiring an in-home visit by a provider that are 
provided under a State plan under this title (or under a waiver 
of the plan) and furnished in a calendar quarter beginning on 
or after January 1, 2019 (or, in the case of home health care 
services, on or after January 1, 2023), unless a State requires 
the use of an electronic visit verification system for such 
services furnished in such quarter under the plan or such 
waiver, the Federal medical assistance percentage shall be 
reduced--
          (A) in the case of personal care services--
                  (i) for calendar quarters in 2019 and 2020, 
                by .25 percentage points;
                  (ii) for calendar quarters in 2021, by .5 
                percentage points;
                  (iii) for calendar quarters in 2022, by .75 
                percentage points; and
                  (iv) for calendar quarters in 2023 and each 
                year thereafter, by 1 percentage point; and
          (B) in the case of home health care services--
                  (i) for calendar quarters in 2023 and 2024, 
                by .25 percentage points;
                  (ii) for calendar quarters in 2025, by .5 
                percentage points;
                  (iii) for calendar quarters in 2026, by .75 
                percentage points; and
                  (iv) for calendar quarters in 2027 and each 
                year thereafter, by 1 percentage point.
  (2) Subject to paragraphs (3) and (4), in implementing the 
requirement for the use of an electronic visit verification 
system under paragraph (1), a State shall--
          (A) consult with agencies and entities that provide 
        personal care services, home health care services, or 
        both under the State plan (or under a waiver of the 
        plan) to ensure that such system--
                  (i) is minimally burdensome;
                  (ii) takes into account existing best 
                practices and electronic visit verification 
                systems in use in the State; and
                  (iii) is conducted in accordance with the 
                requirements of HIPAA privacy and security law 
                (as defined in section 3009 of the Public 
                Health Service Act);
          (B) take into account a stakeholder process that 
        includes input from beneficiaries, family caregivers, 
        individuals who furnish personal care services or home 
        health care services, and other stakeholders, as 
        determined by the State in accordance with guidance 
        from the Secretary; and
          (C) ensure that individuals who furnish personal care 
        services, home health care services, or both under the 
        State plan (or under a waiver of the plan) are provided 
        the opportunity for training on the use of such system.
  (3) Paragraphs (1) and (2) shall not apply in the case of a 
State that, as of the date of the enactment of this subsection, 
requires the use of any system for the electronic verification 
of visits conducted as part of both personal care services and 
home health care services, so long as the State continues to 
require the use of such system with respect to the electronic 
verification of such visits.
  (4)(A) In the case of a State described in subparagraph (B), 
the reduction under paragraph (1) shall not apply--
          (i) in the case of personal care services, for 
        calendar quarters in 2019; and
          (ii) in the case of home health care services, for 
        calendar quarters in 2023.
  (B) For purposes of subparagraph (A), a State described in 
this subparagraph is a State that demonstrates to the Secretary 
that the State--
          (i) has made a good faith effort to comply with the 
        requirements of paragraphs (1) and (2) (including by 
        taking steps to adopt the technology used for an 
        electronic visit verification system); and
          (ii) in implementing such a system, has encountered 
        unavoidable system delays.
  (5) In this subsection:
          (A) The term ``electronic visit verification system'' 
        means, with respect to personal care services or home 
        health care services, a system under which visits 
        conducted as part of such services are electronically 
        verified with respect to--
                  (i) the type of service performed;
                  (ii) the individual receiving the service;
                  (iii) the date of the service;
                  (iv) the location of service delivery;
                  (v) the individual providing the service; and
                  (vi) the time the service begins and ends.
          (B) The term ``home health care services'' means 
        services described in section 1905(a)(7) provided under 
        a State plan under this title (or under a waiver of the 
        plan).
          (C) The term ``personal care services'' means 
        personal care services provided under a State plan 
        under this title (or under a waiver of the plan), 
        including services provided under section 1905(a)(24), 
        1915(c), 1915(i), 1915(j), or 1915(k) or under a wavier 
        under section 1115.
  (6)(A) In the case in which a State requires personal care 
service and home health care service providers to utilize an 
electronic visit verification system operated by the State or a 
contractor on behalf of the State, the Secretary shall pay to 
the State, for each quarter, an amount equal to 90 per centum 
of so much of the sums expended during such quarter as are 
attributable to the design, development, or installation of 
such system, and 75 per centum of so much of the sums for the 
operation and maintenance of such system.
  (B) Subparagraph (A) shall not apply in the case in which a 
State requires personal care service and home health care 
service providers to utilize an electronic visit verification 
system that is not operated by the State or a contractor on 
behalf of the State.
  (m)(1)(A) The term ``medicaid managed care organization'' 
means a health maintenance organization, an eligible 
organization with a contract under section 1876 or a 
Medicare+Choice organization with a contract under part C of 
title XVIII, a provider sponsored organization, or any other 
public or private organization, which meets the requirement of 
section 1902(w) and--
          (i) makes services it provides to individuals 
        eligible for benefits under this title accessible to 
        such individuals, within the area served by the 
        organization, to the same extent as such services are 
        made accessible to individuals (eligible for medical 
        assistance under the State plan) not enrolled with the 
        organization, and
          (ii) has made adequate provision against the risk of 
        insolvency, which provision is satisfactory to the 
        State, meets the requirements of subparagraph (C)(i) 
        (if applicable), and which assures that individuals 
        eligible for benefits under this title are in no case 
        held liable for debts of the organization in case of 
        the organization's insolvency.
An organization that is a qualified health maintenance 
organization (as defined in section 1310(d) of the Public 
Health Service Act) is deemed to meet the requirements of 
clauses (i) and (ii).
  (B) The duties and functions of the Secretary, insofar as 
they involve making determinations as to whether an 
organization is a medicaid managed care organization within the 
meaning of subparagraph (A), shall be integrated with the 
administration of section 1312 (a) and (b) of the Public Health 
Service Act.
  (C)(i) Subject to clause (ii), a provision meets the 
requirements of this subparagraph for an organization if the 
organization meets solvency standards established by the State 
for private health maintenance organizations or is licensed or 
certified by the State as a risk-bearing entity.
  (ii) Clause (i) shall not apply to an organization if--
          (I) the organization is not responsible for the 
        provision (directly or through arrangements with 
        providers of services) of inpatient hospital services 
        and physicians' services;
          (II) the organization is a public entity;
          (III) the solvency of the organization is guaranteed 
        by the State; or
          (IV) the organization is (or is controlled by) one or 
        more Federally-qualified health centers and meets 
        solvency standards established by the State for such an 
        organization.
For purposes of subclause (IV), the term ``control'' means the 
possession, whether direct or indirect, of the power to direct 
or cause the direction of the management and policies of the 
organization through membership, board representation, or an 
ownership interest equal to or greater than 50.1 percent.
  (2)(A) Except as provided in subparagraphs (B), (C), and (G), 
no payment shall be made under this title to a State with 
respect to expenditures incurred by it for payment (determined 
under a prepaid capitation basis or under any other risk basis) 
for services provided by any entity (including a health 
insuring organization) which is responsible for the provision 
(directly or through arrangements with providers of services) 
of inpatient hospital services and any other service described 
in paragraph (2), (3), (4), (5), or (7) of section 1905(a) or 
for the provision of any three or more of the services 
described in such paragraphs unless--
          (i) the Secretary has determined that the entity is a 
        medicaid managed care organization organization as 
        defined in paragraph (1);
          (iii) such services are provided for the benefit of 
        individuals eligible for benefits under this title in 
        accordance with a contract between the State and the 
        entity under which prepaid payments to the entity are 
        made on an actuarially sound basis and under which the 
        Secretary must provide prior approval for contracts 
        providing for expenditures in excess of $1,000,000 for 
        1998 and, for a subsequent year, the amount established 
        under this clause for the previous year increased by 
        the percentage increase in the consumer price index for 
        all urban consumers over the previous year;
          (iv) such contract provides that the Secretary and 
        the State (or any person or organization designated by 
        either) shall have the right to audit and inspect any 
        books and records of the entity (and of any 
        subcontractor) that pertain (I) to the ability of the 
        entity to bear the risk of potential financial losses, 
        or (II) to services performed or determinations of 
        amounts payable under the contract;
          (v) such contract provides that in the entity's 
        enrollment, reenrollment, or disenrollment of 
        individuals who are eligible for benefits under this 
        title and eligible to enroll, reenroll, or disenroll 
        with the entity pursuant to the contract, the entity 
        will not discriminate among such individuals on the 
        basis of their health status or requirements for health 
        care services;
          (vi) such contract (I) permits individuals who have 
        elected under the plan to enroll with the entity for 
        provision of such benefits to terminate such enrollment 
        in accordance with section 1932(a)(4), and (II) 
        provides for notification in accordance with such 
        section of each such individual, at the time of the 
        individual's enrollment, of such right to terminate 
        such enrollment;
          (vii) such contract provides that, in the case of 
        medically necessary services which were provided (I) to 
        an individual enrolled with the entity under the 
        contract and entitled to benefits with respect to such 
        services under the State's plan and (II) other than 
        through the organization because the services were 
        immediately required due to an unforeseen illness, 
        injury, or condition, either the entity or the State 
        provides for reimbursement with respect to those 
        services,
          (viii) such contract provides for disclosure of 
        information in accordance with section 1124 and 
        paragraph (4) of this subsection;
          (ix) such contract provides, in the case of an entity 
        that has entered into a contract for the provision of 
        services with a Federally-qualified health center or a 
        rural health clinic, that the entity shall provide 
        payment that is not less than the level and amount of 
        payment which the entity would make for the services if 
        the services were furnished by a provider which is not 
        a Federally-qualified health center or a rural health 
        clinic;
          (x) any physician incentive plan that it operates 
        meets the requirements described in section 1876(i)(8);
          (xi) such contract provides for maintenance of 
        sufficient patient encounter data to identify the 
        physician who delivers services to patients and for the 
        provision of such data to the State at a frequency and 
        level of detail to be specified by the Secretary;
          (xii) such contract, and the entity complies with the 
        applicable requirements of section 1932; and
                  (xiii) such contract provides that (I) 
                covered outpatient drugs dispensed to 
                individuals eligible for medical assistance who 
                are enrolled with the entity shall be subject 
                to the same rebate required by the agreement 
                entered into under section 1927 as the State is 
                subject to and that the State shall collect 
                such rebates from manufacturers, (II) 
                capitation rates paid to the entity shall be 
                based on actual cost experience related to 
                rebates and subject to the Federal regulations 
                requiring actuarially sound rates, and (III) 
                the entity shall report to the State, on such 
                timely and periodic basis as specified by the 
                Secretary in order to include in the 
                information submitted by the State to a 
                manufacturer and the Secretary under section 
                1927(b)(2)(A), information on the total number 
                of units of each dosage form and strength and 
                package size by National Drug Code of each 
                covered outpatient drug dispensed to 
                individuals eligible for medical assistance who 
                are enrolled with the entity and for which the 
                entity is responsible for coverage of such drug 
                under this subsection (other than covered 
                outpatient drugs that under subsection (j)(1) 
                of section 1927 are not subject to the 
                requirements of that section) and such other 
                data as the Secretary determines necessary to 
                carry out this subsection.
  (B) Subparagraph (A) except with respect to clause (ix) of 
subparagraph (A), does not apply with respect to payments under 
this title to a State with respect to expenditures incurred by 
it for payment for services provided by an entity which--
          (i)(I) received a grant of at least $100,000 in the 
        fiscal year ending June 30, 1976, under section 
        329(d)(1)(A) or 330(d)(1) of the Public Health Service 
        Act, and for the period beginning July 1, 1976, and 
        ending on the expiration of the period for which 
        payments are to be made under this title has been the 
        recipient of a grant under either such section; and
          (II) provides to its enrollees, on a prepaid 
        capitation risk basis or on any other risk basis, all 
        of the services and benefits described in paragraphs 
        (1), (2), (3), (4)(C), and (5) of section 1905(a) and, 
        to the extent required by section 1902(a)(10)(D) to be 
        provided under a State plan for medical assistance, the 
        services and benefits described in paragraph (7) of 
        section 1905(a); or
          (ii) is a nonprofit primary health care entity 
        located in a rural area (as defined by the Appalachian 
        Regional Commission)--
                  (I) which received in the fiscal year ending 
                June 30, 1976, at least $100,000 (by grant, 
                subgrant, or subcontract) under the Appalachian 
                Regional Development Act of 1965, and
                  (II) for the period beginning July 1, 1976, 
                and ending on the expiration of the period for 
                which payments are to be made under this title 
                either has been the recipient of a grant, 
                subgrant, or subcontract under such Act or has 
                provided services under a contract (initially 
                entered into during a year in which the entity 
                was the recipient of such a grant, subgrant, or 
                subcontract) with a State agency under this 
                title on a prepaid capitation risk basis or on 
                any other risk basis; or
          (iii) which has contracted with the single State 
        agency for the provision of services (but not including 
        inpatient hospital services) to persons eligible under 
        this title on a prepaid risk basis prior to 1970.
  (G) In the case of an entity which is receiving (and has 
received during the previous two years) a grant of at least 
$100,000 under section 329(d)(1)(A) or 330(d)(1) of the Public 
Health Service Act or is receiving (and has received during the 
previous two years) at least $100,000 (by grant, subgrant, or 
subcontract) under the Appalachian Regional Development Act of 
1965, clause (i) of subparagraph (A) shall not apply.
  (H) In the case of an individual who--
          (i) in a month is eligible for benefits under this 
        title and enrolled with a medicaid managed care 
        organization with a contract under this paragraph or 
        with a primary care case manager with a contract 
        described in section 1905(t)(3),
          (ii) in the next month (or in the next 2 months) is 
        not eligible for such benefits, but
          (iii) in the succeeding month is again eligible for 
        such benefits,
the State plan, subject to subparagraph (A)(vi), may enroll the 
individual for that succeeding month with the organization 
described in clause (i) if the organization continues to have a 
contract under this paragraph with the State or with the 
manager described in such clause if the manager continues to 
have a contract described in section 1905(t)(3) with the State.
  (3) No payment shall be made under this title to a State with 
respect to expenditures incurred by the State for payment for 
services provided by a managed care entity (as defined under 
section 1932(a)(1)) under the State plan under this title (or 
under a waiver of the plan) unless the State--
          (A) beginning on July 1, 2018, has a contract with 
        such entity that complies with the requirement 
        specified in section 1932(d)(5); and
          (B) beginning on January 1, 2018, complies with the 
        requirement specified in section 1932(d)(6)(A).
  (4)(A) Each medicaid managed care organization which is not a 
qualified health maintenance organization (as defined in 
section 1310(d) of the Public Health Service Act) must report 
to the State and, upon request, to the Secretary, the Inspector 
General of the Department of Health and Human Services, and the 
Comptroller General a description of transactions between the 
organization and a party in interest (as defined in section 
1318(b) of such Act), including the following transactions:
          (i) Any sale or exchange, or leasing of any property 
        between the organization and such a party.
          (ii) Any furnishing for consideration of goods, 
        services (including management services), or facilities 
        between the organization and such a party, but not 
        including salaries paid to employees for services 
        provided in the normal course of their employment.
          (iii) Any lending of money or other extension of 
        credit between the organization and such a party.
The State or Secretary may require that information reported 
respecting an organization which controls, or is controlled by, 
or is under common control with, another entity be in the form 
of a consolidated financial statement for the organization and 
such entity.
  (B) Each organization shall make the information reported 
pursuant to subparagraph (A) available to its enrollees upon 
reasonable request.
  (5)(A) If the Secretary determines that an entity with a 
contract under this subsection--
          (i) fails substantially to provide medically 
        necessary items and services that are required (under 
        law or under the contract) to be provided to an 
        individual covered under the contract, if the failure 
        has adversely affected (or has substantial likelihood 
        of adversely affecting) the individual;
          (ii) imposes premiums on individuals enrolled under 
        this subsection in excess of the premiums permitted 
        under this title;
          (iii) acts to discriminate among individuals in 
        violation of the provision of paragraph (2)(A)(v), 
        including expulsion or refusal to re-enroll an 
        individual or engaging in any practice that would 
        reasonably be expected to have the effect of denying or 
        discouraging enrollment (except as permitted by this 
        subsection) by eligible individuals with the 
        organization whose medical condition or history 
        indicates a need for substantial future medical 
        services;
          (iv) misrepresents or falsifies information that is 
        furnished--
                  (I) to the Secretary or the State under this 
                subsection, or
                  (II) to an individual or to any other entity 
                under this subsection, or
          (v) fails to comply with the requirements of section 
        1876(i)(8),
the Secretary may provide, in addition to any other remedies 
available under law, for any of the remedies described in 
subparagraph (B).
  (B) The remedies described in this subparagraph are--
          (i) civil money penalties of not more than $25,000 
        for each determination under subparagraph (A), or, with 
        respect to a determination under clause (iii) or 
        (iv)(I) of such subparagraph, of not more than $100,000 
        for each such determination, plus, with respect to a 
        determination under subparagraph (A)(ii), double the 
        excess amount charged in violation of such subparagraph 
        (and the excess amount charged shall be deducted from 
        the penalty and returned to the individual concerned), 
        and plus, with respect to a determination under 
        subparagraph (A)(iii), $15,000 for each individual not 
        enrolled as a result of a practice described in such 
        subparagraph, or
          (ii) denial of payment to the State for medical 
        assistance furnished under the contract under this 
        subsection for individuals enrolled after the date the 
        Secretary notifies the organization of a determination 
        under subparagraph (A) and until the Secretary is 
        satisfied that the basis for such determination has 
        been corrected and is not likely to recur.
The provisions of section 1128A (other than subsections (a) and 
(b)) shall apply to a civil money penalty under clause (i) in 
the same manner as such provisions apply to a penalty or 
proceeding under section 1128A(a).
  (6)(A) For purposes of this subsection and section 
1902(e)(2)(A), in the case of the State of New Jersey, the term 
``contract'' shall be deemed to include an undertaking by the 
State agency, in the State plan under this title, to operate a 
program meeting all requirements of this subsection.
  (B) The undertaking described in subparagraph (A) must 
provide--
          (i) for the establishment of a separate entity 
        responsible for the operation of a program meeting the 
        requirements of this subsection, which entity may be a 
        subdivision of the State agency administering the State 
        plan under this title;
          (ii) for separate accounting for the funds used to 
        operate such program; and
          (iii) for setting the capitation rates and any other 
        payment rates for services provided in accordance with 
        this subsection using a methodology satisfactory to the 
        Secretary designed to ensure that total Federal 
        matching payments under this title for such services 
        will be lower than the matching payments that would be 
        made for the same services, if provided under the State 
        plan on a fee for service basis to an actuarially 
        equivalent population.
  (C) The undertaking described in subparagraph (A) shall be 
subject to approval (and annual re-approval) by the Secretary 
in the same manner as a contract under this subsection.
  (D) The undertaking described in subparagraph (A) shall not 
be eligible for a waiver under section 1915(b).
  (o) Notwithstanding the preceding provisions of this section, 
no payment shall be made to a State under the preceding 
provisions of this section for expenditures for medical 
assistance provided for an individual under its State plan 
approved under this title to the extent that a private insurer 
(as defined by the Secretary by regulation and including a 
group health plan (as defined in section 607(1) of the Employee 
Retirement Income Security Act of 1974), a service benefit 
plan, and a health maintenance organization) would have been 
obligated to provide such assistance but for a provision of its 
insurance contract which has the effect of limiting or 
excluding such obligation because the individual is eligible 
for or is provided medical assistance under the plan.
  (p)(1) When a political subdivision of a State makes, for the 
State of which it is a political subdivision, or one State 
makes, for another State, the enforcement and collection of 
rights of support or payment assigned under section 1912, 
pursuant to a cooperative arrangement under such section 
(either within or outside of such State), there shall be paid 
to such political subdivision or such other State from amounts 
which would otherwise represent the Federal share of payments 
for medical assistance provided to the eligible individuals on 
whose behalf such enforcement and collection was made, an 
amount equal to 15 percent of any amount collected which is 
attributable to such rights of support or payment.
  (2) Where more than one jurisdiction is involved in such 
enforcement or collection, the amount of the incentive payment 
determined under paragraph (1) shall be allocated among the 
jurisdictions in a manner to be prescribed by the Secretary.
  (q) For the purposes of this section, the term ``State 
medicaid fraud control unit'' means a single identifiable 
entity of the State government which the Secretary certifies 
(and annually recertifies) as meeting the following 
requirements:
          (1) The entity (A) is a unit of the office of the 
        State Attorney General or of another department of 
        State government which possesses statewide authority to 
        prosecute individuals for criminal violations, (B) is 
        in a State the constitution of which does not provide 
        for the criminal prosecution of individuals by a 
        statewide authority and has formal procedures, approved 
        by the Secretary, that (i) assure its referral of 
        suspected criminal violations relating to the program 
        under this title to the appropriate authority or 
        authorities in the State for prosecution and (ii) 
        assure its assistance of, and coordination with, such 
        authority or authorities in such prosecutions, or (C) 
        has a formal working relationship with the office of 
        the State Attorney General and has formal procedures 
        (including procedures for its referral of suspected 
        criminal violations to such office) which are approved 
        by the Secretary and which provide effective 
        coordination of activities between the entity and such 
        office with respect to the detection, investigation, 
        and prosecution of suspected criminal violations 
        relating to the program under this title.
          (2) The entity is separate and distinct from the 
        single State agency that administers or supervises the 
        administration of the State plan under this title.
          (3) The entity's function is conducting a statewide 
        program for the investigation and prosecution of 
        violations of all applicable State laws regarding any 
        and all aspects of fraud in connection with (A) any 
        aspect of the provision of medical assistance and the 
        activities of providers of such assistance under the 
        State plan under this title; and (B) upon the approval 
        of the Inspector General of the relevant Federal 
        agency, any aspect of the provision of health care 
        services and activities of providers of such services 
        under any Federal health care program (as defined in 
        section 1128B(f)(1)), if the suspected fraud or 
        violation of law in such case or investigation is 
        primarily related to the State plan under this title.
          (4)(A) The entity has--
                  (i) procedures for reviewing complaints of 
                abuse or neglect of patients in health care 
                facilities which receive payments under the 
                State plan under this title;
                  (ii) at the option of the entity, procedures 
                for reviewing complaints of abuse or neglect of 
                patients residing in board and care facilities; 
                and
                  (iii) procedures for acting upon such 
                complaints under the criminal laws of the State 
                or for referring such complaints to other State 
                agencies for action.
          (B) For purposes of this paragraph, the term ``board 
        and care facility'' means a residential setting which 
        receives payment (regardless of whether such payment is 
        made under the State plan under this title) from or on 
        behalf of two or more unrelated adults who reside in 
        such facility, and for whom one or both of the 
        following is provided:
                  (i) Nursing care services provided by, or 
                under the supervision of, a registered nurse, 
                licensed practical nurse, or licensed nursing 
                assistant.
                  (ii) A substantial amount of personal care 
                services that assist residents with the 
                activities of daily living, including personal 
                hygiene, dressing, bathing, eating, toileting, 
                ambulation, transfer, positioning, self-
                medication, body care, travel to medical 
                services, essential shopping, meal preparation, 
                laundry, and housework.
          (5) The entity provides for the collection, or 
        referral for collection to a single State agency, of 
        overpayments that are made under the State plan or 
        under any Federal health care program (as so defined) 
        to health care facilities and that are discovered by 
        the entity in carrying out its activities. All funds 
        collected in accordance with this paragraph shall be 
        credited exclusively to, and available for expenditure 
        under, the Federal health care program (including the 
        State plan under this title) that was subject to the 
        activity that was the basis for the collection.
          (6) The entity employs such auditors, attorneys, 
        investigators, and other necessary personnel and is 
        organized in such a manner as is necessary to promote 
        the effective and efficient conduct of the entity's 
        activities.
          (7) The entity submits to the Secretary an 
        application and annual reports containing such 
        information as the Secretary determines, by regulation, 
        to be necessary to determine whether the entity meets 
        the other requirements of this subsection.
  (r)(1) In order to receive payments under subsection (a) for 
use of automated data systems in administration of the State 
plan under this title, a State must, in addition to meeting the 
requirements of paragraph (3), have in operation mechanized 
claims processing and information retrieval systems that meet 
the requirements of this subsection and that the Secretary has 
found--
          (A) are adequate to provide efficient, economical, 
        and effective administration of such State plan;
          (B) are compatible with the claims processing and 
        information retrieval systems used in the 
        administration of title XVIII, and for this purpose--
                  (i) have a uniform identification coding 
                system for providers, other payees, and 
                beneficiaries under this title or title XVIII;
                  (ii) provide liaison between States and 
                carriers and intermediaries with agreements 
                under title XVIII to facilitate timely exchange 
                of appropriate data;
                  (iii) provide for exchange of data between 
                the States and the Secretary with respect to 
                persons sanctioned under this title or title 
                XVIII; and
                  (iv) effective for claims filed on or after 
                October 1, 2010, incorporate compatible 
                methodologies of the National Correct Coding 
                Initiative administered by the Secretary (or 
                any successor initiative to promote correct 
                coding and to control improper coding leading 
                to inappropriate payment) and such other 
                methodologies of that Initiative (or such other 
                national correct coding methodologies) as the 
                Secretary identifies in accordance with 
                paragraph (4);
          (C) are capable of providing accurate and timely 
        data;
          (D) are complying with the applicable provisions of 
        part C of title XI;
          (E) are designed to receive provider claims in 
        standard formats to the extent specified by the 
        Secretary; and
          (F) effective for claims filed on or after January 1, 
        1999, provide for electronic transmission of claims 
        data in the format specified by the Secretary and 
        consistent with the Medicaid Statistical Information 
        System (MSIS) (including detailed individual enrollee 
        encounter data and other information that the Secretary 
        may find necessary and including, for data submitted to 
        the Secretary on or after January 1, 2010, data 
        elements from the automated data system that the 
        Secretary determines to be necessary for program 
        integrity, program oversight, and administration, at 
        such frequency as the Secretary shall determine).
  (2) In order to meet the requirements of this paragraph, 
mechanized claims processing and information retrieval systems 
must meet the following requirements:
          (A) The systems must be capable of developing 
        provider, physician, and patient profiles which are 
        sufficient to provide specific information as to the 
        use of covered types of services and items, including 
        prescribed drugs.
          (B) The State must provide that information on 
        probable fraud or abuse which is obtained from, or 
        developed by, the systems, is made available to the 
        State's medicaid fraud control unit (if any) certified 
        under subsection (q) of this section.
          (C) The systems must meet all performance standards 
        and other requirements for initial approval developed 
        by the Secretary.
  (3) In order to meet the requirements of this paragraph, a 
State must have in operation an eligibility determination 
system which provides for data matching through the Public 
Assistance Reporting Information System (PARIS) facilitated by 
the Secretary (or any successor system), including matching 
with medical assistance programs operated by other States.
  (4) For purposes of paragraph (1)(B)(iv), the Secretary shall 
do the following:
          (A) Not later than September 1, 2010:
                  (i) Identify those methodologies of the 
                National Correct Coding Initiative administered 
                by the Secretary (or any successor initiative 
                to promote correct coding and to control 
                improper coding leading to inappropriate 
                payment) which are compatible to claims filed 
                under this title.
                  (ii) Identify those methodologies of such 
                Initiative (or such other national correct 
                coding methodologies) that should be 
                incorporated into claims filed under this title 
                with respect to items or services for which 
                States provide medical assistance under this 
                title and no national correct coding 
                methodologies have been established under such 
                Initiative with respect to title XVIII.
                  (iii) Notify States of--
                          (I) the methodologies identified 
                        under subparagraphs (A) and (B) (and of 
                        any other national correct coding 
                        methodologies identified under 
                        subparagraph (B)); and
                          (II) how States are to incorporate 
                        such methodologies into claims filed 
                        under this title.
          (B) Not later than March 1, 2011, submit a report to 
        Congress that includes the notice to States under 
        clause (iii) of subparagraph (A) and an analysis 
        supporting the identification of the methodologies made 
        under clauses (i) and (ii) of subparagraph (A).
  (s) Notwithstanding the preceding provisions of this section, 
no payment shall be made to a State under this section for 
expenditures for medical assistance under the State plan 
consisting of a designated health service (as defined in 
subsection (h)(6) of section 1877) furnished to an individual 
on the basis of a referral that would result in the denial of 
payment for the service under title XVIII if such title 
provided for coverage of such service to the same extent and 
under the same terms and conditions as under the State plan, 
and subsections (f) and (g)(5) of such section shall apply to a 
provider of such a designated health service for which payment 
may be made under this title in the same manner as such 
subsections apply to a provider of such a service for which 
payment may be made under such title.
  (t)(1) For purposes of subsection (a)(3)(F), the payments 
described in this paragraph to encourage the adoption and use 
of certified EHR technology are payments made by the State in 
accordance with this subsection --
          (A) to Medicaid providers described in paragraph 
        (2)(A) not in excess of 85 percent of net average 
        allowable costs (as defined in paragraph (3)(E)) for 
        certified EHR technology (and support services 
        including maintenance and training that is for, or is 
        necessary for the adoption and operation of, such 
        technology) with respect to such providers; and
          (B) to Medicaid providers described in paragraph 
        (2)(B) not in excess of the maximum amount permitted 
        under paragraph (5) for the provider involved.
  (2) In this subsection and subsection (a)(3)(F), the term 
``Medicaid provider'' means--
          (A) an eligible professional (as defined in paragraph 
        (3)(B))--
                  (i) who is not hospital-based and has at 
                least 30 percent of the professional's patient 
                volume (as estimated in accordance with a 
                methodology established by the Secretary) 
                attributable to individuals who are receiving 
                medical assistance under this title;
                  (ii) who is not described in clause (i), who 
                is a pediatrician, who is not hospital-based, 
                and who has at least 20 percent of the 
                professional's patient volume (as estimated in 
                accordance with a methodology established by 
                the Secretary) attributable to individuals who 
                are receiving medical assistance under this 
                title; and
                  (iii) who practices predominantly in a 
                Federally qualified health center or rural 
                health clinic and has at least 30 percent of 
                the professional's patient volume (as estimated 
                in accordance with a methodology established by 
                the Secretary) attributable to needy 
                individuals (as defined in paragraph (3)(F)); 
                and
          (B)(i) a children's hospital, or
          (ii) an acute-care hospital that is not described in 
        clause (i) and that has at least 10 percent of the 
        hospital's patient volume (as estimated in accordance 
        with a methodology established by the Secretary) 
        attributable to individuals who are receiving medical 
        assistance under this title.
An eligible professional shall not qualify as a Medicaid 
provider under this subsection unless any right to payment 
under sections 1848(o) and 1853(l) with respect to the eligible 
professional has been waived in a manner specified by the 
Secretary. For purposes of calculating patient volume under 
subparagraph (A)(iii), insofar as it is related to 
uncompensated care, the Secretary may require the adjustment of 
such uncompensated care data so that it would be an appropriate 
proxy for charity care, including a downward adjustment to 
eliminate bad debt data from uncompensated care. In applying 
subparagraphs (A) and (B)(ii), the methodology established by 
the Secretary for patient volume shall include individuals 
enrolled in a Medicaid managed care plan (under section 1903(m) 
or section 1932).
  (3) In this subsection and subsection (a)(3)(F):
          (A) The term ``certified EHR technology'' means a 
        qualified electronic health record (as defined in 
        3000(13) of the Public Health Service Act) that is 
        certified pursuant to section 3001(c)(5) of such Act as 
        meeting standards adopted under section 3004 of such 
        Act that are applicable to the type of record involved 
        (as determined by the Secretary, such as an ambulatory 
        electronic health record for office-based physicians or 
        an inpatient hospital electronic health record for 
        hospitals).
          (B) The term ``eligible professional'' means a--
                  (i) physician;
                  (ii) dentist;
                  (iii) certified nurse mid-wife;
                  (iv) nurse practitioner; and
                  (v) physician assistant insofar as the 
                assistant is practicing in a rural health 
                clinic that is led by a physician assistant or 
                is practicing in a Federally qualified health 
                center that is so led.
          (C) The term ``average allowable costs'' means, with 
        respect to certified EHR technology of Medicaid 
        providers described in paragraph (2)(A) for--
                  (i) the first year of payment with respect to 
                such a provider, the average costs for the 
                purchase and initial implementation or upgrade 
                of such technology (and support services 
                including training that is for, or is necessary 
                for the adoption and initial operation of, such 
                technology) for such providers, as determined 
                by the Secretary based upon studies conducted 
                under paragraph (4)(C); and
                  (ii) a subsequent year of payment with 
                respect to such a provider, the average costs 
                not described in clause (i) relating to the 
                operation, maintenance, and use of such 
                technology for such providers, as determined by 
                the Secretary based upon studies conducted 
                under paragraph (4)(C).
          (D) The term ``hospital-based'' means, with respect 
        to an eligible professional, a professional (such as a 
        pathologist, anesthesiologist, or emergency physician) 
        who furnishes substantially all of the individual's 
        professional services in a hospital inpatient or 
        emergency room setting and through the use of the 
        facilities and equipment, including qualified 
        electronic health records, of the hospital. The 
        determination of whether an eligible professional is a 
        hospital-based eligible professional shall be made on 
        the basis of the site of service (as defined by the 
        Secretary) and without regard to any employment or 
        billing arrangement between the eligible professional 
        and any other provider.
          (E) The term ``net average allowable costs'' means, 
        with respect to a Medicaid provider described in 
        paragraph (2)(A), average allowable costs reduced by 
        the average payment the Secretary estimates will be 
        made to such Medicaid providers (determined on a 
        percentage or other basis for such classes or types of 
        providers as the Secretary may specify) from other 
        sources (other than under this subsection, or by the 
        Federal government or a State or local government) that 
        is directly attributable to payment for certified EHR 
        technology or support services described in 
        subparagraph (C).
          (F) The term ``needy individual'' means, with respect 
        to a Medicaid provider, an individual--
                  (i) who is receiving assistance under this 
                title;
                  (ii) who is receiving assistance under title 
                XXI;
                  (iii) who is furnished uncompensated care by 
                the provider; or
                  (iv) for whom charges are reduced by the 
                provider on a sliding scale basis based on an 
                individual's ability to pay.
  (4)(A) With respect to a Medicaid provider described in 
paragraph (2)(A), subject to subparagraph (B), in no case 
shall--
                  (i) the net average allowable costs under 
                this subsection for the first year of payment 
                (which may not be later than 2016), which is 
                intended to cover the costs described in 
                paragraph (3)(C)(i), exceed $25,000 (or such 
                lesser amount as the Secretary determines based 
                on studies conducted under subparagraph (C));
                  (ii) the net average allowable costs under 
                this subsection for a subsequent year of 
                payment, which is intended to cover costs 
                described in paragraph (3)(C)(ii), exceed 
                $10,000; and
                  (iii) payments be made for costs described in 
                clause (ii) after 2021 or over a period of 
                longer than 5 years.
  (B) In the case of Medicaid provider described in paragraph 
(2)(A)(ii), the dollar amounts specified in subparagraph (A) 
shall be \2/3\ of the dollar amounts otherwise specified.
  (C) For the purposes of determining average allowable costs 
under this subsection, the Secretary shall study the average 
costs to Medicaid providers described in paragraph (2)(A) of 
purchase and initial implementation and upgrade of certified 
EHR technology described in paragraph (3)(C)(i) and the average 
costs to such providers of operations, maintenance, and use of 
such technology described in paragraph (3)(C)(ii). In 
determining such costs for such providers, the Secretary may 
utilize studies of such amounts submitted by States.
  (5)(A) In no case shall the payments described in paragraph 
(1)(B) with respect to a Medicaid provider described in 
paragraph (2)(B) exceed--
          (i) in the aggregate the product of--
                          (I) the overall hospital EHR amount 
                        for the provider computed under 
                        subparagraph (B); and
                          (II) the Medicaid share for such 
                        provider computed under subparagraph 
                        (C);
          (ii) in any year 50 percent of the product described 
        in clause (i); and
          (iii) in any 2-year period 90 percent of such 
        product.
  (B) For purposes of this paragraph, the overall hospital EHR 
amount, with respect to a Medicaid provider, is the sum of the 
applicable amounts specified in section 1886(n)(2)(A) for such 
provider for the first 4 payment years (as estimated by the 
Secretary) determined as if the Medicare share specified in 
clause (ii) of such section were 1. The Secretary shall 
establish, in consultation with the State, the overall hospital 
EHR amount for each such Medicaid provider eligible for 
payments under paragraph (1)(B). For purposes of this 
subparagraph in computing the amounts under section 
1886(n)(2)(C) for payment years after the first payment year, 
the Secretary shall assume that in subsequent payment years 
discharges increase at the average annual rate of growth of the 
most recent 3 years for which discharge data are available per 
year.
  (C) The Medicaid share computed under this subparagraph, for 
a Medicaid provider for a period specified by the Secretary, 
shall be calculated in the same manner as the Medicare share 
under section 1886(n)(2)(D) for such a hospital and period, 
except that there shall be substituted for the numerator under 
clause (i) of such section the amount that is equal to the 
number of inpatient-bed-days (as established by the Secretary) 
which are attributable to individuals who are receiving medical 
assistance under this title and who are not described in 
section 1886(n)(2)(D)(i). In computing inpatient-bed-days under 
the previous sentence, the Secretary shall take into account 
inpatient-bed-days attributable to inpatient-bed-days that are 
paid for individuals enrolled in a Medicaid managed care plan 
(under section 1903(m) or section 1932).
  (D) In no case may the payments described in paragraph (1)(B) 
with respect to a Medicaid provider described in paragraph 
(2)(B) be paid--
          (i) for any year beginning after 2016 unless the 
        provider has been provided payment under paragraph 
        (1)(B) for the previous year; and
          (ii) over a period of more than 6 years of payment.
  (6) Payments described in paragraph (1) are not in accordance 
with this subsection unless the following requirements are met:
          (A)(i) The State provides assurances satisfactory to 
        the Secretary that amounts received under subsection 
        (a)(3)(F) with respect to payments to a Medicaid 
        provider are paid, subject to clause (ii), directly to 
        such provider (or to an employer or facility to which 
        such provider has assigned payments) without any 
        deduction or rebate.
          (ii) Amounts described in clause (i) may also be paid 
        to an entity promoting the adoption of certified EHR 
        technology, as designated by the State, if 
        participation in such a payment arrangement is 
        voluntary for the eligible professional involved and if 
        such entity does not retain more than 5 percent of such 
        payments for costs not related to certified EHR 
        technology (and support services including maintenance 
        and training) that is for, or is necessary for the 
        operation of, such technology.
          (B) A Medicaid provider described in paragraph (2)(A) 
        is responsible for payment of the remaining 15 percent 
        of the net average allowable cost and shall be 
        determined to have met such responsibility to the 
        extent that the payment to the Medicaid provider is not 
        in excess of 85 percent of the net average allowable 
        cost.
          (C)(i) Subject to clause (ii), with respect to 
        payments to a Medicaid provider--
                  (I) for the first year of payment to the 
                Medicaid provider under this subsection, the 
                Medicaid provider demonstrates that it is 
                engaged in efforts to adopt, implement, or 
                upgrade certified EHR technology; and
                  (II) for a year of payment, other than the 
                first year of payment to the Medicaid provider 
                under this subsection, the Medicaid provider 
                demonstrates meaningful use of certified EHR 
                technology through a means that is approved by 
                the State and acceptable to the Secretary, and 
                that may be based upon the methodologies 
                applied under section 1848(o) or 1886(n).
          (ii) In the case of a Medicaid provider who has 
        completed adopting, implementing, or upgrading such 
        technology prior to the first year of payment to the 
        Medicaid provider under this subsection, clause (i)(I) 
        shall not apply and clause (i)(II) shall apply to each 
        year of payment to the Medicaid provider under this 
        subsection, including the first year of payment.
          (D) To the extent specified by the Secretary, the 
        certified EHR technology is compatible with State or 
        Federal administrative management systems.
For purposes of subparagraph (B), a Medicaid provider described 
in paragraph (2)(A) may accept payments for the costs described 
in such subparagraph from a State or local government. For 
purposes of subparagraph (C), in establishing the means 
described in such subparagraph, which may include clinical 
quality reporting to the State, the State shall ensure that 
populations with unique needs, such as children, are 
appropriately addressed.
  (7) With respect to Medicaid providers described in paragraph 
(2)(A), the Secretary shall ensure coordination of payment with 
respect to such providers under sections 1848(o) and 1853(l) 
and under this subsection to assure no duplication of funding. 
Such coordination shall include, to the extent practicable, a 
data matching process between State Medicaid agencies and the 
Centers for Medicare & Medicaid Services using national 
provider identifiers. For such purposes, the Secretary may 
require the submission of such data relating to payments to 
such Medicaid providers as the Secretary may specify.
  (8) In carrying out paragraph (6)(C), the State and Secretary 
shall seek, to the maximum extent practicable, to avoid 
duplicative requirements from Federal and State governments to 
demonstrate meaningful use of certified EHR technology under 
this title and title XVIII. In doing so, the Secretary may deem 
satisfaction of requirements for such meaningful use for a 
payment year under title XVIII to be sufficient to qualify as 
meaningful use under this subsection. The Secretary may also 
specify the reporting periods under this subsection in order to 
carry out this paragraph.
  (9) In order to be provided Federal financial participation 
under subsection (a)(3)(F)(ii), a State must demonstrate to the 
satisfaction of the Secretary, that the State--
          (A) is using the funds provided for the purposes of 
        administering payments under this subsection, including 
        tracking of meaningful use by Medicaid providers;
          (B) is conducting adequate oversight of the program 
        under this subsection, including routine tracking of 
        meaningful use attestations and reporting mechanisms; 
        and
          (C) is pursuing initiatives to encourage the adoption 
        of certified EHR technology to promote health care 
        quality and the exchange of health care information 
        under this title, subject to applicable laws and 
        regulations governing such exchange.
  (10) The Secretary shall periodically submit reports to the 
Committee on Energy and Commerce of the House of 
Representatives and the Committee on Finance of the Senate on 
status, progress, and oversight of payments described in 
paragraph (1), including steps taken to carry out paragraph 
(7). Such reports shall also describe the extent of adoption of 
certified EHR technology among Medicaid providers resulting 
from the provisions of this subsection and any improvements in 
health outcomes, clinical quality, or efficiency resulting from 
such adoption.
  (u)(1)(A) Notwithstanding subsection (a)(1), if the ratio of 
a State's erroneous excess payments for medical assistance (as 
defined in subparagraph (D)) to its total expenditures for 
medical assistance under the State plan approved under this 
title exceeds 0.03, for the period consisting of the third and 
fourth quarters of fiscal year 1983, or for any full fiscal 
year thereafter, then the Secretary shall make no payment for 
such period or fiscal year with respect to so much of such 
erroneous excess payments as exceeds such allowable error rate 
of 0.03.
  (B) The Secretary may waive, in certain limited cases, all or 
part of the reduction required under subparagraph (A) with 
respect to any State if such State is unable to reach the 
allowable error rate for a period or fiscal year despite a good 
faith effort by such State.
  (C) In estimating the amount to be paid to a State under 
subsection (d), the Secretary shall take into consideration the 
limitation on Federal financial participation imposed by 
subparagraph (A) and shall reduce the estimate he makes under 
subsection (d)(1), for purposes of payment to the State under 
subsection (d)(3), in light of any expected erroneous excess 
payments for medical assistance (estimated in accordance with 
such criteria, including sampling procedures, as he may 
prescribe and subject to subsequent adjustment, if necessary, 
under subsection (d)(2)).
  (D)(i) For purposes of this subsection, the term ``erroneous 
excess payments for medical assistance'' means the total of--
          (I) payments under the State plan with respect to 
        ineligible individuals and families, and
          (II) overpayments on behalf of eligible individuals 
        and families by reason of error in determining the 
        amount of expenditures for medical care required of an 
        individual or family as a condition of eligibility.
  (ii) In determining the amount of erroneous excess payments 
for medical assistance to an ineligible individual or family 
under clause (i)(I), if such ineligibility is the result of an 
error in determining the amount of the resources of such 
individual or family, the amount of the erroneous excess 
payment shall be the smaller of (I) the amount of the payment 
with respect to such individual or family, or (II) the 
difference between the actual amount of such resources and the 
allowable resource level established under the State plan.
  (iii) In determining the amount of erroneous excess payments 
for medical assistance to an individual or family under clause 
(i)(II), the amount of the erroneous excess payment shall be 
the smaller of (I) the amount of the payment on behalf of the 
individual or family, or (II) the difference between the actual 
amount incurred for medical care by the individual or family 
and the amount which should have been incurred in order to 
establish eligibility for medical assistance.
  (iv) In determining the amount of erroneous excess payments, 
there shall not be included any error resulting from a failure 
of an individual to cooperate or give correct information with 
respect to third-party liability as required under section 
1912(a)(1)(C) or 402(a)(26)(C) or with respect to payments made 
in violation of section 1906.
  (v) In determining the amount of erroneous excess payments, 
there shall not be included any erroneous payments made for 
ambulatory prenatal care provided during a presumptive 
eligibility period (as defined in section 1920(b)(1)), for 
items and services described in subsection (a) of section 1920A 
provided to a child during a presumptive eligibility period 
under such section, for medical assistance provided to an 
individual described in subsection (a) of section 1920B during 
a presumptive eligibility period under such section, or for 
medical assistance provided to an individual during a 
presumptive eligibility period resulting from a determination 
of presumptive eligibility made by a hospital that elects under 
section 1902(a)(47)(B) to be a qualified entity for such 
purpose.
  (E) For purposes of subparagraph (D), there shall be 
excluded, in determining both erroneous excess payments for 
medical assistance and total expenditures for medical 
assistance--
          (i) payments with respect to any individual whose 
        eligibility therefor was determined exclusively by the 
        Secretary under an agreement pursuant to section 1634 
        and such other classes of individuals as the Secretary 
        may by regulation prescribe whose eligibility was 
        determined in part under such an agreement; and
          (ii) payments made as the result of a technical 
        error.
  (2) The State agency administering the plan approved under 
this title shall, at such times and in such form as the 
Secretary may specify, provide information on the rates of 
erroneous excess payments made (or expected, with respect to 
future periods specified by the Secretary) in connection with 
its administration of such plan, together with any other data 
he requests that are reasonably necessary for him to carry out 
the provisions of this subsection.
  (3)(A) If a State fails to cooperate with the Secretary in 
providing information necessary to carry out this subsection, 
the Secretary, directly or through contractual or such other 
arrangements as he may find appropriate, shall establish the 
error rates for that State on the basis of the best data 
reasonably available to him and in accordance with such 
techniques for sampling and estimating as he finds appropriate.
  (B) In any case in which it is necessary for the Secretary to 
exercise his authority under subparagraph (A) to determine a 
State's error rates for a fiscal year, the amount that would 
otherwise be payable to such State under this title for 
quarters in such year shall be reduced by the costs incurred by 
the Secretary in making (directly or otherwise) such 
determination.
  (4) This subsection shall not apply with respect to Puerto 
Rico, Guam, the Virgin Islands, the Northern Mariana Islands, 
or American Samoa.
  (v)(1) Notwithstanding the preceding provisions of this 
section, except as provided in paragraphs (2) and (4), no 
payment may be made to a State under this section for medical 
assistance furnished to an alien who is not lawfully admitted 
for permanent residence or otherwise permanently residing in 
the United States under color of law.
  (2) Payment shall be made under this section for care and 
services that are furnished to an alien described in paragraph 
(1) only if--
          (A) such care and services are necessary for the 
        treatment of an emergency medical condition of the 
        alien,
          (B) such alien otherwise meets the eligibility 
        requirements for medical assistance under the State 
        plan approved under this title (other than the 
        requirement of the receipt of aid or assistance under 
        title IV, supplemental security income benefits under 
        title XVI, or a State supplementary payment), and
          (C) such care and services are not related to an 
        organ transplant procedure.
  (3) For purposes of this subsection, the term ``emergency 
medical condition'' means a medical condition (including 
emergency labor and delivery) manifesting itself by acute 
symptoms of sufficient severity (including severe pain) such 
that the absence of immediate medical attention could 
reasonably be expected to result in--
          (A) placing the patient's health in serious jeopardy,
          (B) serious impairment to bodily functions, or
          (C) serious dysfunction of any bodily organ or part.
  (4)(A) A State may elect (in a plan amendment under this 
title) to provide medical assistance under this title, 
notwithstanding sections 401(a), 402(b), 403, and 421 of the 
Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996, to children and pregnant women who are lawfully 
residing in the United States (including battered individuals 
described in section 431(c) of such Act) and who are otherwise 
eligible for such assistance, within either or both of the 
following eligibility categories:
          (i) Pregnant women.--Women during pregnancy (and 
        during the 60-day period beginning on the last day of 
        the pregnancy).
          (ii) Children.--Individuals under 21 years of age, 
        including optional targeted low-income children 
        described in section 1905(u)(2)(B).
  (B) In the case of a State that has elected to provide 
medical assistance to a category of aliens under subparagraph 
(A), no debt shall accrue under an affidavit of support against 
any sponsor of such an alien on the basis of provision of 
assistance to such category and the cost of such assistance 
shall not be considered as an unreimbursed cost.
  (C) As part of the State's ongoing eligibility 
redetermination requirements and procedures for an individual 
provided medical assistance as a result of an election by the 
State under subparagraph (A), a State shall verify that the 
individual continues to lawfully reside in the United States 
using the documentation presented to the State by the 
individual on initial enrollment. If the State cannot 
successfully verify that the individual is lawfully residing in 
the United States in this manner, it shall require that the 
individual provide the State with further documentation or 
other evidence to verify that the individual is lawfully 
residing in the United States.
  (w)(1)(A) Notwithstanding the previous provisions of this 
section, for purposes of determining the amount to be paid to a 
State (as defined in paragraph (7)(D)) under subsection (a)(1) 
for quarters in any fiscal year, the total amount expended 
during such fiscal year as medical assistance under the State 
plan (as determined without regard to this subsection) shall be 
reduced by the sum of any revenues received by the State (or by 
a unit of local government in the State) during the fiscal 
year--
          (i) from provider-related donations (as defined in 
        paragraph (2)(A)), other than--
                  (I) bona fide provider-related donations (as 
                defined in paragraph (2)(B)), and
                  (II) donations described in paragraph (2)(C);
          (ii) from health care related taxes (as defined in 
        paragraph (3)(A)), other than broad-based health care 
        related taxes (as defined in paragraph (3)(B));
          (iii) from a broad-based health care related tax, if 
        there is in effect a hold harmless provision (described 
        in paragraph (4)) with respect to the tax; or
          (iv) only with respect to State fiscal years (or 
        portions thereof) occurring on or after January 1, 
        1992, and before October 1, 1995, from broad-based 
        health care related taxes to the extent the amount of 
        such taxes collected exceeds the limit established 
        under paragraph (5).
  (B) Notwithstanding the previous provisions of this section, 
for purposes of determining the amount to be paid to a State 
under subsection (a)(7) for all quarters in a Federal fiscal 
year (beginning with fiscal year 1993), the total amount 
expended during the fiscal year for administrative expenditures 
under the State plan (as determined without regard to this 
subsection) shall be reduced by the sum of any revenues 
received by the State (or by a unit of local government in the 
State) during such quarters from donations described in 
paragraph (2)(C), to the extent the amount of such donations 
exceeds 10 percent of the amounts expended under the State plan 
under this title during the fiscal year for purposes described 
in paragraphs (2), (3), (4), (6), and (7) of subsection (a).
  (C)(i) Except as otherwise provided in clause (ii), 
subparagraph (A)(i) shall apply to donations received on or 
after January 1, 1992.
  (ii) Subject to the limits described in clause (iii) and 
subparagraph (E), subparagraph (A)(i) shall not apply to 
donations received before the effective date specified in 
subparagraph (F) if such donations are received under programs 
in effect or as described in State plan amendments or related 
documents submitted to the Secretary by September 30, 1991, and 
applicable to State fiscal year 1992, as demonstrated by State 
plan amendments, written agreements, State budget 
documentation, or other documentary evidence in existence on 
that date.
  (iii) In applying clause (ii) in the case of donations 
received in State fiscal year 1993, the maximum amount of such 
donations to which such clause may be applied may not exceed 
the total amount of such donations received in the 
corresponding period in State fiscal year 1992 (or not later 
than 5 days after the last day of the corresponding period).
  (D)(i) Except as otherwise provided in clause (ii), 
subparagraphs (A)(ii) and (A)(iii) shall apply to taxes 
received on or after January 1, 1992.
  (ii) Subparagraphs (A)(ii) and (A)(iii) shall not apply to 
impermissible taxes (as defined in clause (iii)) received 
before the effective date specified in subparagraph (F) to the 
extent the taxes (including the tax rate or base) were in 
effect, or the legislation or regulations imposing such taxes 
were enacted or adopted, as of November 22, 1991.
  (iii) In this subparagraph and subparagraph (E), the term 
``impermissible tax'' means a health care related tax for which 
a reduction may be made under clause (ii) or (iii) of 
subparagraph (A).
  (E)(i) In no case may the total amount of donations and taxes 
permitted under the exception provided in subparagraphs (C)(ii) 
and (D)(ii) for the portion of State fiscal year 1992 occurring 
during calendar year 1992 exceed the limit under paragraph (5) 
minus the total amount of broad-based health care related taxes 
received in the portion of that fiscal year.
  (ii) In no case may the total amount of donations and taxes 
permitted under the exception provided in subparagraphs (C)(ii) 
and (D)(ii) for State fiscal year 1993 exceed the limit under 
paragraph (5) minus the total amount of broad-based health care 
related taxes received in that fiscal year.
  (F) In this paragraph in the case of a State--
          (i) except as provided in clause (iii), with a State 
        fiscal year beginning on or before July 1, the 
        effective date is October 1, 1992,
          (ii) except as provided in clause (iii), with a State 
        fiscal year that begins after July 1, the effective 
        date is January 1, 1993, or
          (iii) with a State legislature which is not scheduled 
        to have a regular legislative session in 1992, with a 
        State legislature which is not scheduled to have a 
        regular legislative session in 1993, or with a 
        provider-specific tax enacted on November 4, 1991, the 
        effective date is July 1, 1993.
  (2)(A) In this subsection (except as provided in paragraph 
(6)), the term ``provider-related donation'' means any donation 
or other voluntary payment (whether in cash or in kind) made 
(directly or indirectly) to a State or unit of local government 
by--
          (i) a health care provider (as defined in paragraph 
        (7)(B)),
          (ii) an entity related to a health care provider (as 
        defined in paragraph (7)(C)), or
          (iii) an entity providing goods or services under the 
        State plan for which payment is made to the State under 
        paragraph (2), (3), (4), (6), or (7) of subsection (a).
  (B) For purposes of paragraph (1)(A)(i)(I), the term ``bona 
fide provider-related donation'' means a provider-related 
donation that has no direct or indirect relationship (as 
determined by the Secretary) to payments made under this title 
to that provider, to providers furnishing the same class of 
items and services as that provider, or to any related entity, 
as established by the State to the satisfaction of the 
Secretary. The Secretary may by regulation specify types of 
provider-related donations described in the previous sentence 
that will be considered to be bona fide provider-related 
donations.
  (C) For purposes of paragraph (1)(A)(i)(II), donations 
described in this subparagraph are funds expended by a 
hospital, clinic, or similar entity for the direct cost 
(including costs of training and of preparing and distributing 
outreach materials) of State or local agency personnel who are 
stationed at the hospital, clinic, or entity to determine the 
eligibility of individuals for medical assistance under this 
title and to provide outreach services to eligible or 
potentially eligible individuals.
  (3)(A) In this subsection (except as provided in paragraph 
(6)), the term ``health care related tax'' means a tax (as 
defined in paragraph (7)(F)) that--
          (i) is related to health care items or services, or 
        to the provision of, the authority to provide, or 
        payment for, such items or services, or
          (ii) is not limited to such items or services but 
        provides for treatment of individuals or entities that 
        are providing or paying for such items or services that 
        is different from the treatment provided to other 
        individuals or entities.
In applying clause (i), a tax is considered to relate to health 
care items or services if at least 85 percent of the burden of 
such tax falls on health care providers.
  (B) In this subsection, the term ``broad-based health care 
related tax'' means a health care related tax which is imposed 
with respect to a class of health care items or services (as 
described in paragraph (7)(A)) or with respect to providers of 
such items or services and which, except as provided in 
subparagraphs (D), (E), and (F)--
          (i) is imposed at least with respect to all items or 
        services in the class furnished by all non-Federal, 
        nonpublic providers in the State (or, in the case of a 
        tax imposed by a unit of local government, the area 
        over which the unit has jurisdiction) or is imposed 
        with respect to all non-Federal, nonpublic providers in 
        the class; and
          (ii) is imposed uniformly (in accordance with 
        subparagraph (C)).
  (C)(i) Subject to clause (ii), for purposes of subparagraph 
(B)(ii), a tax is considered to be imposed uniformly if--
          (I) in the case of a tax consisting of a licensing 
        fee or similar tax on a class of health care items or 
        services (or providers of such items or services), the 
        amount of the tax imposed is the same for every 
        provider providing items or services within the class;
          (II) in the case of a tax consisting of a licensing 
        fee or similar tax imposed on a class of health care 
        items or services (or providers of such services) on 
        the basis of the number of beds (licensed or otherwise) 
        of the provider, the amount of the tax is the same for 
        each bed of each provider of such items or services in 
        the class;
          (III) in the case of a tax based on revenues or 
        receipts with respect to a class of items or services 
        (or providers of items or services) the tax is imposed 
        at a uniform rate for all items and services (or 
        providers of such items of services) in the class on 
        all the gross revenues or receipts, or net operating 
        revenues, relating to the provision of all such items 
        or services (or all such providers) in the State (or, 
        in the case of a tax imposed by a unit of local 
        government within the State, in the area over which the 
        unit has jurisdiction); or
          (IV) in the case of any other tax, the State 
        establishes to the satisfaction of the Secretary that 
        the tax is imposed uniformly.
  (ii) Subject to subparagraphs (D) and (E), a tax imposed with 
respect to a class of health care items and services is not 
considered to be imposed uniformly if the tax provides for any 
credits, exclusions, or deductions which have as their purpose 
or effect the return to providers of all or a portion of the 
tax paid in a manner that is inconsistent with subclauses (I) 
and (II) of subparagraph (E)(ii) or provides for a hold 
harmless provision described in paragraph (4).
  (D) A tax imposed with respect to a class of health care 
items and services is considered to be imposed uniformly--
          (i) notwithstanding that the tax is not imposed with 
        respect to items or services (or the providers thereof) 
        for which payment is made under a State plan under this 
        title or title XVIII, or
          (ii) in the case of a tax described in subparagraph 
        (C)(i)(III), notwithstanding that the tax provides for 
        exclusion (in whole or in part) of revenues or receipts 
        from a State plan under this title or title XVIII.
  (E)(i) A State may submit an application to the Secretary 
requesting that the Secretary treat a tax as a broad-based 
health care related tax, notwithstanding that the tax does not 
apply to all health care items or services in class (or all 
providers of such items and services), provides for a credit, 
deduction, or exclusion, is not applied uniformly, or otherwise 
does not meet the requirements of subparagraph (B) or (C). 
Permissible waivers may include exemptions for rural or sole-
community providers.
  (ii) The Secretary shall approve such an application if the 
State establishes to the satisfaction of the Secretary that--
          (I) the net impact of the tax and associated 
        expenditures under this title as proposed by the State 
        is generally redistributive in nature, and
          (II) the amount of the tax is not directly correlated 
        to payments under this title for items or services with 
        respect to which the tax is imposed.
The Secretary shall by regulation specify types of credits, 
exclusions, and deductions that will be considered to meet the 
requirements of this subparagraph.
  (F) In no case shall a tax not qualify as a broad-based 
health care related tax under this paragraph because it does 
not apply to a hospital that is described in section 501(c)(3) 
of the Internal Revenue Code of 1986 and exempt from taxation 
under section 501(a) of such Code and that does not accept 
payment under the State plan under this title or under title 
XVIII.
  (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) The State or other unit of government imposing 
        the tax provides (directly or indirectly) for a payment 
        (other than under this title) to taxpayers and the 
        amount of such payment is positively correlated either 
        to the amount of such tax or to the difference between 
        the amount of the tax and the amount of payment under 
        the State plan.
          (B) All or any portion of the payment made under this 
        title to the taxpayer varies based only upon the amount 
        of the total tax paid.
          (C)(i) The State or other unit of government imposing 
        the tax provides (directly or indirectly) for any 
        payment, offset, or waiver that guarantees to hold 
        taxpayers harmless for any portion of the costs of the 
        tax.
          (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, ``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.
  (5)(A) For purposes of this subsection, the limit under this 
subparagraph with respect to a State is an amount equal to 25 
percent (or, if greater, the State base percentage, as defined 
in subparagraph (B)) of the non-Federal share of the total 
amount expended under the State plan during a State fiscal year 
(or portion thereof), as it would be determined pursuant to 
paragraph (1)(A) without regard to paragraph (1)(A)(iv).
  (B)(i) In subparagraph (A), the term ``State base 
percentage'' means, with respect to a State, an amount 
(expressed as a percentage) equal to--
          (I) the total of the amount of health care related 
        taxes (whether or not broad-based) and the amount of 
        provider-related donations (whether or not bona fide) 
        projected to be collected (in accordance with clause 
        (ii)) during State fiscal year 1992, divided by
          (II) the non-Federal share of the total amount 
        estimated to be expended under the State plan during 
        such State fiscal year.
  (ii) For purposes of clause (i)(I), in the case of a tax that 
is not in effect throughout State fiscal year 1992 or the rate 
(or base) of which is increased during such fiscal year, the 
Secretary shall project the amount to be collected during such 
fiscal year as if the tax (or increase) were in effect during 
the entire State fiscal year.
  (C)(i) The total amount of health care related taxes under 
subparagraph (B)(i)(I) shall be determined by the Secretary 
based on only those taxes (including the tax rate or base) 
which were in effect, or for which legislation or regulations 
imposing such taxes were enacted or adopted, as of November 22, 
1991.
  (ii) The amount of provider-related donations under 
subparagraph (B)(i)(I) shall be determined by the Secretary 
based on programs in effect on September 30, 1991, and 
applicable to State fiscal year 1992, as demonstrated by State 
plan amendments, written agreements, State budget 
documentation, or other documentary evidence in existence on 
that date.
  (iii) The amount of expenditures described in subparagraph 
(B)(i)(II) shall be determined by the Secretary based on the 
best data available as of the date of the enactment of this 
subsection.
  (6)(A) Notwithstanding the provisions of this subsection, the 
Secretary may not restrict States' use of funds where such 
funds are derived from State or local taxes (or funds 
appropriated to State university teaching hospitals) 
transferred from or certified by units of government within a 
State as the non-Federal share of expenditures under this 
title, regardless of whether the unit of government is also a 
health care provider, except as provided in section 1902(a)(2), 
unless the transferred funds are derived by the unit of 
government from donations or taxes that would not otherwise be 
recognized as the non-Federal share under this section.
  (B) For purposes of this subsection, funds the use of which 
the Secretary may not restrict under subparagraph (A) shall not 
be considered to be a provider-related donation or a health 
care related tax.
  (7) For purposes of this subsection:
          (A) Each of the following shall be considered a 
        separate class of health care items and services:
                  (i) Inpatient hospital services.
                  (ii) Outpatient hospital services.
                  (iii) Nursing facility services (other than 
                services of intermediate care facilities for 
                the mentally retarded).
                  (iv) Services of intermediate care facilities 
                for the mentally retarded.
                  (v) Physicians' services.
                  (vi) Home health care services.
                  (vii) Outpatient prescription drugs.
                  (viii) Services of managed care organizations 
                (including health maintenance organizations, 
                preferred provider organizations, and such 
                other similar organizations as the Secretary 
                may specify by regulation).
                  (ix) Such other classification of health care 
                items and services consistent with this 
                subparagraph as the Secretary may establish by 
                regulation.
          (B) The term ``health care provider'' means an 
        individual or person that receives payments for the 
        provision of health care items or services.
          (C) An entity is considered to be ``related'' to a 
        health care provider if the entity--
                  (i) is an organization, association, 
                corporation or partnership formed by or on 
                behalf of health care providers;
                  (ii) is a person with an ownership or control 
                interest (as defined in section 1124(a)(3)) in 
                the provider;
                  (iii) is the employee, spouse, parent, child, 
                or sibling of the provider (or of a person 
                described in clause (ii)); or
                  (iv) has a similar, close relationship (as 
                defined in regulations) to the provider.
          (D) The term ``State'' means only the 50 States and 
        the District of Columbia but does not include any State 
        whose entire program under this title is operated under 
        a waiver granted under section 1115.
          (E) The ``State fiscal year'' means, with respect to 
        a specified year, a State fiscal year ending in that 
        specified year.
          (F) The term ``tax'' includes any licensing fee, 
        assessment, or other mandatory payment, but does not 
        include payment of a criminal or civil fine or penalty 
        (other than a fine or penalty imposed in lieu of or 
        instead of a fee, assessment, or other mandatory 
        payment).
          (G) The term ``unit of local government'' means, with 
        respect to a State, a city, county, special purpose 
        district, or other governmental unit in the State.
  (x)(1) For purposes of section 1902(a)(46)(B)(i), the 
requirement of this subsection is, with respect to an 
individual declaring to be a citizen or national of the United 
States, that, subject to paragraph (2), there is presented 
satisfactory documentary evidence of citizenship or nationality 
(as defined in paragraph (3)) of the individual.
  (2) The requirement of paragraph (1) shall not apply to an 
individual declaring to be a citizen or national of the United 
States who is eligible for medical assistance under this 
title--
          (A) and is entitled to or enrolled for benefits under 
        any part of title XVIII;
          (B) and is receiving--
                  (i) disability insurance benefits under 
                section 223 or monthly insurance benefits under 
                section 202 based on such individual's 
                disability (as defined in section 223(d)); or
                  (ii) supplemental security income benefits 
                under title XVI;
          (C) and with respect to whom--
                  (i) child welfare services are made available 
                under part B of title IV on the basis of being 
                a child in foster care; or
                  (ii) adoption or foster care assistance is 
                made available under part E of title IV;
          (D) pursuant to the application of section 1902(e)(4) 
        (and, in the case of an individual who is eligible for 
        medical assistance on such basis, the individual shall 
        be deemed to have provided satisfactory documentary 
        evidence of citizenship or nationality and shall not be 
        required to provide further documentary evidence on any 
        date that occurs during or after the period in which 
        the individual is eligible for medical assistance on 
        such basis); or
          (E) on such basis as the Secretary may specify under 
        which satisfactory documentary evidence of citizenship 
        or nationality has been previously presented.
  (3)(A) For purposes of this subsection, the term 
``satisfactory documentary evidence of citizenship or 
nationality'' means--
          (i) any document described in subparagraph (B); or
          (ii) a document described in subparagraph (C) and a 
        document described in subparagraph (D).
  (B) The following are documents described in this 
subparagraph:
          (i) A United States passport.
          (ii) Form N-550 or N-570 (Certificate of 
        Naturalization).
          (iii) Form N-560 or N-561 (Certificate of United 
        States Citizenship).
          (iv) A valid State-issued driver's license or other 
        identity document described in section 274A(b)(1)(D) of 
        the Immigration and Nationality Act, but only if the 
        State issuing the license or such document requires 
        proof of United States citizenship before issuance of 
        such license or document or obtains a social security 
        number from the applicant and verifies before 
        certification that such number is valid and assigned to 
        the applicant who is a citizen.
          (v)(I) Except as provided in subclause (II), a 
        document issued by a federally recognized Indian tribe 
        evidencing membership or enrollment in, or affiliation 
        with, such tribe (such as a tribal enrollment card or 
        certificate of degree of Indian blood).
          (II) With respect to those federally recognized 
        Indian tribes located within States having an 
        international border whose membership includes 
        individuals who are not citizens of the United States, 
        the Secretary shall, after consulting with such tribes, 
        issue regulations authorizing the presentation of such 
        other forms of documentation (including tribal 
        documentation, if appropriate) that the Secretary 
        determines to be satisfactory documentary evidence of 
        citizenship or nationality for purposes of satisfying 
        the requirement of this subsection.
          (vi) Such other document as the Secretary may 
        specify, by regulation, that provides proof of United 
        States citizenship or nationality and that provides a 
        reliable means of documentation of personal identity.
  (C) The following are documents described in this 
subparagraph:
          (i) A certificate of birth in the United States.
          (ii) Form FS-545 or Form DS-1350 (Certification of 
        Birth Abroad).
          (iii) Form I-197 (United States Citizen 
        Identification Card).
          (iv) Form FS-240 (Report of Birth Abroad of a Citizen 
        of the United States).
          (v) Such other document (not described in 
        subparagraph (B)(iv)) as the Secretary may specify that 
        provides proof of United States citizenship or 
        nationality.
  (D) The following are documents described in this 
subparagraph:
          (i) Any identity document described in section 
        274A(b)(1)(D) of the Immigration and Nationality Act.
          (ii) Any other documentation of personal identity of 
        such other type as the Secretary finds, by regulation, 
        provides a reliable means of identification.
  (E) A reference in this paragraph to a form includes a 
reference to any successor form.
  (4) In the case of an individual declaring to be a citizen or 
national of the United States with respect to whom a State 
requires the presentation of satisfactory documentary evidence 
of citizenship or nationality under section 1902(a)(46)(B)(i), 
the individual shall be provided at least the reasonable 
opportunity to present satisfactory documentary evidence of 
citizenship or nationality under this subsection as is provided 
under clauses (i) and (ii) of section 1137(d)(4)(A) to an 
individual for the submittal to the State of evidence 
indicating a satisfactory immigration status.
  (5) Nothing in subparagraph (A) or (B) of section 
1902(a)(46), the preceding paragraphs of this subsection, or 
the Deficit Reduction Act of 2005, including section 6036 of 
such Act, shall be construed as changing the requirement of 
section 1902(e)(4) that a child born in the United States to an 
alien mother for whom medical assistance for the delivery of 
such child is available as treatment of an emergency medical 
condition pursuant to subsection (v) shall be deemed eligible 
for medical assistance during the first year of such child's 
life.
  (y) Payments for Establishment of Alternate Non-Emergency 
Services Providers.--
          (1) Payments.--In addition to the payments otherwise 
        provided under subsection (a), subject to paragraph 
        (2), the Secretary shall provide for payments to States 
        under such subsection for the establishment of 
        alternate non-emergency service providers (as defined 
        in section 1916A(e)(5)(B)), or networks of such 
        providers.
          (2) Limitation.--The total amount of payments under 
        this subsection shall not exceed $50,000,000 during the 
        4-year period beginning with 2006. This subsection 
        constitutes budget authority in advance of 
        appropriations Acts and represents the obligation of 
        the Secretary to provide for the payment of amounts 
        provided under this subsection.
          (3) Preference.--In providing for payments to States 
        under this subsection, the Secretary shall provide 
        preference to States that establish, or provide for, 
        alternate non-emergency services providers or networks 
        of such providers that--
                  (A) serve rural or underserved areas where 
                beneficiaries under this title may not have 
                regular access to providers of primary care 
                services; or
                  (B) are in partnership with local community 
                hospitals.
          (4) Form and manner of payment.--Payment to a State 
        under this subsection shall be made only upon the 
        filing of such application in such form and in such 
        manner as the Secretary shall specify. Payment to a 
        State under this subsection shall be made in the same 
        manner as other payments under section 1903(a).
  (z) Medicaid Transformation Payments.--
          (1) In general.--In addition to the payments provided 
        under subsection (a), subject to paragraph (4), the 
        Secretary shall provide for payments to States for the 
        adoption of innovative methods to improve the 
        effectiveness and efficiency in providing medical 
        assistance under this title.
          (2) Permissible uses of funds.--The following are 
        examples of innovative methods for which funds provided 
        under this subsection may be used:
                  (A) Methods for reducing patient error rates 
                through the implementation and use of 
                electronic health records, electronic clinical 
                decision support tools, or e-prescribing 
                programs.
                  (B) Methods for improving rates of collection 
                from estates of amounts owed under this title.
                  (C) Methods for reducing waste, fraud, and 
                abuse under the program under this title, such 
                as reducing improper payment rates as measured 
                by annual payment error rate measurement (PERM) 
                project rates.
                  (D) Implementation of a medication risk 
                management program as part of a drug use review 
                program under section 1927(g).
                  (E) Methods in reducing, in clinically 
                appropriate ways, expenditures under this title 
                for covered outpatient drugs, particularly in 
                the categories of greatest drug utilization, by 
                increasing the utilization of generic drugs 
                through the use of education programs and other 
                incentives to promote greater use of generic 
                drugs.
                  (F) Methods for improving access to primary 
                and specialty physician care for the uninsured 
                using integrated university-based hospital and 
                clinic systems.
          (3) Application; terms and conditions.--
                  (A) In general.--No payments shall be made to 
                a State under this subsection unless the State 
                applies to the Secretary for such payments in a 
                form, manner, and time specified by the 
                Secretary.
                  (B) Terms and conditions.--Such payments are 
                made under such terms and conditions consistent 
                with this subsection as the Secretary 
                prescribes.
                  (C) Annual report.--Payment to a State under 
                this subsection is conditioned on the State 
                submitting to the Secretary an annual report on 
                the programs supported by such payment. Such 
                report shall include information on--
                          (i) the specific uses of such 
                        payment;
                          (ii) an assessment of quality 
                        improvements and clinical outcomes 
                        under such programs; and
                          (iii) estimates of cost savings 
                        resulting from such programs.
          (4) Funding.--
                  (A) Limitation on funds.--The total amount of 
                payments under this subsection shall be equal 
                to, and shall not exceed--
                          (i) $75,000,000 for fiscal year 2007; 
                        and
                          (ii) $75,000,000 for fiscal year 
                        2008.
                This subsection constitutes budget authority in 
                advance of appropriations Acts and represents 
                the obligation of the Secretary to provide for 
                the payment of amounts provided under this 
                subsection.
                  (B) Allocation of funds.--The Secretary shall 
                specify a method for allocating the funds made 
                available under this subsection among States. 
                Such method shall provide preference for States 
                that design programs that target health 
                providers that treat significant numbers of 
                Medicaid beneficiaries. Such method shall 
                provide that not less than 25 percent of such 
                funds shall be allocated among States the 
                population of which (as determined according to 
                data collected by the United States Census 
                Bureau) as of July 1, 2004, was more than 105 
                percent of the population of the respective 
                State (as so determined) as of April 1, 2000.
                  (C) Form and manner of payment.--Payment to a 
                State under this subsection shall be made in 
                the same manner as other payments under section 
                1903(a). There is no requirement for State 
                matching funds to receive payments under this 
                subsection.
          (5) Medication risk management program.--
                  (A) In general.--For purposes of this 
                subsection, the term ``medication risk 
                management program'' means a program for 
                targeted beneficiaries that ensures that 
                covered outpatient drugs are appropriately used 
                to optimize therapeutic outcomes through 
                improved medication use and to reduce the risk 
                of adverse events.
                  (B) Elements.--Such program may include the 
                following elements:
                          (i) The use of established principles 
                        and standards for drug utilization 
                        review and best practices to analyze 
                        prescription drug claims of targeted 
                        beneficiaries and identify outlier 
                        physicians.
                          (ii) On an ongoing basis provide 
                        outlier physicians--
                                  (I) a comprehensive pharmacy 
                                claims history for each 
                                targeted beneficiary under 
                                their care;
                                  (II) information regarding 
                                the frequency and cost of 
                                relapses and hospitalizations 
                                of targeted beneficiaries under 
                                the physician's care; and
                                  (III) applicable best 
                                practice guidelines and 
                                empirical references.
                          (iii) Monitor outlier physician's 
                        prescribing, such as failure to refill, 
                        dosage strengths, and provide 
                        incentives and information to encourage 
                        the adoption of best clinical 
                        practices.
                  (C) Targeted beneficiaries.--For purposes of 
                this paragraph, the term ``targeted 
                beneficiaries'' means Medicaid eligible 
                beneficiaries who are identified as having high 
                prescription drug costs and medical costs, such 
                as individuals with behavioral disorders or 
                multiple chronic diseases who are taking 
                multiple medications.

SEC. 1903A. PER CAPITA-BASED CAP ON PAYMENTS FOR MEDICAL ASSISTANCE.

  (a) Application of Per Capita Cap on Payments for Medical 
Assistance Expenditures.--
          (1) In general.--If a State has excess aggregate 
        medical assistance expenditures (as defined in 
        paragraph (2)) for a fiscal year (beginning with fiscal 
        year 2020), the amount of payment to the State under 
        section 1903(a)(1) for each quarter in the following 
        fiscal year shall be reduced by 1/4 of the excess 
        aggregate medical assistance payments (as defined in 
        paragraph (3)) for that previous fiscal year. In this 
        section, the term ``State'' means only the 50 States 
        and the District of Columbia.
          (2) Excess aggregate medical assistance 
        expenditures.--In this subsection, the term ``excess 
        aggregate medical assistance expenditures'' means, for 
        a State for a fiscal year, the amount (if any) by 
        which--
                  (A) the amount of the adjusted total medical 
                assistance expenditures (as defined in 
                subsection (b)(1)) for the State and fiscal 
                year; exceeds
                  (B) the amount of the target total medical 
                assistance expenditures (as defined in 
                subsection (c)) for the State and fiscal year.
          (3) Excess aggregate medical assistance payments.--In 
        this subsection, the term ``excess aggregate medical 
        assistance payments'' means, for a State for a fiscal 
        year, the product of--
                  (A) the excess aggregate medical assistance 
                expenditures (as defined in paragraph (2)) for 
                the State for the fiscal year; and
                  (B) the Federal average medical assistance 
                matching percentage (as defined in paragraph 
                (4)) for the State for the fiscal year.
          (4) Federal average medical assistance matching 
        percentage.--In this subsection, the term ``Federal 
        average medical assistance matching percentage'' means, 
        for a State for a fiscal year, the ratio (expressed as 
        a percentage) of--
                  (A) the amount of the Federal payments that 
                would be made to the State under section 
                1903(a)(1) for medical assistance expenditures 
                for calendar quarters in the fiscal year if 
                paragraph (1) did not apply; to
                  (B) the amount of the medical assistance 
                expenditures for the State and fiscal year.
  (b) Adjusted Total Medical Assistance Expenditures.--Subject 
to subsection (g), the following shall apply:
          (1) In general.--In this section, the term ``adjusted 
        total medical assistance expenditures'' means, for a 
        State--
                  (A) for fiscal year 2016, the product of--
                          (i) the amount of the medical 
                        assistance expenditures (as defined in 
                        paragraph (2)) for the State and fiscal 
                        year, reduced by the amount of any 
                        excluded expenditures (as defined in 
                        paragraph (3)) for the State and fiscal 
                        year otherwise included in such medical 
                        assistance expenditures; and
                          (ii) the 1903A FY16 population 
                        percentage (as defined in paragraph 
                        (4)) for the State; or
                  (B) for fiscal year 2019 or a subsequent 
                fiscal year, the amount of the medical 
                assistance expenditures (as defined in 
                paragraph (2)) for the State and fiscal year 
                that is attributable to 1903A enrollees, 
                reduced by the amount of any excluded 
                expenditures (as defined in paragraph (3)) for 
                the State and fiscal year otherwise included in 
                such medical assistance expenditures.
          (2) Medical assistance expenditures.--In this 
        section, the term ``medical assistance expenditures'' 
        means, for a State and fiscal year, the medical 
        assistance payments as reported by medical service 
        category on the Form CMS-64 quarterly expense report 
        (or successor to such a report form, and including 
        enrollment data and subsequent adjustments to any such 
        report, in this section referred to collectively as a 
        ``CMS-64 report'') that directly result from providing 
        medical assistance under the State plan (including 
        under a waiver of the plan) for which payment is (or 
        may otherwise be) made pursuant to section 1903(a)(1).
          (3) Excluded expenditures.--In this section, the term 
        ``excluded expenditures'' means, for a State and fiscal 
        year, expenditures under the State plan (or under a 
        waiver of such plan) that are attributable to any of 
        the following:
                  (A) DSH.--Payment adjustments made for 
                disproportionate share hospitals under section 
                1923.
                  (B) Medicare cost-sharing.--Payments made for 
                medicare cost-sharing (as defined in section 
                1905(p)(3)).
                  (C) Safety net provider payment adjustments 
                in non-expansion states.--Payment adjustments 
                under subsection (a) of section 1923A for which 
                payment is permitted under subsection (c) of 
                such section.
          (4) 1903A fy 16 population percentage.--In this 
        subsection, the term ``1903A FY16 population 
        percentage'' means, for a State, the Secretary's 
        calculation of the percentage of the actual medical 
        assistance expenditures, as reported by the State on 
        the CMS-64 reports for calendar quarters in fiscal year 
        2016, that are attributable to 1903A enrollees (as 
        defined in subsection (e)(1)).
  (c)  Target Total Medical Assistance Expenditures.--
          (1) Calculation.--In this section, the term ``target 
        total medical assistance expenditures'' means, for a 
        State for a fiscal year, the sum of the products, for 
        each of the 1903A enrollee categories (as defined in 
        subsection (e)(2)), of--
                  (A) the target per capita medical assistance 
                expenditures (as defined in paragraph (2)) for 
                the enrollee category, State, and fiscal year; 
                and
                  (B) the number of 1903A enrollees for such 
                enrollee category, State, and fiscal year, as 
                determined under subsection (e)(4).
          (2) Target per capita medical assistance 
        expenditures.--In this subsection, the term ``target 
        per capita medical assistance expenditures'' means, for 
        a 1903A enrollee category, State, and a fiscal year, an 
        amount equal to--
                  (A) the provisional FY19 target per capita 
                amount for such enrollee category (as 
                calculated under subsection (d)(5)) for the 
                State; increased by
                  (B) the percentage increase in the medical 
                care component of the consumer price index for 
                all urban consumers (U.S. city average) from 
                September of 2019 to September of the fiscal 
                year involved.
  (d) Calculation of FY19 Provisional Target Amount for Each 
1903A Enrollee Category.--Subject to subsection (g), the 
following shall apply:
          (1) Calculation of base amounts for fiscal year 
        2016.--For each State the Secretary shall calculate 
        (and provide notice to the State not later than April 
        1, 2018, of) the following:
                  (A) The amount of the adjusted total medical 
                assistance expenditures (as defined in 
                subsection (b)(1)) for the State for fiscal 
                year 2016.
                  (B) The number of 1903A enrollees for the 
                State in fiscal year 2016 (as determined under 
                subsection (e)(4)).
                  (C) The average per capita medical assistance 
                expenditures for the State for fiscal year 2016 
                equal to--
                          (i) the amount calculated under 
                        subparagraph (A); divided by
                          (ii) the number calculated under 
                        subparagraph (B).
          (2) Fiscal year 2019 average per capita amount based 
        on inflating the fiscal year 2016 amount to fiscal year 
        2019 by cpi-medical.--The Secretary shall calculate a 
        fiscal year 2019 average per capita amount for each 
        State equal to--
                  (A) the average per capita medical assistance 
                expenditures for the State for fiscal year 2016 
                (calculated under paragraph (1)(C)); increased 
                by
                  (B) the percentage increase in the medical 
                care component of the consumer price index for 
                all urban consumers (U.S. city average) from 
                September, 2016 to September, 2019.
          (3) Aggregate and average expenditures per capita for 
        fiscal year 2019.--The Secretary shall calculate for 
        each State the following:
                  (A) The amount of the adjusted total medical 
                assistance expenditures (as defined in 
                subsection (b)(1)) for the State for fiscal 
                year 2019. 
                  (B) The number of 1903A enrollees for the 
                State in fiscal year 2019 (as determined under 
                subsection (e)(4)).
          (4) Per capita expenditures for fiscal year 2019 for 
        each 1903a enrollee category.--The Secretary shall 
        calculate (and provide notice to each State not later 
        than January 1, 2020, of) the following:
                  (A)(i) For each 1903A enrollee category, the 
                amount of the adjusted total medical assistance 
                expenditures (as defined in subsection (b)(1)) 
                for the State for fiscal year 2019 for 
                individuals in the enrollee category, 
                calculated by excluding from medical assistance 
                expenditures those expenditures attributable to 
                expenditures described in clause (iii) or non-
                DSH supplemental expenditures (as defined in 
                clause (ii)).
                  (ii) In this paragraph, the term ``non-DSH 
                supplemental expenditure'' means a payment to a 
                provider under the State plan (or under a 
                waiver of the plan) that--
                          (I) is not made under section 1923;
                          (II) is not made with respect to a 
                        specific item or service for an 
                        individual;
                          (III) is in addition to any payments 
                        made to the provider under the plan (or 
                        waiver) for any such item or service; 
                        and
                          (IV) complies with the limits for 
                        additional payments to providers under 
                        the plan (or waiver) imposed pursuant 
                        to section 1902(a)(30)(A), including 
                        the regulations specifying upper 
                        payment limits under the State plan in 
                        part 447 of title 42, Code of Federal 
                        Regulations (or any successor 
                        regulations).
                  (iii) An expenditure described in this clause 
                is an expenditure that meets the criteria 
                specified in subclauses (I), (II), and (III) of 
                clause (ii) and is authorized under section 
                1115 for the purposes of funding a delivery 
                system reform pool, uncompensated care pool, a 
                designated state health program, or any other 
                similar expenditure (as defined by the 
                Secretary).
                  (B) For each 1903A enrollee category, the 
                number of 1903A enrollees for the State in 
                fiscal year 2019 in the enrollee category (as 
                determined under subsection (e)(4)).
                  (C) For fiscal year 2016, the State's non-DSH 
                supplemental payment percentage is equal to the 
                ratio (expressed as a percentage) of--
                          (i) the total amount of non-DSH 
                        supplemental expenditures (as defined 
                        in subparagraph (A)(ii)) for the State 
                        for fiscal year 2016; to
                          (ii) the amount described in 
                        subsection (b)(1)(A) for the State for 
                        fiscal year 2016.
                  (D) For each 1903A enrollee category an 
                average medical assistance expenditures per 
                capita for the State for fiscal year 2019 for 
                the enrollee category equal to--
                          (i) the amount calculated under 
                        subparagraph (A) for the State, 
                        increased by the non-DSH supplemental 
                        payment percentage for the State (as 
                        calculated under subparagraph (C)); 
                        divided by
                          (ii) the number calculated under 
                        subparagraph (B) for the State for the 
                        enrollee category.
          (5) Provisional fy19 per capita target amount for 
        each 1903a enrollee category.--Subject to subsection 
        (f)(2), the Secretary shall calculate for each State a 
        provisional FY19 per capita target amount for each 
        1903A enrollee category equal to the average medical 
        assistance expenditures per capita for the State for 
        fiscal year 2019 (as calculated under paragraph (4)(D)) 
        for such enrollee category multiplied by the ratio of--
                  (A) the product of--
                          (i) the fiscal year 2019 average per 
                        capita amount for the State, as 
                        calculated under paragraph (2); and
                          (ii) the number of 1903A enrollees 
                        for the State in fiscal year 2019, as 
                        calculated under paragraph (3)(B); to
                  (B) the amount of the adjusted total medical 
                assistance expenditures for the State for 
                fiscal year 2019, as calculated under paragraph 
                (3)(A).
  (e) 1903A Enrollee; 1903A Enrollee Category.--Subject to 
subsection (g), for purposes of this section, the following 
shall apply:
          (1) 1903A enrollee.--The term ``1903A enrollee'' 
        means, with respect to a State and a month, any 
        Medicaid enrollee (as defined in paragraph (3)) for the 
        month, other than such an enrollee who for such month 
        is in any of the following categories of excluded 
        individuals:
                  (A) CHIP.--An individual who is provided, 
                under this title in the manner described in 
                section 2101(a)(2), child health assistance 
                under title XXI.
                  (B) IHS.--An individual who receives any 
                medical assistance under this title for 
                services for which payment is made under the 
                third sentence of section 1905(b).
                  (C) Breast and cervical cancer services 
                eligible individual.--An individual who is 
                entitled to medical assistance under this title 
                only pursuant to section 
                1902(a)(10)(A)(ii)(XVIII).
                  (D) Partial-benefit enrollees.--An individual 
                who--
                          (i) is an alien who is entitled to 
                        medical assistance under this title 
                        only pursuant to section 1903(v)(2);
                          (ii) is entitled to medical 
                        assistance under this title only 
                        pursuant to subclause (XII) or (XXI) of 
                        section 1902(a)(10)(A)(ii) (or pursuant 
                        to a waiver that provides only 
                        comparable benefits);
                          (iii) is a dual eligible individual 
                        (as defined in section 1915(h)(2)(B)) 
                        and is entitled to medical assistance 
                        under this title (or under a waiver) 
                        only for some or all of medicare cost-
                        sharing (as defined in section 
                        1905(p)(3)); or
                          (iv) is entitled to medical 
                        assistance under this title and for 
                        whom the State is providing a payment 
                        or subsidy to an employer for coverage 
                        of the individual under a group health 
                        plan pursuant to section 1906 or 
                        section 1906A (or pursuant to a waiver 
                        that provides only comparable 
                        benefits).
          (2) 1903A enrollee category.--The term ``1903A 
        enrollee category'' means each of the following:
                  (A) Elderly.--A category of 1903A enrollees 
                who are 65 years of age or older.
                  (B) Blind and disabled.--A category of 1903A 
                enrollees (not described in the previous 
                subparagraph) who are eligible for medical 
                assistance under this title on the basis of 
                being blind or disabled.
                  (C) Children.--A category of 1903A enrollees 
                (not described in a previous subparagraph) who 
                are children under 19 years of age.
                  (D) Expansion enrollees.--A category of 1903A 
                enrollees (not described in a previous 
                subparagraph) for whom the amounts expended for 
                medical assistance are subject to an increase 
                or change in the Federal medical assistance 
                percentage under subsection (y) or (z)(2), 
                respectively, of section 1905.
                  (E) Other nonelderly, nondisabled, non-
                expansion adults.--A category of 1903A 
                enrollees who are not described in any previous 
                subparagraph.
          (3) Medicaid enrollee.--The term ``Medicaid 
        enrollee'' means, with respect to a State for a month, 
        an individual who is eligible for medical assistance 
        for items or services under this title and enrolled 
        under the State plan (or a waiver of such plan) under 
        this title for the month.
          (4) Determination of number of 1903a enrollees.--The 
        number of 1903A enrollees for a State and fiscal year, 
        and, if applicable, for a 1903A enrollee category, is 
        the average monthly number of Medicaid enrollees for 
        such State and fiscal year (and, if applicable, in such 
        category) that are reported through the CMS-64 report 
        under (and subject to audit under) subsection (h).
  (f) Special Payment Rules.--
          (1) Application in case of research and demonstration 
        projects and other waivers.--In the case of a State 
        with a waiver of the State plan approved under section 
        1115, section 1915, or another provision of this title, 
        this section shall apply to medical assistance 
        expenditures and medical assistance payments under the 
        waiver, in the same manner as if such expenditures and 
        payments had been made under a State plan under this 
        title and the limitations on expenditures under this 
        section shall supersede any other payment limitations 
        or provisions (including limitations based on a per 
        capita limitation) otherwise applicable under such a 
        waiver.
          (2) Treatment of states expanding coverage after 
        fiscal year 2016.--In the case of a State that did not 
        provide for medical assistance for the 1903A enrollee 
        category described in subsection (e)(2)(D) during 
        fiscal year 2016 but which provides for such assistance 
        for such category in a subsequent year, the provisional 
        FY19 per capita target amount for such enrollee 
        category under subsection (d)(5) shall be equal to the 
        provisional FY19 per capita target amount for the 1903A 
        enrollee category described in subsection (e)(2)(E).
          (3) In case of state failure to report necessary 
        data.--If a State for any quarter in a fiscal year 
        (beginning with fiscal year 2019) fails to 
        satisfactorily submit data on expenditures and 
        enrollees in accordance with subsection (h)(1), for 
        such fiscal year and any succeeding fiscal year for 
        which such data are not satisfactorily submitted--
                  (A) the Secretary shall calculate and apply 
                subsections (a) through (e) with respect to the 
                State as if all 1903A enrollee categories for 
                which such expenditure and enrollee data were 
                not satisfactorily submitted were a single 
                1903A enrollee category; and
                  (B) the growth factor otherwise applied under 
                subsection (c)(2)(B) shall be decreased by 1 
                percentage point.
  (g) Recalculation of Certain Amounts for Data Errors.--The 
amounts and percentage calculated under paragraphs (1) and 
(4)(C) of subsection (d) for a State for fiscal year 2016, and 
the amounts of the adjusted total medical assistance 
expenditures calculated under subsection (b) and the number of 
Medicaid enrollees and 1903A enrollees determined under 
subsection (e)(4) for a State for fiscal year 2016, fiscal year 
2019, and any subsequent fiscal year, may be adjusted by the 
Secretary based upon an appeal (filed by the State in such a 
form, manner, and time, and containing such information 
relating to data errors that support such appeal, as the 
Secretary specifies) that the Secretary determines to be valid, 
except that any adjustment by the Secretary under this 
subsection for a State may not result in an increase of the 
target total medical assistance expenditures exceeding 2 
percent.
  (h) Required Reporting and Auditing of CMS-64 Data; 
Transitional Increase in Federal Matching Percentage for 
Certain Administrative Expenses.--
          (1) Reporting.--In addition to the data required on 
        form Group VIII on the CMS-64 report form as of January 
        1, 2017, in each CMS-64 report required to be submitted 
        (for each quarter beginning on or after October 1, 
        2018), the State shall include data on medical 
        assistance expenditures within such categories of 
        services and categories of enrollees (including each 
        1903A enrollee category and each category of excluded 
        individuals under subsection (e)(1)) and the numbers of 
        enrollees within each of such enrollee categories, as 
        the Secretary determines are necessary (including 
        timely guidance published as soon as possible after the 
        date of the enactment of this section) in order to 
        implement this section and to enable States to comply 
        with the requirement of this paragraph on a timely 
        basis.
          (2) Auditing.--The Secretary shall conduct for each 
        State an audit of the number of individuals and 
        expenditures reported through the CMS-64 report for 
        fiscal year 2016, fiscal year 2019, and each subsequent 
        fiscal year, which audit may be conducted on a 
        representative sample (as determined by the Secretary).
          (3) Temporary increase in federal matching percentage 
        to support improved data reporting systems for fiscal 
        years 2018 and 2019.--For amounts expended during 
        calendar quarters beginning on or after October 1, 
        2017, and before October 1, 2019--
                  (A) the Federal matching percentage applied 
                under section 1903(a)(3)(A)(i) shall be 
                increased by 10 percentage points to 100 
                percent;
                  (B) the Federal matching percentage applied 
                under section 1903(a)(3)(B) shall be increased 
                by 25 percentage points to 100 percent; and
                  (C) the Federal matching percentage applied 
                under section 1903(a)(7) shall be increased by 
                10 percentage points to 60 percent but only 
                with respect to amounts expended that are 
                attributable to a State's additional 
                administrative expenditures to implement the 
                data requirements of paragraph (1).

           *       *       *       *       *       *       *


                              DEFINITIONS

  Sec. 1905. For purposes of this title--
  (a) The term ``medical assistance'' means payment of part or 
all of the cost of the following care and services or the care 
and services themselves, or both (if provided [in or after the 
third month before the month in which the recipient makes 
application for assistance] in or after the month in which the 
recipient makes application for assistance or, in the case of 
medicare cost-sharing with respect to a qualified medicare 
beneficiary described in subsection (p)(1), if provided after 
the month in which the individual becomes such a beneficiary) 
for individuals, and, with respect to physicians' or dentists' 
services, at the option of the State, to individuals (other 
than individuals with respect to whom there is being paid, or 
who are eligible, or would be eligible if they were not in a 
medical institution, to have paid with respect to them a State 
supplementary payment and are eligible for medical assistance 
equal in amount, duration, and scope to the medical assistance 
made available to individuals described in section 
1902(a)(10)(A)) not receiving aid or assistance under any plan 
of the State approved under title I, X, XIV, or XVI, or part A 
of title IV, and with respect to whom supplemental security 
income benefits are not being paid under title XVI, who are--
          
                  
          (i) under the age of 21, or, at the option of the 
        State, under the age of 20, 19, or 18 as the State may 
        choose,
          (ii) relatives specified in section 406(b)(1) with 
        whom a child is living if such child is (or would, if 
        needy, be) a dependent child under part A of title IV,
          (iii) 65 years of age or older,
          (iv) blind, with respect to States eligible to 
        participate in the State plan program established under 
        title XVI,
          (v) 18 years of age or older and permanently and 
        totally disabled, with respect to States eligible to 
        participate in the State plan program established under 
        title XVI,
          (vi) persons essential (as described in the second 
        sentence of this subsection) to individuals receiving 
        aid or assistance under State plans approved under 
        title I, X, XIV, or XVI,
          (vii) blind or disabled as defined in section 1614, 
        with respect to States not eligible to participate in 
        the State plan program established under title XVI,
          (viii) pregnant women,
          (ix) individuals provided extended benefits under 
        section 1925,
          (x) individuals described in section 1902(u)(1),
          (xi) individuals described in section 1902(z)(1),
          (xii) employed individuals with a medically improved 
        disability (as defined in subsection (v)),
          (xiii) individuals described in section 1902(aa),
          (xiv) individuals described in section 
        1902(a)(10)(A)(i)(VIII) or 1902(a)(10)(A)(i)(IX),
          (xv) individuals described in section 
        1902(a)(10)(A)(ii)(XX),
                          (xvi) individuals described in 
                        section 1902(ii), or
          (xvii) individuals who are eligible for home and 
        community-based services under needs-based criteria 
        established under paragraph (1)(A) of section 1915(i), 
        or who are eligible for home and community-based 
        services under paragraph (6) of such section, and who 
        will receive home and community-based services pursuant 
        to a State plan amendment under such subsection,
but whose income and resources are insufficient to meet all of 
such cost--
          (1) inpatient hospital services (other than services 
        in an institution for mental diseases);
          (2)(A) outpatient hospital services, (B) consistent 
        with State law permitting such services, rural health 
        clinic services (as defined in subsection (l)(1)) and 
        any other ambulatory services which are offered by a 
        rural health clinic (as defined in subsection (l)(1)) 
        and which are otherwise included in the plan, and (C) 
        Federally-qualified health center services (as defined 
        in subsection (l)(2)) and any other ambulatory services 
        offered by a Federally-qualified health center and 
        which are otherwise included in the plan;
          (3) other laboratory and X-ray services;
          (4)(A) nursing facility services (other than services 
        in an institution for mental diseases) for individuals 
        21 years of age or older; (B) early and periodic 
        screening, diagnostic, and treatment services (as 
        defined in subsection (r)) for individuals who are 
        eligible under the plan and are under the age of 21; 
        (C) family planning services and supplies furnished 
        (directly or under arrangements with others) to 
        individuals of child-bearing age (including minors who 
        can be considered to be sexually active) who are 
        eligible under the State plan and who desire such 
        services and supplies; and (D) counseling and 
        pharmacotherapy for cessation of tobacco use by 
        pregnant women (as defined in subsection (bb));
          (5)(A) physicians' services furnished by a physician 
        (as defined in section 1861(r)(1)), whether furnished 
        in the office, the patient's home, a hospital, or a 
        nursing facility, or elsewhere, and (B) medical and 
        surgical services furnished by a dentist (described in 
        section 1861(r)(2)) to the extent such services may be 
        performed under State law either by a doctor of 
        medicine or by a doctor of dental surgery or dental 
        medicine and would be described in clause (A) if 
        furnished by a physician (as defined in section 
        1861(r)(1));
          (6) medical care, or any other type of remedial care 
        recognized under State law, furnished by licensed 
        practitioners within the scope of their practice as 
        defined by State law;
          (7) home health care services;
          (8) private duty nursing services;
          (9) clinic services furnished by or under the 
        direction of a physician, without regard to whether the 
        clinic itself is administered by a physician, including 
        such services furnished outside the clinic by clinic 
        personnel to an eligible individual who does not reside 
        in a permanent dwelling or does not have a fixed home 
        or mailing address;
          (10) dental services;
          (11) physical therapy and related services;
          (12) prescribed drugs, dentures, and prosthetic 
        devices; and eyeglasses prescribed by a physician 
        skilled in diseases of the eye or by an optometrist, 
        whichever the individual may select;
          (13) other diagnostic, screening, preventive, and 
        rehabilitative services, including--
                  (A) any clinical preventive services that are 
                assigned a grade of A or B by the United States 
                Preventive Services Task Force;
                  (B) with respect to an adult individual, 
                approved vaccines recommended by the Advisory 
                Committee on Immunization Practices (an 
                advisory committee established by the 
                Secretary, acting through the Director of the 
                Centers for Disease Control and Prevention) and 
                their administration; and
                  (C) any medical or remedial services 
                (provided in a facility, a home, or other 
                setting) recommended by a physician or other 
                licensed practitioner of the healing arts 
                within the scope of their practice under State 
                law, for the maximum reduction of physical or 
                mental disability and restoration of an 
                individual to the best possible functional 
                level;
          (14) inpatient hospital services and nursing facility 
        services for individuals 65 years of age or over in an 
        institution for mental diseases;
          (15) services in an intermediate care facility for 
        the mentally retarded (other than in an institution for 
        mental diseases) for individuals who are determined, in 
        accordance with section 1902(a)(31), to be in need of 
        such care;
          (16) (A) effective January 1, 1973, inpatient 
        psychiatric hospital services for individuals under age 
        21, as defined in subsection (h), and, (B) for 
        individuals receiving services described in 
        subparagraph (A), early and periodic screening, 
        diagnostic, and treatment services (as defined in 
        subsection (r)), whether or not such screening, 
        diagnostic, and treatment services are furnished by the 
        provider of the services described in such 
        subparagraph;
          (17) services furnished by a nurse-midwife (as 
        defined in section 1861(gg)) which the nurse-midwife is 
        legally authorized to perform under State law (or the 
        State regulatory mechanism provided by State law), 
        whether or not the nurse-midwife is under the 
        supervision of, or associated with, a physician or 
        other health care provider, and without regard to 
        whether or not the services are performed in the area 
        of management of the care of mothers and babies 
        throughout the maternity cycle;
          (18) hospice care (as defined in subsection (o));
          (19) case management services (as defined in section 
        1915(g)(2)) and TB-related services described in 
        section 1902(z)(2)(F);
          (20) respiratory care services (as defined in section 
        1902(e)(9)(C));
          (21) services furnished by a certified pediatric 
        nurse practitioner or certified family nurse 
        practitioner (as defined by the Secretary) which the 
        certified pediatric nurse practitioner or certified 
        family nurse practitioner is legally authorized to 
        perform under State law (or the State regulatory 
        mechanism provided by State law), whether or not the 
        certified pediatric nurse practitioner or certified 
        family nurse practitioner is under the supervision of, 
        or associated with, a physician or other health care 
        provider;
          (22) home and community care (to the extent allowed 
        and as defined in section 1929) for functionally 
        disabled elderly individuals;
          (23) community supported living arrangements services 
        (to the extent allowed and as defined in section 1930);
          (24) personal care services furnished to an 
        individual who is not an inpatient or resident of a 
        hospital, nursing facility, intermediate care facility 
        for the mentally retarded, or institution for mental 
        disease that are (A) authorized for the individual by a 
        physician in accordance with a plan of treatment or (at 
        the option of the State) otherwise authorized for the 
        individual in accordance with a service plan approved 
        by the State, (B) provided by an individual who is 
        qualified to provide such services and who is not a 
        member of the individual's family, and (C) furnished in 
        a home or other location;
          (25) primary care case management services (as 
        defined in subsection (t));
          (26) services furnished under a PACE program under 
        section 1934 to PACE program eligible individuals 
        enrolled under the program under such section;
          (27) subject to subsection (x), primary and secondary 
        medical strategies and treatment and services for 
        individuals who have Sickle Cell Disease;
          (28) freestanding birth center services (as defined 
        in subsection (l)(3)(A)) and other ambulatory services 
        that are offered by a freestanding birth center (as 
        defined in subsection (l)(3)(B)) and that are otherwise 
        included in the plan; and
          (29) any other medical care, and any other type of 
        remedial care recognized under State law, specified by 
        the Secretary,
except as otherwise provided in paragraph (16), such term does 
not include--
          (A) any such payments with respect to care or 
        services for any individual who is an inmate of a 
        public institution (except as a patient in a medical 
        institution); or
          (B) any such payments with respect to care or 
        services for any individual who has not attained 65 
        years of age and who is a patient in an institution for 
        mental diseases.
For purposes of clause (vi) of the preceding sentence, a person 
shall be considered essential to another individual if such 
person is the spouse of and is living with such individual, the 
needs of such person are taken into account in determining the 
amount of aid or assistance furnished to such individual (under 
a State plan approved under title I, X, XIV, or XVI), and such 
person is determined, under such a State plan, to be essential 
to the well-being of such individual. The payment described in 
the first sentence may include expenditures for medicare cost-
sharing and for premiums under part B of title XVIII for 
individuals who are eligible for medical assistance under the 
plan and (A) are receiving aid or assistance under any plan of 
the State approved under title I, X, XIV, or XVI, or part A of 
title IV, or with respect to whom supplemental security income 
benefits are being paid under title XVI, or (B) with respect to 
whom there is being paid a State supplementary payment and are 
eligible for medical assistance equal in amount, duration, and 
scope to the medical assistance made available to individuals 
described in section 1902(a)(10)(A), and, except in the case of 
individuals 65 years of age or older and disabled individuals 
entitled to health insurance benefits under title XVIII who are 
not enrolled under part B of title XVIII, other insurance 
premiums for medical or any other type of remedial care or the 
cost thereof. No service (including counseling) shall be 
excluded from the definition of ``medical assistance'' solely 
because it is provided as a treatment service for alcoholism or 
drug dependency.
  (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, (3) for purposes of this title and title XXI, the 
Federal medical assistance percentage for the District of 
Columbia shall be 70 percent, (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), and (5) 
in the case of a State that provides medical assistance for 
services and vaccines described in subparagraphs (A) and (B) of 
subsection (a)(13), and prohibits cost-sharing for such 
services and vaccines, the Federal medical assistance 
percentage, as determined under this subsection and subsection 
(y) (without regard to paragraph (1)(C) of such subsection), 
shall be increased by 1 percentage point with respect to 
medical assistance for such services and vaccines and for items 
and services described in subsection (a)(4)(D). 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).
  (c) For definition of the term ``nursing facility'', see 
section 1919(a).
  (d) The term ``intermediate care facility for the mentally 
retarded'' means an institution (or distinct part thereof) for 
the mentally retarded or persons with related conditions if--
          (1) the primary purpose of such institution (or 
        distinct part thereof) is to provide health or 
        rehabilitative services for mentally retarded 
        individuals and the institution meets such standards as 
        may be prescribed by the Secretary;
          (2) the mentally retarded individual with respect to 
        whom a request for payment is made under a plan 
        approved under this title is receiving active treatment 
        under such a program; and
          (3) in the case of a public institution, the State or 
        political subdivision responsible for the operation of 
        such institution has agreed that the non-Federal 
        expenditures in any calendar quarter prior to January 
        1, 1975, with respect to services furnished to patients 
        in such institution (or distinct part thereof) in the 
        State will not, because of payments made under this 
        title, be reduced below the average amount expended for 
        such services in such institution in the four quarters 
        immediately preceding the quarter in which the State in 
        which such institution is located elected to make such 
        services available under its plan approved under this 
        title.
  (e) In the case of any State the State plan of which (as 
approved under this title)--
          (1) does not provide for the payment of services 
        (other than services covered under section 1902(a)(12)) 
        provided by an optometrist; but
          (2) at a prior period did provide for the payment of 
        services referred to in paragraph (1);
the term ``physicians' services'' (as used in subsection 
(a)(5)) shall include services of the type which an optometrist 
is legally authorized to perform where the State plan 
specifically provides that the term ``physicians' services'', 
as employed in such plan, includes services of the type which 
an optometrist is legally authorized to perform, and shall be 
reimbursed whether furnished by a physician or an optometrist.
  (f) For purposes of this title, the term ``nursing facility 
services'' means services which are or were required to be 
given an individual who needs or needed on a daily basis 
nursing care (provided directly by or requiring the supervision 
of nursing personnel) or other rehabilitation services which as 
a practical matter can only be provided in a nursing facility 
on an inpatient basis.
  (g) If the State plan includes provision of chiropractors' 
services, such services include only--
          (1) services provided by a chiropractor (A) who is 
        licensed as such by the State and (B) who meets uniform 
        minimum standards promulgated by the Secretary under 
        section 1861(r)(5); and
          (2) services which consist of treatment by means of 
        manual manipulation of the spine which the chiropractor 
        is legally authorized to perform by the State.
  (h)(1) For purposes of paragraph (16) of subsection (a), the 
term ``inpatient psychiatric hospital services for individuals 
under age 21'' includes only--
          (A) inpatient services which are provided in an 
        institution (or distinct part thereof) which is a 
        psychiatric hospital as defined in section 1861(f) or 
        in another inpatient setting that the Secretary has 
        specified in regulations;
          (B) inpatient services which, in the case of any 
        individual (i) involve active treatment which meets 
        such standards as may be prescribed in regulations by 
        the Secretary, and (ii) a team, consisting of 
        physicians and other personnel qualified to make 
        determinations with respect to mental health conditions 
        and the treatment thereof, has determined are necessary 
        on an inpatient basis and can reasonably be expected to 
        improve the condition, by reason of which such services 
        are necessary, to the extent that eventually such 
        services will no longer be necessary; and
          (C) inpatient services which, in the case of any 
        individual, are provided prior to (i) the date such 
        individual attains age 21, or (ii) in the case of an 
        individual who was receiving such services in the 
        period immediately preceding the date on which he 
        attained age 21, (I) the date such individual no longer 
        requires such services, or (II) if earlier, the date 
        such individual attains age 22;
  (2) Such term does not include services provided during any 
calendar quarter under the State plan of any State if the total 
amount of the funds expended, during such quarter, by the State 
(and the political subdivisions thereof) from non-Federal funds 
for inpatient services included under paragraph (1), and for 
active psychiatric care and treatment provided on an outpatient 
basis for eligible mentally ill children, is less than the 
average quarterly amount of the funds expended, during the 4-
quarter period ending December 31, 1971, by the State (and the 
political subdivisions thereof) from non-Federal funds for such 
services.
  (i) The term ``institution for mental diseases'' means a 
hospital, nursing facility, or other institution of more than 
16 beds, that is primarily engaged in providing diagnosis, 
treatment, or care of persons with mental diseases, including 
medical attention, nursing care, and related services.
  (j) The term ``State supplementary payment'' means any cash 
payment made by a State on a regular basis to an individual who 
is receiving supplemental security income benefits under title 
XVI or who would but for his income be eligible to receive such 
benefits, as assistance based on need in supplementation of 
such benefits (as determined by the Commissioner of Social 
Security), but only to the extent that such payments are made 
with respect to an individual with respect to whom supplemental 
security income benefits are payable under title XVI, or would 
but for his income be payable under that title.
  (k) Increased supplemental security income benefits payable 
pursuant to section 211 of Public Law 93-66 shall not be 
considered supplemental security income benefits payable under 
title XVI.
  (l)(1) The terms ``rural health clinic services'' and ``rural 
health clinic'' have the meanings given such terms in section 
1861(aa), except that (A) clause (ii) of section 1861(aa)(2) 
shall not apply to such terms, and (B) the physician 
arrangement required under section 1861(aa)(2)(B) shall only 
apply with respect to rural health clinic services and, with 
respect to other ambulatory care services, the physician 
arrangement required shall be only such as may be required 
under the State plan for those services.
  (2)(A) The term ``Federally-qualified health center 
services'' means services of the type described in 
subparagraphs (A) through (C) of section 1861(aa)(1) when 
furnished to an individual as an patient of a Federally-
qualified health center and, for this purpose, any reference to 
a rural health clinic or a physician described in section 
1861(aa)(2)(B) is deemed a reference to a Federally-qualified 
health center or a physician at the center, respectively.
  (B) The term ``Federally-qualified health center'' means an 
entity which--
          (i) is receiving a grant under section 330 of the 
        Public Health Service Act,
          (ii)(I) is receiving funding from such a grant under 
        a contract with the recipient of such a grant, and
          (II) meets the requirements to receive a grant under 
        section 330 of such Act,
          (iii) based on the recommendation of the Health 
        Resources and Services Administration within the Public 
        Health Service, is determined by the Secretary to meet 
        the requirements for receiving such a grant, including 
        requirements of the Secretary that an entity may not be 
        owned, controlled, or operated by another entity, or
          (iv) was treated by the Secretary, for purposes of 
        part B of title XVIII, as a comprehensive Federally 
        funded health center as of January 1, 1990;
and includes an outpatient health program or facility operated 
by a tribe or tribal organization under the Indian Self-
Determination Act (Public Law 93-638) or by an urban Indian 
organization receiving funds under title V of the Indian Health 
Care Improvement Act for the provision of primary health 
services. In applying clause (ii), the Secretary may waive any 
requirement referred to in such clause for up to 2 years for 
good cause shown.
  (3)(A) The term ``freestanding birth center services'' means 
services furnished to an individual at a freestanding birth 
center (as defined in subparagraph (B)) at such center.
  (B) The term ``freestanding birth center'' means a health 
facility--
          (i) that is not a hospital;
          (ii) where childbirth is planned to occur away from 
        the pregnant woman's residence;
          (iii) that is licensed or otherwise approved by the 
        State to provide prenatal labor and delivery or 
        postpartum care and other ambulatory services that are 
        included in the plan; and
          (iv) that complies with such other requirements 
        relating to the health and safety of individuals 
        furnished services by the facility as the State shall 
        establish.
  (C) A State shall provide separate payments to providers 
administering prenatal labor and delivery or postpartum care in 
a freestanding birth center (as defined in subparagraph (B)), 
such as nurse midwives and other providers of services such as 
birth attendants recognized under State law, as determined 
appropriate by the Secretary. For purposes of the preceding 
sentence, the term ``birth attendant'' means an individual who 
is recognized or registered by the State involved to provide 
health care at childbirth and who provides such care within the 
scope of practice under which the individual is legally 
authorized to perform such care under State law (or the State 
regulatory mechanism provided by State law), regardless of 
whether the individual is under the supervision of, or 
associated with, a physician or other health care provider. 
Nothing in this subparagraph shall be construed as changing 
State law requirements applicable to a birth attendant.
  (m)(1) Subject to paragraph (2), the term ``qualified family 
member'' means an individual (other than a qualified pregnant 
woman or child, as defined in subsection (n)) who is a member 
of a family that would be receiving aid under the State plan 
under part A of title IV pursuant to section 407 if the State 
had not exercised the option under section 407(b)(2)(B)(i).
  (2) No individual shall be a qualified family member for any 
period after September 30, 1998.
  (n) The term ``qualified pregnant woman or child'' means--
          (1) a pregnant woman who--
                  (A) would be eligible for aid to families 
                with dependent children under part A of title 
                IV (or would be eligible for such aid if 
                coverage under the State plan under part A of 
                title IV included aid to families with 
                dependent children of unemployed parents 
                pursuant to section 407) if her child had been 
                born and was living with her in the month such 
                aid would be paid, and such pregnancy has been 
                medically verified;
                  (B) is a member of a family which would be 
                eligible for aid under the State plan under 
                part A of title IV pursuant to section 407 if 
                the plan required the payment of aid pursuant 
                to such section; or
                  (C) otherwise meets the income and resources 
                requirements of a State plan under part A of 
                title IV; and
          (2) a child who has not attained the age of 19, who 
        was born after September 30, 1983 (or such earlier date 
        as the State may designate), and who meets the income 
        and resources requirements of the State plan under part 
        A of title IV.
  (o)(1)(A) Subject to subparagraphs (B) and (C), the term 
``hospice care'' means the care described in section 
1861(dd)(1) furnished by a hospice program (as defined in 
section 1861(dd)(2)) to a terminally ill individual who has 
voluntarily elected (in accordance with paragraph (2)) to have 
payment made for hospice care instead of having payment made 
for certain benefits described in section 1812(d)(2)(A) and for 
which payment may otherwise be made under title XVIII and 
intermediate care facility services under the plan. For 
purposes of such election, hospice care may be provided to an 
individual while such individual is a resident of a skilled 
nursing facility or intermediate care facility, but the only 
payment made under the State plan shall be for the hospice 
care.
  (B) For purposes of this title, with respect to the 
definition of hospice program under section 1861(dd)(2), the 
Secretary may allow an agency or organization to make the 
assurance under subparagraph (A)(iii) of such section without 
taking into account any individual who is afflicted with 
acquired immune deficiency syndrome (AIDS).
  (C) A voluntary election to have payment made for hospice 
care for a child (as defined by the State) shall not constitute 
a waiver of any rights of the child to be provided with, or to 
have payment made under this title for, services that are 
related to the treatment of the child's condition for which a 
diagnosis of terminal illness has been made.
  (2) An individual's voluntary election under this subsection 
--
          (A) shall be made in accordance with procedures that 
        are established by the State and that are consistent 
        with the procedures established under section 
        1812(d)(2);
          (B) shall be for such a period or periods (which need 
        not be the same periods described in section 
        1812(d)(1)) as the State may establish; and
          (C) may be revoked at any time without a showing of 
        cause and may be modified so as to change the hospice 
        program with respect to which a previous election was 
        made.
  (3) In the case of an individual--
          (A) who is residing in a nursing facility or 
        intermediate care facility for the mentally retarded 
        and is receiving medical assistance for services in 
        such facility under the plan,
          (B) who is entitled to benefits under part A of title 
        XVIII and has elected, under section 1812(d), to 
        receive hospice care under such part, and
          (C) with respect to whom the hospice program under 
        such title and the nursing facility or intermediate 
        care facility for the mentally retarded have entered 
        into a written agreement under which the program takes 
        full responsibility for the professional management of 
        the individual's hospice care and the facility agrees 
        to provide room and board to the individual,
instead of any payment otherwise made under the plan with 
respect to the facility's services, the State shall provide for 
payment to the hospice program of an amount equal to the 
additional amount determined in section 1902(a)(13)(B) and, if 
the individual is an individual described in section 
1902(a)(10)(A), shall provide for payment of any coinsurance 
amounts imposed under section 1813(a)(4).
  (p)(1) The term ``qualified medicare beneficiary'' means an 
individual--
          (A) who is entitled to hospital insurance benefits 
        under part A of title XVIII (including an individual 
        entitled to such benefits pursuant to an enrollment 
        under section 1818, but not including an individual 
        entitled to such benefits only pursuant to an 
        enrollment under section 1818A),
          (B) whose income (as determined under section 1612 
        for purposes of the supplemental security income 
        program, except as provided in paragraph (2)(D)) does 
        not exceed an income level established by the State 
        consistent with paragraph (2), and
          (C) whose resources (as determined under section 1613 
        for purposes of the supplemental security income 
        program) do not exceed twice the maximum amount of 
        resources that an individual may have and obtain 
        benefits under that program or, effective beginning 
        with January 1, 2010, whose resources (as so 
        determined) do not exceed the maximum resource level 
        applied for the year under subparagraph (D) of section 
        1860D-14(a)(3) (determined without regard to the life 
        insurance policy exclusion provided under subparagraph 
        (G) of such section) applicable to an individual or to 
        the individual and the individual's spouse (as the case 
        may be).
  (2)(A) The income level established under paragraph (1)(B) 
shall be at least the percent provided under subparagraph (B) 
(but not more than 100 percent) of the 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.
  (B) Except as provided in subparagraph (C), the percent 
provided under this clause, with respect to eligibility for 
medical assistance on or after--
          (i) January 1, 1989, is 85 percent,
          (ii) January 1, 1990, is 90 percent, and
          (iii) January 1, 1991, is 100 percent.
  (C) In the case of a State which has elected treatment under 
section 1902(f) and which, as of January 1, 1987, used an 
income standard for individuals age 65 or older which was more 
restrictive than the income standard established under the 
supplemental security income program under title XVI, the 
percent provided under subparagraph (B), with respect to 
eligibility for medical assistance on or after--
          (i) January 1, 1989, is 80 percent,
          (ii) January 1, 1990, is 85 percent,
          (iii) January 1, 1991, is 95 percent, and
          (iv) January 1, 1992, is 100 percent.
  (D)(i) In determining under this subsection the income of an 
individual who is entitled to monthly insurance benefits under 
title II for a transition month (as defined in clause (ii)) in 
a year, such income shall not include any amounts attributable 
to an increase in the level of monthly insurance benefits 
payable under such title which have occurred pursuant to 
section 215(i) for benefits payable for months beginning with 
December of the previous year.
  (ii) For purposes of clause (i), the term ``transition 
month'' means each month in a year through the month following 
the month in which the annual revision of the official poverty 
line, referred to in subparagraph (A), is published.
  (3) The term ``medicare cost-sharing'' means (subject to 
section 1902(n)(2)) the following costs incurred with respect 
to a qualified medicare beneficiary, without regard to whether 
the costs incurred were for items and services for which 
medical assistance is otherwise available under the plan:
          (A)(i) premiums under section 1818 or 1818A, and
          (ii) premiums under section 1839,
          (B) Coinsurance under title XVIII (including 
        coinsurance described in section 1813).
          (C) Deductibles established under title XVIII 
        (including those described in section 1813 and section 
        1833(b)).
          (D) The difference between the amount that is paid 
        under section 1833(a) and the amount that would be paid 
        under such section if any reference to ``80 percent'' 
        therein were deemed a reference to ``100 percent''.
Such term also may include, at the option of a State, premiums 
for enrollment of a qualified medicare beneficiary with an 
eligible organization under section 1876.
  (4) Notwithstanding any other provision of this title, in the 
case of a State (other than the 50 States and the District of 
Columbia)--
          (A) the requirement stated in section 1902(a)(10)(E) 
        shall be optional, and
          (B) for purposes of paragraph (2), the State may 
        substitute for the percent provided under subparagraph 
        (B) of such paragraph or 1902(a)(10)(E)(iii) any 
        percent.
In the case of any State which is providing medical assistance 
to its residents under a waiver granted under section 1115, the 
Secretary shall require the State to meet the requirement of 
section 1902(a)(10)(E) in the same manner as the State would be 
required to meet such requirement if the State had in effect a 
plan approved under this title.
  (5)(A) The Secretary shall develop and distribute to States a 
simplified application form for use by individuals (including 
both qualified medicare beneficiaries and specified low-income 
medicare beneficiaries) in applying for medical assistance for 
medicare cost-sharing under this title in the States which 
elect to use such form. Such form shall be easily readable by 
applicants and uniform nationally. The Secretary shall provide 
for the translation of such application form into at least the 
10 languages (other than English) that are most often used by 
individuals applying for hospital insurance benefits under 
section 226 or 226A and shall make the translated forms 
available to the States and to the Commissioner of Social 
Security.
  (B) In developing such form, the Secretary shall consult with 
beneficiary groups and the States.
  (6) For provisions relating to outreach efforts to increase 
awareness of the availability of medicare cost-sharing, see 
section 1144.
  (q) The term ``qualified severely impaired individual'' means 
an individual under age 65--
          (1) who for the month preceding the first month to 
        which this subsection applies to such individual--
                  (A) received (i) a payment of supplemental 
                security income benefits under section 1611(b) 
                on the basis of blindness or disability, (ii) a 
                supplementary payment under section 1616 of 
                this Act or under section 212 of Public Law 93-
                66 on such basis, (iii) a payment of monthly 
                benefits under section 1619(a), or (iv) a 
                supplementary payment under section 1616(c)(3), 
                and
                  (B) was eligible for medical assistance under 
                the State plan approved under this title; and
          (2) with respect to whom the Commissioner of Social 
        Security determines that--
                  (A) the individual continues to be blind or 
                continues to have the disabling physical or 
                mental impairment on the basis of which he was 
                found to be under a disability and, except for 
                his earnings, continues to meet all non-
                disability-related requirements for eligibility 
                for benefits under title XVI,
                  (B) the income of such individual would not, 
                except for his earnings, be equal to or in 
                excess of the amount which would cause him to 
                be ineligible for payments under section 
                1611(b) (if he were otherwise eligible for such 
                payments),
                  (C) the lack of eligibility for benefits 
                under this title would seriously inhibit his 
                ability to continue or obtain employment, and
                  (D) the individual's earnings are not 
                sufficient to allow him to provide for himself 
                a reasonable equivalent of the benefits under 
                title XVI (including any federally administered 
                State supplementary payments), this title, and 
                publicly funded attendant care services 
                (including personal care assistance) that would 
                be available to him in the absence of such 
                earnings.
        In the case of an individual who is eligible for 
        medical assistance pursuant to section 1619(b) in June, 
        1987, the individual shall be a qualified severely 
        impaired individual for so long as such individual 
        meets the requirements of paragraph (2).
  (r) The term ``early and periodic screening, diagnostic, and 
treatment services'' means the following items and services:
          (1) Screening services--
                  (A) which are provided--
                          (i) at intervals which meet 
                        reasonable standards of medical and 
                        dental practice, as determined by the 
                        State after consultation with 
                        recognized medical and dental 
                        organizations involved in child health 
                        care and, with respect to immunizations 
                        under subparagraph (B)(iii), in 
                        accordance with the schedule referred 
                        to in section 1928(c)(2)(B)(i) for 
                        pediatric vaccines, and
                          (ii) at such other intervals, 
                        indicated as medically necessary, to 
                        determine the existence of certain 
                        physical or mental illnesses or 
                        conditions; and
                  (B) which shall at a minimum include--
                          (i) a comprehensive health and 
                        developmental history (including 
                        assessment of both physical and mental 
                        health development),
                          (ii) a comprehensive unclothed 
                        physical exam,
                          (iii) appropriate immunizations 
                        (according to the schedule referred to 
                        in section 1928(c)(2)(B)(i) for 
                        pediatric vaccines) according to age 
                        and health history,
                          (iv) laboratory tests (including lead 
                        blood level assessment appropriate for 
                        age and risk factors), and
                          (v) health education (including 
                        anticipatory guidance).
          (2) Vision services--
                  (A) which are provided--
                          (i) at intervals which meet 
                        reasonable standards of medical 
                        practice, as determined by the State 
                        after consultation with recognized 
                        medical organizations involved in child 
                        health care, and
                          (ii) at such other intervals, 
                        indicated as medically necessary, to 
                        determine the existence of a suspected 
                        illness or condition; and
                  (B) which shall at a minimum include 
                diagnosis and treatment for defects in vision, 
                including eyeglasses.
          (3) Dental services--
                  (A) which are provided--
                          (i) at intervals which meet 
                        reasonable standards of dental 
                        practice, as determined by the State 
                        after consultation with recognized 
                        dental organizations involved in child 
                        health care, and
                          (ii) at such other intervals, 
                        indicated as medically necessary, to 
                        determine the existence of a suspected 
                        illness or condition; and
                  (B) which shall at a minimum include relief 
                of pain and infections, restoration of teeth, 
                and maintenance of dental health.
          (4) Hearing services--
                  (A) which are provided--
                          (i) at intervals which meet 
                        reasonable standards of medical 
                        practice, as determined by the State 
                        after consultation with recognized 
                        medical organizations involved in child 
                        health care, and
                          (ii) at such other intervals, 
                        indicated as medically necessary, to 
                        determine the existence of a suspected 
                        illness or condition; and
                  (B) which shall at a minimum include 
                diagnosis and treatment for defects in hearing, 
                including hearing aids.
          (5) Such other necessary health care, diagnostic 
        services, treatment, and other measures described in 
        section 1905(a) to correct or ameliorate defects and 
        physical and mental illnesses and conditions discovered 
        by the screening services, whether or not such services 
        are covered under the State plan.
Nothing in this title shall be construed as limiting providers 
of early and periodic screening, diagnostic, and treatment 
services to providers who are qualified to provide all of the 
items and services described in the previous sentence or as 
preventing a provider that is qualified under the plan to 
furnish one or more (but not all) of such items or services 
from being qualified to provide such items and services as part 
of early and periodic screening, diagnostic, and treatment 
services. The Secretary shall, not later than July 1, 1990, and 
every 12 months thereafter, develop and set annual 
participation goals for each State for participation of 
individuals who are covered under the State plan under this 
title in early and periodic screening, diagnostic, and 
treatment services.
  (s) The term ``qualified disabled and working individual'' 
means an individual--
          (1) who is entitled to enroll for hospital insurance 
        benefits under part A of title XVIII under section 
        1818A (as added by 6012 of the Omnibus Budget 
        Reconciliation Act of 1989);
          (2) whose income (as determined under section 1612 
        for purposes of the supplemental security income 
        program) does not exceed 200 percent of the 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;
          (3) whose resources (as determined under section 1613 
        for purposes of the supplemental security income 
        program) do not exceed twice the maximum amount of 
        resources that an individual or a couple (in the case 
        of an individual with a spouse) may have and obtain 
        benefits for supplemental security income benefits 
        under title XVI; and
          (4) who is not otherwise eligible for medical 
        assistance under this title.
  (t)(1) The term ``primary care case management services'' 
means case-management related services (including locating, 
coordinating, and monitoring of health care services) provided 
by a primary care case manager under a primary care case 
management contract.
  (2) The term ``primary care case manager'' means any of the 
following that provides services of the type described in 
paragraph (1) under a contract referred to in such paragraph:
          (A) A physician, a physician group practice, or an 
        entity employing or having other arrangements with 
        physicians to provide such services.
          (B) At State option--
                  (i) a nurse practitioner (as described in 
                section 1905(a)(21));
                  (ii) a certified nurse-midwife (as defined in 
                section 1861(gg)); or
                  (iii) a physician assistant (as defined in 
                section 1861(aa)(5)).
  (3) The term ``primary care case management contract'' means 
a contract between a primary care case manager and a State 
under which the manager undertakes to locate, coordinate, and 
monitor covered primary care (and such other covered services 
as may be specified under the contract) to all individuals 
enrolled with the manager, and which--
          (A) provides for reasonable and adequate hours of 
        operation, including 24-hour availability of 
        information, referral, and treatment with respect to 
        medical emergencies;
          (B) restricts enrollment to individuals residing 
        sufficiently near a service delivery site of the 
        manager to be able to reach that site within a 
        reasonable time using available and affordable modes of 
        transportation;
          (C) provides for arrangements with, or referrals to, 
        sufficient numbers of physicians and other appropriate 
        health care professionals to ensure that services under 
        the contract can be furnished to enrollees promptly and 
        without compromise to quality of care;
          (D) prohibits discrimination on the basis of health 
        status or requirements for health care services in 
        enrollment, disenrollment, or reenrollment of 
        individuals eligible for medical assistance under this 
        title;
          (E) provides for a right for an enrollee to terminate 
        enrollment in accordance with section 1932(a)(4); and
          (F) complies with the other applicable provisions of 
        section 1932.
  (4) For purposes of this subsection, the term ``primary 
care'' includes all health care services customarily provided 
in accordance with State licensure and certification laws and 
regulations, and all laboratory services customarily provided 
by or through, a general practitioner, family medicine 
physician, internal medicine physician, obstetrician/
gynecologist, or pediatrician.
  (u)(1) The conditions described in this paragraph for a State 
plan are as follows:
          (A) The State is complying with the requirement of 
        section 2105(d)(1).
          (B) The plan provides for such reporting of 
        information about expenditures and payments 
        attributable to the operation of this subsection as the 
        Secretary deems necessary in order to carry out the 
        fourth sentence of subsection (b).
  (2)(A) For purposes of subsection (b), the expenditures 
described in this subparagraph are expenditures for medical 
assistance for optional targeted low-income children described 
in subparagraph (B).
  (B) For purposes of this paragraph, the term ``optional 
targeted low-income child'' means a targeted low-income child 
as defined in section 2110(b)(1) (determined without regard to 
that portion of subparagraph (C) of such section concerning 
eligibility for medical assistance under this title) who would 
not qualify for medical assistance under the State plan under 
this title as in effect on March 31, 1997 (but taking into 
account the expansion of age of eligibility effected through 
the operation of section 1902(l)(1)(D)). Such term excludes any 
child eligible for medical assistance only by reason of section 
1902(a)(10)(A)(ii)(XIX).
  (3) For purposes of subsection (b), the expenditures 
described in this paragraph are expenditures for medical 
assistance for children who are born before October 1, 1983, 
and who would be described in section 1902(l)(1)(D) if they had 
been born on or after such date, and who are not eligible for 
such assistance under the State plan under this title based on 
such State plan as in effect as of March 31, 1997.
  (4) The limitations on payment under subsections (f) and (g) 
of section 1108 shall not apply to Federal payments made under 
section 1903(a)(1) based on an enhanced FMAP described in 
section 2105(b).
  (v)(1) The term ``employed individual with a medically 
improved disability'' means an individual who--
          (A) is at least 16, but less than 65, years of age;
          (B) is employed (as defined in paragraph (2));
          (C) ceases to be eligible for medical assistance 
        under section 1902(a)(10)(A)(ii)(XV) because the 
        individual, by reason of medical improvement, is 
        determined at the time of a regularly scheduled 
        continuing disability review to no longer be eligible 
        for benefits under section 223(d) or 1614(a)(3); and
          (D) continues to have a severe medically determinable 
        impairment, as determined under regulations of the 
        Secretary.
  (2) For purposes of paragraph (1), an individual is 
considered to be ``employed'' if the individual--
          (A) is earning at least the applicable minimum wage 
        requirement under section 6 of the Fair Labor Standards 
        Act (29 U.S.C. 206) and working at least 40 hours per 
        month; or
          (B) is engaged in a work effort that meets 
        substantial and reasonable threshold criteria for hours 
        of work, wages, or other measures, as defined by the 
        State and approved by the Secretary.'
  (w)(1) For purposes of this title, the term ``independent 
foster care adolescent'' means an individual--
          (A) who is under 21 years of age;
          (B) who, on the individual's 18th birthday, was in 
        foster care under the responsibility of a State; and
          (C) whose assets, resources, and income do not exceed 
        such levels (if any) as the State may establish 
        consistent with paragraph (2).
  (2) The levels established by a State under paragraph (1)(C) 
may not be less than the corresponding levels applied by the 
State under section 1931(b).
  (3) A State may limit the eligibility of independent foster 
care adolescents under section 1902(a)(10)(A)(ii)(XVII) to 
those individuals with respect to whom foster care maintenance 
payments or independent living services were furnished under a 
program funded under part E of title IV before the date the 
individuals attained 18 years of age.
  (x) For purposes of subsection (a)(27), the strategies, 
treatment, and services described in that subsection include 
the following:
          (1) Chronic blood transfusion (with deferoxamine 
        chelation) to prevent stroke in individuals with Sickle 
        Cell Disease who have been identified as being at high 
        risk for stroke.
          (2) Genetic counseling and testing for individuals 
        with Sickle Cell Disease or the sickle cell trait to 
        allow health care professionals to treat such 
        individuals and to prevent symptoms of Sickle Cell 
        Disease.
          (3) Other treatment and services to prevent 
        individuals who have Sickle Cell Disease and who have 
        had a stroke from having another stroke.
  (y) Increased FMAP for Medical Assistance for Newly Eligible 
Mandatory Individuals.--
          (1) Amount of increase.--Notwithstanding subsection 
        (b), the Federal medical assistance percentage for a 
        State that is one of the 50 States or the District of 
        Columbia, [with respect to amounts expended by such 
        State for medical assistance for newly eligible 
        individuals described in subclause (VIII) of section 
        1902(a)(10)(A)(i), shall be] with respect to amounts 
        expended before January 1, 2020, by such State for 
        medical assistance for newly eligible individuals 
        described in subclause (VIII) of section 
        1902(a)(10)(A)(i) who are enrolled under the State plan 
        (or a waiver of the plan) before such date and with 
        respect to amounts expended after such date by such 
        State for medical assistance for individuals described 
        in such subclause who were enrolled under such plan (or 
        waiver of such plan) as of December 31, 2019, and who 
        do not have a break in eligibility for medical 
        assistance under such State plan (or waiver) for more 
        than one month after such date, shall be equal to--
                  (A) 100 percent for calendar quarters in 
                2014, 2015, and 2016;
                  (B) 95 percent for calendar quarters in 2017;
                  (C) 94 percent for calendar quarters in 2018;
                  (D) 93 percent for calendar quarters in 2019; 
                and
                  (E) 90 percent for calendar quarters in 2020 
                and each year thereafter.
          (2) Definitions.--In this subsection:
                  (A) Newly eligible.--The term ``newly 
                eligible'' means, with respect to an individual 
                described in subclause (VIII) of section 
                1902(a)(10)(A)(i), an individual who is not 
                under 19 years of age (or such higher age as 
                the State may have elected) and who, as of 
                December 1, 2009, is not eligible under the 
                State plan or under a waiver of the plan for 
                full benefits or for benchmark coverage 
                described in subparagraph (A), (B), or (C) of 
                section 1937(b)(1) or benchmark equivalent 
                coverage described in section 1937(b)(2) that 
                has an aggregate actuarial value that is at 
                least actuarially equivalent to benchmark 
                coverage described in subparagraph (A), (B), or 
                (C) of section 1937(b)(1), or is eligible but 
                not enrolled (or is on a waiting list) for such 
                benefits or coverage through a waiver under the 
                plan that has a capped or limited enrollment 
                that is full.
                  (B) Full benefits.--The term ``full 
                benefits'' means, with respect to an 
                individual, medical assistance for all services 
                covered under the State plan under this title 
                that is not less in amount, duration, or scope, 
                or is determined by the Secretary to be 
                substantially equivalent, to the medical 
                assistance available for an individual 
                described in section 1902(a)(10)(A)(i).
  (z) Equitable Support for Certain States.--
          (1)(A) During the period that begins on January 1, 
        2014, and ends on December 31, 2015, notwithstanding 
        subsection (b), the Federal medical assistance 
        percentage otherwise determined under subsection (b) 
        with respect to a fiscal year occurring during that 
        period shall be increased by 2.2 percentage points for 
        any State described in subparagraph (B) for amounts 
        expended for medical assistance for individuals who are 
        not newly eligible (as defined in subsection (y)(2)) 
        individuals described in subclause (VIII) of section 
        1902(a)(10)(A)(i).
          (B) For purposes of subparagraph (A), a State 
        described in this subparagraph is a State that--
                  (i) is an expansion State described in 
                paragraph (3);
                  (ii) the Secretary determines will not 
                receive any payments under this title on the 
                basis of an increased Federal medical 
                assistance percentage under subsection (y) for 
                expenditures for medical assistance for newly 
                eligible individuals (as so defined); and
                  (iii) has not been approved by the Secretary 
                to divert a portion of the DSH allotment for a 
                State to the costs of providing medical 
                assistance or other health benefits coverage 
                under a waiver that is in effect on July 2009.
          (2)(A) For calendar quarters in 2014 and each year 
        thereafter, the Federal medical assistance percentage 
        otherwise determined under subsection (b) for an 
        expansion State described in paragraph (3) with respect 
        to [medical assistance for individuals described in 
        section 1902(a)(10)(A)(i)(VIII) who are nonpregnant 
        childless adults with respect to whom the State may 
        require enrollment in benchmark coverage under section 
        1937 shall be] amounts expended before January 1, 2020, 
        by such State for medical assistance for individuals 
        described in section 1902(a)(10)(A)(i)(VIII) who are 
        nonpregnant childless adults with respect to whom the 
        State may require enrollment in benchmark coverage 
        under section 1937 and who are enrolled under the State 
        plan (or a waiver of the plan) before such date and 
        with respect to amounts expended after such date by 
        such State for medical assistance for individuals 
        described in such section, who are nonpregnant 
        childless adults with respect to whom the State may 
        require enrollment in benchmark coverage under section 
        1937, who were enrolled under such plan (or waiver of 
        such plan) as of December 31, 2019, and who do not have 
        a break in eligibility for medical assistance under 
        such State plan (or waiver) for more than one month 
        after such date, shall be equal to the percent 
        specified in subparagraph (B)(i) for such year.
          (B)(i) The percent specified in this subparagraph for 
        a State for a year is equal to the Federal medical 
        assistance percentage (as defined in the first sentence 
        of subsection (b)) for the State increased by a number 
        of percentage points equal to the transition percentage 
        (specified in clause (ii) for the year) of the number 
        of percentage points by which--
                  (I) such Federal medical assistance 
                percentage for the State, is less than
                  (II) the percent specified in subsection 
                (y)(1) for the year.
          (ii) The transition percentage specified in this 
        clause for--
                  (I) 2014 is 50 percent;
                  (II) 2015 is 60 percent;
                  (III) 2016 is 70 percent; and
                  [(IV) 2017 is 80 percent;
                  [(V) 2018 is 90 percent; and
                  [(VI) 2019 and each subsequent year is 100 
                percent.]
                  (IV) 2017 and each subsequent year is 80 
                percent.
          (3) A State is an expansion State if, on the date of 
        the enactment of the Patient Protection and Affordable 
        Care Act, the State offers health benefits coverage 
        statewide to parents and nonpregnant, childless adults 
        whose income is at least 100 percent of the poverty 
        line, that includes inpatient hospital services, is not 
        dependent on access to employer coverage, employer 
        contribution, or employment and is not limited to 
        premium assistance, hospital-only benefits, a high 
        deductible health plan, or alternative benefits under a 
        demonstration program authorized under section 1938. A 
        State that offers health benefits coverage to only 
        parents or only nonpregnant childless adults described 
        in the preceding sentence shall not be considered to be 
        an expansion State.
  (aa)(1) Notwithstanding subsection (b), beginning January 1, 
2011, the Federal medical assistance percentage for a fiscal 
year for a disaster-recovery FMAP adjustment State shall be 
equal to the following:
          (A) In the case of the first fiscal year (or part of 
        a fiscal year) for which this subsection applies to the 
        State, the State's regular FMAP shall be increased by 
        50 percent of the number of percentage points by which 
        the State's regular FMAP for such fiscal year is less 
        than the Federal medical assistance percentage 
        determined for the State for the preceding fiscal year 
        after the application of only subsection (a) of section 
        5001 of Public Law 111-5 (if applicable to the 
        preceding fiscal year) and without regard to this 
        subsection, subsections (y) and (z), and subsections 
        (b) and (c) of section 5001 of Public Law 111-5.
          (B) In the case of the second or any succeeding 
        fiscal year for which this subsection applies to the 
        State, the State's regular FMAP for such fiscal year 
        shall be increased by 25 percent (or 50 percent in the 
        case of fiscal year 2013) of the number of percentage 
        points by which the State's regular FMAP for such 
        fiscal year is less than the Federal medical assistance 
        percentage received by the State during the preceding 
        fiscal year.
  (2) In this subsection, the term ``disaster-recovery FMAP 
adjustment State'' means a State that is one of the 50 States 
or the District of Columbia, for which, at any time during the 
preceding 7 fiscal years, the President has declared a major 
disaster under section 401 of the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act and determined as a result 
of such disaster that every county or parish in the State 
warrant individual and public assistance or public assistance 
from the Federal Government under such Act and for which--
          (A) in the case of the first fiscal year (or part of 
        a fiscal year) for which this subsection applies to the 
        State, the State's regular FMAP for the fiscal year is 
        less than the Federal medical assistance percentage 
        determined for the State for the preceding fiscal year 
        after the application of only subsection (a) of section 
        5001 of Public Law 111-5 (if applicable to the 
        preceding fiscal year) and without regard to this 
        subsection, subsections (y) and (z), and subsections 
        (b) and (c) of section 5001 of Public Law 111-5, by at 
        least 3 percentage points; and
          (B) in the case of the second or any succeeding 
        fiscal year for which this subsection applies to the 
        State, the State's regular FMAP for the fiscal year is 
        less than the Federal medical assistance percentage 
        determined for the State for the preceding fiscal year 
        under this subsection by at least 3 percentage points.
  (3) In this subsection, the term ``regular FMAP'' means, for 
each fiscal year for which this subsection applies to a State, 
the Federal medical assistance percentage that would otherwise 
apply to the State for the fiscal year, as determined under 
subsection (b) and without regard to this subsection, 
subsections (y) and (z), and section 10202 of the Patient 
Protection and Affordable Care Act.
  (4) The Federal medical assistance percentage determined for 
a disaster-recovery FMAP adjustment State under paragraph (1) 
shall apply for purposes of this title (other than with respect 
to disproportionate share hospital payments described in 
section 1923 and payments under this title that are based on 
the enhanced FMAP described in 2105(b)) and shall not apply 
with respect to payments under title IV (other than under part 
E of title IV) or payments under title XXI.
  (bb)(1) For purposes of this title, the term ``counseling and 
pharmacotherapy for cessation of tobacco use by pregnant 
women'' means diagnostic, therapy, and counseling services and 
pharmacotherapy (including the coverage of prescription and 
nonprescription tobacco cessation agents approved by the Food 
and Drug Administration) for cessation of tobacco use by 
pregnant women who use tobacco products or who are being 
treated for tobacco use that is furnished--
          (A) by or under the supervision of a physician; or
          (B) by any other health care professional who--
                  (i) is legally authorized to furnish such 
                services under State law (or the State 
                regulatory mechanism provided by State law) of 
                the State in which the services are furnished; 
                and
                  (ii) is authorized to receive payment for 
                other services under this title or is 
                designated by the Secretary for this purpose.
  (2) Subject to paragraph (3), such term is limited to--
          (A) services recommended with respect to pregnant 
        women in ``Treating Tobacco Use and Dependence: 2008 
        Update: A Clinical Practice Guideline'', published by 
        the Public Health Service in May 2008, or any 
        subsequent modification of such Guideline; and
          (B) such other services that the Secretary recognizes 
        to be effective for cessation of tobacco use by 
        pregnant women.
  (3) Such term shall not include coverage for drugs or 
biologicals that are not otherwise covered under this title.
  (cc) Requirement for Certain States.--Notwithstanding 
subsections (y), (z), and (aa), in the case of a State that 
requires political subdivisions within the State to contribute 
toward the non-Federal share of expenditures required under the 
State plan under section 1902(a)(2), the State shall not be 
eligible for an increase in its Federal medical assistance 
percentage under such subsections if it requires that political 
subdivisions pay a greater percentage of the non-Federal share 
of such expenditures, or a greater percentage of the non-
Federal share of payments under section 1923, than the 
respective percentages that would have been required by the 
State under the State plan under this title, State law, or 
both, as in effect on December 31, 2009, and without regard to 
any such increase. Voluntary contributions by a political 
subdivision to the non-Federal share of expenditures under the 
State plan under this title or to the non-Federal share of 
payments under section 1923, shall not be considered to be 
required contributions for purposes of this subsection. The 
treatment of voluntary contributions, and the treatment of 
contributions required by a State under the State plan under 
this title, or State law, as provided by this subsection, shall 
also apply to the increases in the Federal medical assistance 
percentage under section 5001 of the American Recovery and 
Reinvestment Act of 2009.
  (dd) Increased FMAP for Additional Expenditures for Primary 
Care Services.--Notwithstanding subsection (b), with respect to 
the portion of the amounts expended for medical assistance for 
services described in section 1902(a)(13)(C) furnished on or 
after January 1, 2013, and before January 1, 2015, that is 
attributable to the amount by which the minimum payment rate 
required under such section (or, by application, section 
1932(f)) exceeds the payment rate applicable to such services 
under the State plan as of July 1, 2009, the Federal medical 
assistance percentage for a State that is one of the 50 States 
or the District of Columbia shall be equal to 100 percent. The 
preceding sentence does not prohibit the payment of Federal 
financial participation based on the Federal medical assistance 
percentage for amounts in excess of those specified in such 
sentence.

           *       *       *       *       *       *       *


      PROVISIONS RESPECTING INAPPLICABILITY AND WAIVER OF CERTAIN 
                       REQUIREMENTS OF THIS TITLE

  Sec. 1915. (a) A State shall not be deemed to be out of 
compliance with the requirements of paragraphs (1), (10), or 
(23) of section 1902(a) solely by reason of the fact that the 
State (or any political subdivision thereof)--
          (1) has entered into--
                  (A) a contract with an organization which has 
                agreed to provide care and services in addition 
                to those offered under the State plan to 
                individuals eligible for medical assistance who 
                reside in the geographic area served by such 
                organization and who elect to obtain such care 
                and services from such organization, or by 
                reason of the fact that the plan provides for 
                payment for rural health clinic services only 
                if those services are provided by a rural 
                health clinic; or
                  (B) arrangements through a competitive 
                bidding process or otherwise for the purchase 
                of laboratory services referred to in section 
                1905(a)(3) or medical devices if the Secretary 
                has found that--
                          (i) adequate services or devices will 
                        be available under such arrangements, 
                        and
                          (ii) any such laboratory services 
                        will be provided only through 
                        laboratories--
                                  (I) which meet the applicable 
                                requirements of section 
                                1861(e)(9) or paragraphs (16) 
                                and (17) of section 1861(s), 
                                and such additional 
                                requirements as the Secretary 
                                may require, and
                                  (II) no more than 75 percent 
                                of whose charges for such 
                                services are for services 
                                provided to individuals who are 
                                entitled to benefits under this 
                                title or under part A or part B 
                                of title XVIII; or
          (2) restricts for a reasonable period of time the 
        provider or providers from which an individual 
        (eligible for medical assistance for items or services 
        under the State plan) can receive such items or 
        services, if--
                  (A) the State has found, after notice and 
                opportunity for a hearing (in accordance with 
                procedures established by the State), that the 
                individual has utilized such items or services 
                at a frequency or amount not medically 
                necessary (as determined in accordance with 
                utilization guidelines established by the 
                State), and
                  (B) under such restriction, individuals 
                eligible for medical assistance for such 
                services have reasonable access (taking into 
                account geographic location and reasonable 
                travel time) to such services of adequate 
                quality.
  (b) The Secretary, to the extent he finds it to be cost-
effective and efficient and not inconsistent with the purposes 
of this title, may waive such requirements of section 1902 
(other than subsection (s)) (other than sections 1902(a)(15), 
1902(bb), and 1902(a)(10)(A) insofar as it requires provision 
of the care and services described in section 1905(a)(2)(C)) as 
may be necessary for a State--
          (1) to implement a primary care case-management 
        system or a specialty physician services arrangement 
        which restricts the provider from (or through) whom an 
        individual (eligible for medical assistance under this 
        title) can obtain medical care services (other than in 
        emergency circumstances), if such restriction does not 
        substantially impair access to such services of 
        adequate quality where medically necessary,
          (2) to allow a locality to act as a central broker in 
        assisting individuals (eligible for medical assistance 
        under this title) in selecting among competing health 
        care plans, if such restriction does not substantially 
        impair access to services of adequate quality where 
        medically necessary,
          (3) to share (through provision of additional 
        services) with recipients of medical assistance under 
        the State plan cost savings resulting from use by the 
        recipient of more cost-effective medical care, and
          (4) to restrict the provider from (or through) whom 
        an individual (eligible for medical assistance under 
        this title) can obtain services (other than in 
        emergency circumstances) to providers or practitioners 
        who undertake to provide such services and who meet, 
        accept, and comply with the reimbursement, quality, and 
        utilization standards under the State plan, which 
        standards shall be consistent with the requirements of 
        section 1923 and are consistent with access, quality, 
        and efficient and economic provision of covered care 
        and services, if such restriction does not discriminate 
        among classes of providers on grounds unrelated to 
        their demonstrated effectiveness and efficiency in 
        providing those services and if providers under such 
        restriction are paid on a timely basis in the same 
        manner as health care practitioners must be paid under 
        section 1902(a)(37)(A).
No waiver under this subsection may restrict the choice of the 
individual in receiving services under section 1905(a)(4)(C). 
Subsection (h)(2) shall apply to a waiver under this 
subsection.
  (c)(1) The Secretary may by waiver provide that a State plan 
approved under this title may include as ``medical assistance'' 
under such plan payment for part or all of the cost of home or 
community-based services (other than room and board) approved 
by the Secretary which are provided pursuant to a written plan 
of care to individuals with respect to whom there has been a 
determination that but for the provision of such services the 
individuals would require the level of care provided in a 
hospital or a nursing facility or intermediate care facility 
for the mentally retarded the cost of which could be reimbursed 
under the State plan. For purposes of this subsection, the term 
``room and board'' shall not include an amount established 
under a method determined by the State to reflect the portion 
of costs of rent and food attributable to an unrelated personal 
caregiver who is residing in the same household with an 
individual who, but for the assistance of such caregiver, would 
require admission to a hospital, nursing facility, or 
intermediate care facility for the mentally retarded.
  (2) A waiver shall not be granted under this subsection 
unless the State provides assurances satisfactory to the 
Secretary that--
          (A) necessary safeguards (including adequate 
        standards for provider participation) have been taken 
        to protect the health and welfare of individuals 
        provided services under the waiver and to assure 
        financial accountability for funds expended with 
        respect to such services;
          (B) the State will provide, with respect to 
        individuals who--
                  (i) are entitled to medical assistance for 
                inpatient hospital services, nursing facility 
                services, or services in an intermediate care 
                facility for the mentally retarded under the 
                State plan,
                  (ii) may require such services, and
                  (iii) may be eligible for such home or 
                community-based care under such waiver,
        for an evaluation of the need for inpatient hospital 
        services, nursing facility services, or services in an 
        intermediate care facility for the mentally retarded;
          (C) such individuals who are determined to be likely 
        to require the level of care provided in a hospital, 
        nursing facility, or intermediate care facility for the 
        mentally retarded are informed of the feasible 
        alternatives, if available under the waiver, at the 
        choice of such individuals, to the provision of 
        inpatient hospital services, nursing facility services, 
        or services in an intermediate care facility for the 
        mentally retarded;
          (D) under such waiver the average per capita 
        expenditure estimated by the State in any fiscal year 
        for medical assistance provided with respect to such 
        individuals does not exceed 100 percent of the average 
        per capita expenditure that the State reasonably 
        estimates would have been made in that fiscal year for 
        expenditures under the State plan for such individuals 
        if the waiver had not been granted; and
          (E) the State will provide to the Secretary annually, 
        consistent with a data collection plan designed by the 
        Secretary, information on the impact of the waiver 
        granted under this subsection on the type and amount of 
        medical assistance provided under the State plan and on 
        the health and welfare of recipients.
  (3) A waiver granted under this subsection may include a 
waiver of the requirements of section 1902(a)(1) (relating to 
statewideness), section 1902(a)(10)(B) (relating to 
comparability), and section 1902(a)(10)(C)(i)(III) (relating to 
income and resource rules applicable in the community). A 
waiver under this subsection (other than a waiver described in 
subsection (h)(2)) shall be for an initial term of three years 
and, upon the request of a State, shall be extended for 
additional five-year periods unless the Secretary determines 
that for the previous waiver period the assurances provided 
under paragraph (2) have not been met. A waiver may provide, 
with respect to post-eligibility treatment of income of all 
individuals receiving services under that waiver, that the 
maximum amount of the individual's income which may be 
disregarded for any month for the maintenance needs of the 
individual may be an amount greater than the maximum allowed 
for that purpose under regulations in effect on July 1, 1985.
  (4) A waiver granted under this subsection may, consistent 
with paragraph (2)--
          (A) limit the individuals provided benefits under 
        such waiver to individuals with respect to whom the 
        State has determined that there is a reasonable 
        expectation that the amount of medical assistance 
        provided with respect to the individual under such 
        waiver will not exceed the amount of such medical 
        assistance provided for such individual if the waiver 
        did not apply, and
          (B) provide medical assistance to individuals (to the 
        extent consistent with written plans of care, which are 
        subject to the approval of the State) for case 
        management services, homemaker/home health aide 
        services and personal care services, adult day health 
        services, habilitation services, respite care, and such 
        other services requested by the State as the Secretary 
        may approve and for day treatment or other partial 
        hospitalization services, psychosocial rehabilitation 
        services, and clinic services (whether or not furnished 
        in a facility) for individuals with chronic mental 
        illness.
Except as provided under paragraph (2)(D), the Secretary may 
not restrict the number of hours or days of respite care in any 
period which a State may provide under a waiver under this 
subsection.
  (5) For purposes of paragraph (4)(B), the term ``habilitation 
services''--
          (A) means services designed to assist individuals in 
        acquiring, retaining, and improving the self-help, 
        socialization, and adaptive skills necessary to reside 
        successfully in home and community based settings; and
          (B) includes (except as provided in subparagraph (C)) 
        prevocational, educational, and supported employment 
        services; but
          (C) does not include--
                  (i) special education and related services 
                (as such terms are defined in section 602 of 
                the Individuals with Disabilities Education Act 
                (20 U.S.C. 1401)) which otherwise are available 
                to the individual through a local educational 
                agency; and
                  (ii) vocational rehabilitation services which 
                otherwise are available to the individual 
                through a program funded under section 110 of 
                the Rehabilitation Act of 1973 (29 U.S.C. 730).
  (6) The Secretary may not require, as a condition of approval 
of a waiver under this section under paragraph (2)(D), that the 
actual total expenditures for home and community-based services 
under the waiver (and a claim for Federal financial 
participation in expenditures for the services) cannot exceed 
the approved estimates for these services. The Secretary may 
not deny Federal financial payment with respect to services 
under such a waiver on the ground that, in order to comply with 
paragraph (2)(D), a State has failed to comply with such a 
requirement.
  (7)(A) In making estimates under paragraph (2)(D) in the case 
of a waiver that applies only to individuals with a particular 
illness or condition who are inpatients in, or who would 
require the level of care provided in, hospitals, nursing 
facilities, or intermediate care facilities for the mentally 
retarded, the State may determine the average per capita 
expenditure that would have been made in a fiscal year for 
those individuals under the State plan separately from the 
expenditures for other individuals who are inpatients in, or 
who would require the level of care provided in, those 
respective facilities.
  (B) In making estimates under paragraph (2)(D) in the case of 
a waiver that applies only to individuals with developmental 
disabilities who are inpatients in a nursing facility and whom 
the State has determined, on the basis of an evaluation under 
paragraph (2)(B), to need the level of services provided by an 
intermediate care facility for the mentally retarded, the State 
may determine the average per capita expenditures that would 
have been made in a fiscal year for those individuals under the 
State plan on the basis of the average per capita expenditures 
under the State plan for services to individuals who are 
inpatients in an intermediate care facility for the mentally 
retarded, without regard to the availability of beds for such 
inpatients.
  (C) In making estimates under paragraph (2)(D) in the case of 
a waiver to the extent that it applies to individuals with 
mental retardation or a related condition who are resident in 
an intermediate care facility for the mentally retarded the 
participation of which under the State plan is terminated, the 
State may determine the average per capita expenditures that 
would have been made in a fiscal year for those individuals 
without regard to any such termination.
  (8) The State agency administering the plan under this title 
may, whenever appropriate, enter into cooperative arrangements 
with the State agency responsible for administering the program 
for children with special health care needs under title V in 
order to assure improved access to coordinated services to meet 
the needs of such children.
  (9) In the case of any waiver under this subsection which 
contains a limit on the number of individuals who shall receive 
home or community-based services, the State may substitute 
additional individuals to receive such services to replace any 
individuals who die or become ineligible for services under the 
State plan.
  (10) The Secretary shall not limit to fewer than 200 the 
number of individuals in the State who may receive home and 
community-based services under a waiver under this subsection.
  (d)(1) Subject to paragraph (2), the Secretary shall grant a 
waiver to provide that a State plan approved under this title 
shall include as ``medical assistance'' under such plan payment 
for part or all of the cost of home or community-based services 
(other than room and board) which are provided pursuant to a 
written plan of care to individuals 65 years of age or older 
with respect to whom there has been a determination that but 
for the provision of such services the individuals would be 
likely to require the level of care provided in a skilled 
nursing facility or intermediate care facility the cost of 
which could be reimbursed under the State plan. For purposes of 
this subsection, the term ``room and board'' shall not include 
an amount established under a method determined by the State to 
reflect the portion of costs of rent and food attributable to 
an unrelated personal caregiver who is residing in the same 
household with an individual who, but for the assistance of 
such caregiver, would require admission to a hospital, nursing 
facility, or intermediate care facility for the mentally 
retarded.
  (2) A waiver shall not be granted under this subsection 
unless the State provides assurances satisfactory to the 
Secretary that--
          (A) necessary safeguards (including adequate 
        standards for provider participation) have been taken 
        to protect the health and welfare of individuals 
        provided services under the waiver and to assure 
        financial accountability for funds expended with 
        respect to such services;
          (B) with respect to individuals 65 years of age or 
        older who--
                  (i) are entitled to medical assistance for 
                skilled nursing or intermediate care facility 
                services under the State plan,
                  (ii) may require such services, and
                  (iii) may be eligible for such home or 
                community-based services under such waiver,
        the State will provide for an evaluation of the need 
        for such skilled nursing facility or intermediate care 
        facility services; and
          (C) such individuals who are determined to be likely 
        to require the level of care provided in a skilled 
        nursing facility or intermediate care facility are 
        informed of the feasible alternatives to the provision 
        of skilled nursing facility or intermediate care 
        facility services, which such individuals may choose if 
        available under the waiver.
Each State with a waiver under this subsection shall provide to 
the Secretary annually, consistent with a reasonable data 
collection plan designed by the Secretary, information on the 
impact of the waiver granted under this subsection on the type 
and amount of medical assistance provided under the State plan 
and on the health and welfare of recipients.
  (3) A waiver granted under this subsection may include a 
waiver of the requirements of section 1902(a)(1) (relating to 
statewideness), section 1902(a)(10)(B) (relating to 
comparability), and section 1902(a)(10)(C)(i)(III) (relating to 
income and resource rules applicable in the community). Subject 
to a termination by the State (with notice to the Secretary) at 
any time, a waiver under this subsection (other than a waiver 
described in subsection (h)(2)) shall be for an initial term of 
3 years and, upon the request of a State, shall be extended for 
additional 5-year periods unless the Secretary determines that 
for the previous waiver period the assurances provided under 
paragraph (2) have not been met. A waiver may provide, with 
respect to post-eligibility treatment of income of all 
individuals receiving services under the waiver, that the 
maximum amount of the individual's income which may be 
disregarded for any month is equal to the amount that may be 
allowed for that purpose under a waiver under subsection (c).
  (4) A waiver under this subsection may, consistent with 
paragraph (2), provide medical assistance to individuals for 
case management services, homemaker/home health aide services 
and personal care services, adult day health services, respite 
care, and other medical and social services that can contribute 
to the health and well-being of individuals and their ability 
to reside in a community-based care setting.
  (5)(A) In the case of a State having a waiver approved under 
this subsection, notwithstanding any other provision of section 
1903 to the contrary, the total amount expended by the State 
for medical assistance with respect to skilled nursing facility 
services, intermediate care facility services, and home and 
community-based services under the State plan for individuals 
65 years of age or older during a waiver year under this 
subsection may not exceed the projected amount determined under 
subparagraph (B).
  (B) For purposes of subparagraph (A), the projected amount 
under this subparagraph is the sum of the following:
          (i) The aggregate amount of the State's medical 
        assistance under this title for skilled nursing 
        facility services and intermediate care facility 
        services furnished to individuals who have attained the 
        age of 65 for the base year increased by a percentage 
        which is equal to the lesser of 7 percent times the 
        number of years (rounded to the nearest quarter of a 
        year) beginning after the base year and ending at the 
        end of the waiver year involved or the sum of--
                  (I) the percentage increase (based on an 
                appropriate market-basket index representing 
                the costs of elements of such services) between 
                the beginning of the base year and the 
                beginning of the waiver year involved, plus
                  (II) the percentage increase between the 
                beginning of the base year and the beginning of 
                the waiver year involved in the number of 
                residents in the State who have attained the 
                age of 65, plus
                  (III) 2 percent for each year (rounded to the 
                nearest quarter of a year) beginning after the 
                base year and ending at the end of the waiver 
                year.
          (ii) The aggregate amount of the State's medical 
        assistance under this title for home and community-
        based services for individuals who have attained the 
        age of 65 for the base year increased by a percentage 
        which is equal to the lesser of 7 percent times the 
        number of years (rounded to the nearest quarter of a 
        year) beginning after the base year and ending at the 
        end of the waiver year involved or the sum of--
                  (I) the percentage increase (based on an 
                appropriate market-basket index representing 
                the costs of elements of such services) between 
                the beginning of the base year and the 
                beginning of the waiver year involved, plus
                  (II) the percentage increase between the 
                beginning of the base year and the beginning of 
                the waiver year involved in the number of 
                residents in the State who have attained the 
                age of 65, plus
                  (III) 2 percent for each year (rounded to the 
                nearest quarter of a year) beginning after the 
                base year and ending at the end of the waiver 
                year.
  (iii) The Secretary shall develop and promulgate by 
regulation (by not later than October 1, 1989)--
          (I) a method, based on an index of appropriately 
        weighted indicators of changes in the wages and prices 
        of the mix of goods and services which comprise both 
        skilled nursing facility services and intermediate care 
        facility services (regardless of the source of payment 
        for such services), for projecting the percentage 
        increase for purposes of clause (i)(I);
          (II) a method, based on an index of appropriately 
        weighted indicators of changes in the wages and prices 
        of the mix of goods and services which comprise home 
        and community-based services (regardless of the source 
        of payment for such services), for projecting the 
        percentage increase for purposes of clause (ii)(I); and
          (III) a method for projecting, on a State specific 
        basis, the percentage increase in the number of 
        residents in each State who are over 65 years of age 
        for any period.
The Secretary shall develop (by not later than October 1, 1989) 
a method for projecting, on a State-specific basis, the 
percentage increase in the number of residents in each State 
who are over 65 years of age for any period. Effective on and 
after the date the Secretary promulgates the regulation under 
clause (iii), any reference in this subparagraph to the 
``lesser of 7 percent'' shall be deemed to be a reference to 
the ``greater of 7 percent''.
  (iv) If there is enacted after December 22, 1987, an Act 
which amends this title whose provisions become effective on or 
after such date and which results in an increase in the 
aggregate amount of medical assistance under this title for 
nursing facility services and home and community-based services 
for individuals who have attained the age of 65 years, the 
Secretary, at the request of a State with a waiver under this 
subsection for a waiver year or years and in close consultation 
with the State, shall adjust the projected amount computed 
under this subparagraph for the waiver year or years to take 
into account such increase.
  (C) In this paragraph:
          (i) The term ``home and community-based services'' 
        includes services described in sections 1905(a)(7) and 
        1905(a)(8), services described in subsection (c)(4)(B), 
        services described in paragraph (4), and personal care 
        services.
          (ii)(I) Subject to subclause (II), the term ``base 
        year'' means the most recent year (ending before the 
        date of the enactment of this subsection) for which 
        actual final expenditures under this title have been 
        reported to, and accepted by, the Secretary.
          (II) For purposes of subparagraph (C), in the case of 
        a State that does not report expenditures on the basis 
        of the age categories described in such subparagraph 
        for a year ending before the date of the enactment of 
        this subsection, the term ``base year'' means fiscal 
        year 1989.
          (iii) The term ``intermediate care facility 
        services'' does not include services furnished in an 
        institution certified in accordance with section 
        1905(d).
  (6)(A) A determination by the Secretary to deny a request for 
a waiver (or extension of waiver) under this subsection shall 
be subject to review to the extent provided under section 
1116(b).
  (B) Notwithstanding any other provision of this Act, if the 
Secretary denies a request of the State for an extension of a 
waiver under this subsection, any waiver under this subsection 
in effect on the date such request is made shall remain in 
effect for a period of not less than 90 days after the date on 
which the Secretary denies such request (or, if the State seeks 
review of such determination in accordance with subparagraph 
(A), the date on which a final determination is made with 
respect to such review).
  (e)(1)(A) Subject to paragraph (2), the Secretary shall grant 
a waiver to provide that a State plan approved under this title 
shall include as ``medical assistance'' under such plan payment 
for part or all of the cost of nursing care, respite care, 
physicians' services, prescribed drugs, medical devices and 
supplies, transportation services, and such other services 
requested by the State as the Secretary may approve which are 
provided pursuant to a written plan of care to a child 
described in subparagraph (B) with respect to whom there has 
been a determination that but for the provision of such 
services the infants would be likely to require the level of 
care provided in a hospital or nursing facility the cost of 
which could be reimbursed under the State plan.
  (B) Children described in this subparagraph are individuals 
under 5 years of age who--
          (i) at the time of birth were infected with (or 
        tested positively for) the etiologic agent for acquired 
        immune deficiency syndrome (AIDS),
          (ii) have such syndrome, or
          (iii) at the time of birth were dependent on heroin, 
        cocaine, or phencyclidine,
and with respect to whom adoption or foster care assistance is 
(or will be) made available under part E of title IV.
  (2) A waiver shall not be granted under this subsection 
unless the State provides assurances satisfactory to the 
Secretary that--
          (A) necessary safeguards (including adequate 
        standards for provider participation) have been taken 
        to protect the health and welfare of individuals 
        provided services under the waiver and to assure 
        financial accountability for funds expended with 
        respect to such services;
          (B) under such waiver the average per capita 
        expenditure estimated by the State in any fiscal year 
        for medical assistance provided with respect to such 
        individuals does not exceed 100 percent of the average 
        per capita expenditure that the State reasonably 
        estimates would have been made in that fiscal year for 
        expenditures under the State plan for such individuals 
        if the waiver had not been granted; and
          (C) the State will provide to the Secretary annually, 
        consistent with a data collection plan designed by the 
        Secretary, information on the impact of the waiver 
        granted under this subsection on the type and amount of 
        medical assistance provided under the State plan and on 
        the health and welfare of recipients.
  (3) A waiver granted under this subsection may include a 
waiver of the requirements of section 1902(a)(1) (relating to 
statewideness) and section 1902(a)(10)(B) (relating to 
comparability). A waiver under this subsection shall be for an 
initial term of 3 years and, upon the request of a State, shall 
be extended for additional five-year periods unless the 
Secretary determines that for the previous waiver period the 
assurances provided under paragraph (2) have not been met.
  (4) The provisions of paragraph (6) of subsection (d) shall 
apply to this subsection in the same manner as it applies to 
subsection (d).
  (f)(1) The Secretary shall monitor the implementation of 
waivers granted under this section to assure that the 
requirements for such waiver are being met and shall, after 
notice and opportunity for a hearing, terminate any such waiver 
where he finds noncompliance has occurred.
  (2) A request to the Secretary from a State for approval of a 
proposed State plan or plan amendment or a waiver of a 
requirement of this title submitted by the State pursuant to a 
provision of this title shall be deemed granted unless the 
Secretary, within 90 days after the date of its submission to 
the Secretary, either denies such request in writing or informs 
the State agency in writing with respect to any additional 
information which is needed in order to make a final 
determination with respect to the request. After the date the 
Secretary receives such additional information, the request 
shall be deemed granted unless the Secretary, within 90 days of 
such date, denies such request.
  (g)(1) A State may provide, as medical assistance, case 
management services under the plan without regard to the 
requirements of section 1902(a)(1) and section 1902(a)(10)(B). 
The provision of case management services under this subsection 
shall not restrict the choice of the individual to receive 
medical assistance in violation of section 1902(a)(23). A State 
may limit the provision of case management services under this 
subsection to individuals with acquired immune deficiency 
syndrome (AIDS), or with AIDS-related conditions, or with 
either, or to individuals described in section 1902(z)(1)(A) 
and a State may limit the provision of case management services 
under this subsection to individuals with chronic mental 
illness. The State may limit the case managers available with 
respect to case management services for eligible individuals 
with developmental disabilities or with chronic mental illness 
in order to ensure that the case managers for such individuals 
are capable of ensuring that such individuals receive needed 
services.
  (2) For purposes of this subsection:
          (A)(i) The term ``case management services'' means 
        services which will assist individuals eligible under 
        the plan in gaining access to needed medical, social, 
        educational, and other services.
          (ii) Such term includes the following:
                  (I) Assessment of an eligible individual to 
                determine service needs, including activities 
                that focus on needs identification, to 
                determine the need for any medical, 
                educational, social, or other services. Such 
                assessment activities include the following:
                          (aa) Taking client history.
                          (bb) Identifying the needs of the 
                        individual, and completing related 
                        documentation.
                          (cc) Gathering information from other 
                        sources such as family members, medical 
                        providers, social workers, and 
                        educators, if necessary, to form a 
                        complete assessment of the eligible 
                        individual.
                  (II) Development of a specific care plan 
                based on the information collected through an 
                assessment, that specifies the goals and 
                actions to address the medical, social, 
                educational, and other services needed by the 
                eligible individual, including activities such 
                as ensuring the active participation of the 
                eligible individual and working with the 
                individual (or the individual's authorized 
                health care decision maker) and others to 
                develop such goals and identify a course of 
                action to respond to the assessed needs of the 
                eligible individual.
                  (III) Referral and related activities to help 
                an individual obtain needed services, including 
                activities that help link eligible individuals 
                with medical, social, educational providers or 
                other programs and services that are capable of 
                providing needed services, such as making 
                referrals to providers for needed services and 
                scheduling appointments for the individual.
                  (IV) Monitoring and followup activities, 
                including activities and contacts that are 
                necessary to ensure the care plan is 
                effectively implemented and adequately 
                addressing the needs of the eligible 
                individual, and which may be with the 
                individual, family members, providers, or other 
                entities and conducted as frequently as 
                necessary to help determine such matters as--
                          (aa) whether services are being 
                        furnished in accordance with an 
                        individual's care plan;
                          (bb) whether the services in the care 
                        plan are adequate; and
                          (cc) whether there are changes in the 
                        needs or status of the eligible 
                        individual, and if so, making necessary 
                        adjustments in the care plan and 
                        service arrangements with providers.
          (iii) Such term does not include the direct delivery 
        of an underlying medical, educational, social, or other 
        service to which an eligible individual has been 
        referred, including, with respect to the direct 
        delivery of foster care services, services such as (but 
        not limited to) the following:
                  (I) Research gathering and completion of 
                documentation required by the foster care 
                program.
                  (II) Assessing adoption placements.
                  (III) Recruiting or interviewing potential 
                foster care parents.
                  (IV) Serving legal papers.
                  (V) Home investigations.
                  (VI) Providing transportation.
                  (VII) Administering foster care subsidies.
                  (VIII) Making placement arrangements.
          (B) The term ``targeted case management services'' 
        are case management services that are furnished without 
        regard to the requirements of section 1902(a)(1) and 
        section 1902(a)(10)(B) to specific classes of 
        individuals or to individuals who reside in specified 
        areas.
  (3) With respect to contacts with individuals who are not 
eligible for medical assistance under the State plan or, in the 
case of targeted case management services, individuals who are 
eligible for such assistance but are not part of the target 
population specified in the State plan, such contacts--
          (A) are considered an allowable case management 
        activity, when the purpose of the contact is directly 
        related to the management of the eligible individual's 
        care; and
          (B) are not considered an allowable case management 
        activity if such contacts relate directly to the 
        identification and management of the noneligible or 
        nontargeted individual's needs and care.
  (4)(A) In accordance with section 1902(a)(25), Federal 
financial participation only is available under this title for 
case management services or targeted case management services 
if there are no other third parties liable to pay for such 
services, including as reimbursement under a medical, social, 
educational, or other program.
  (B) A State shall allocate the costs of any part of such 
services which are reimbursable under another federally funded 
program in accordance with OMB Circular A-87 (or any related or 
successor guidance or regulations regarding allocation of costs 
among federally funded programs) under an approved cost 
allocation program.
  (5) Nothing in this subsection shall be construed as 
affecting the application of rules with respect to third party 
liability under programs, or activities carried out under title 
XXVI of the Public Health Service Act or by the Indian Health 
Service.
  (h)(1) No waiver under this section (other than a waiver 
under subsection (c), (d), or (e), or a waiver described in 
paragraph (2)) may extend over a period of longer than two 
years unless the State requests continuation of such waiver, 
and such request shall be deemed granted unless the Secretary, 
within 90 days after the date of its submission to the 
Secretary, either denies such request in writing or informs the 
State agency in writing with respect to any additional 
information which is needed in order to make a final 
determination with respect to the request. After the date the 
Secretary receives such additional information, the request 
shall be deemed granted unless the Secretary, within 90 days of 
such date, denies such request.
  (2)(A) Notwithstanding subsections (c)(3) and (d) (3), any 
waiver under subsection (b), (c), or (d), or a waiver under 
section 1115, that provides medical assistance for dual 
eligible individuals (including any such waivers under which 
non dual eligible individuals may be enrolled in addition to 
dual eligible individuals) may be conducted for a period of 5 
years and, upon the request of the State, may be extended for 
additional 5-year periods unless the Secretary determines that 
for the previous waiver period the conditions for the waiver 
have not been met or it would no longer be cost-effective and 
efficient, or consistent with the purposes of this title, to 
extend the waiver.
  (B) In this paragraph, the term ``dual eligible individual'' 
means an individual who is entitled to, or enrolled for, 
benefits under part A of title XVIII, or enrolled for benefits 
under part B of title XVIII, and is eligible for medical 
assistance under the State plan under this title or under a 
waiver of such plan.
  (i) State Plan Amendment Option To Provide Home and 
Community-Based Services for Elderly and Disabled 
Individuals.--
          (1) In general.--Subject to the succeeding provisions 
        of this subsection, a State may provide through a State 
        plan amendment for the provision of medical assistance 
        for home and community-based services (within the scope 
        of services described in paragraph (4)(B) of subsection 
        (c) for which the Secretary has the authority to 
        approve a waiver and not including room and board) for 
        individuals eligible for medical assistance under the 
        State plan whose income does not exceed 150 percent of 
        the poverty line (as defined in section 2110(c)(5)), 
        without determining that but for the provision of such 
        services the individuals would require the level of 
        care provided in a hospital or a nursing facility or 
        intermediate care facility for the mentally retarded, 
        but only if the State meets the following requirements:
                  (A) Needs-based criteria for eligibility for, 
                and receipt of, home and community-based 
                services.--The State establishes needs-based 
                criteria for determining an individual's 
                eligibility under the State plan for medical 
                assistance for such home and community-based 
                services, and if the individual is eligible for 
                such services, the specific home and community-
                based services that the individual will 
                receive.
                  (B) Establishment of more stringent needs-
                based eligibility criteria for 
                institutionalized care.--The State establishes 
                needs-based criteria for determining whether an 
                individual requires the level of care provided 
                in a hospital, a nursing facility, or an 
                intermediate care facility for the mentally 
                retarded under the State plan or under any 
                waiver of such plan that are more stringent 
                than the needs-based criteria established under 
                subparagraph (A) for determining eligibility 
                for home and community-based services.
                  (C) Projection of number of individuals to be 
                provided home and community-based services.--
                The State submits to the Secretary, in such 
                form and manner, and upon such frequency as the 
                Secretary shall specify, the projected number 
                of individuals to be provided home and 
                community-based services.
                  (D) Criteria based on individual 
                assessment.--
                          (i) In general.--The criteria 
                        established by the State for purposes 
                        of subparagraphs (A) and (B) requires 
                        an assessment of an individual's 
                        support needs and capabilities, and may 
                        take into account the inability of the 
                        individual to perform 2 or more 
                        activities of daily living (as defined 
                        in section 7702B(c)(2)(B) of the 
                        Internal Revenue Code of 1986) or the 
                        need for significant assistance to 
                        perform such activities, and such other 
                        risk factors as the State determines to 
                        be appropriate.
                          (ii) Adjustment authority.--The State 
                        plan amendment provides the State with 
                        the option to modify the criteria 
                        established under subparagraph (A) 
                        (without having to obtain prior 
                        approval from the Secretary) in the 
                        event that the enrollment of 
                        individuals eligible for home and 
                        community-based services exceeds the 
                        projected enrollment submitted for 
                        purposes of subparagraph (C), but only 
                        if--
                                  (I) the State provides at 
                                least 60 days notice to the 
                                Secretary and the public of the 
                                proposed modification;
                                  (II) the State deems an 
                                individual receiving home and 
                                community-based services on the 
                                basis of the most recent 
                                version of the criteria in 
                                effect prior to the effective 
                                date of the modification to 
                                continue to be eligible for 
                                such services after the 
                                effective date of the 
                                modification and until such 
                                time as the individual no 
                                longer meets the standard for 
                                receipt of such services under 
                                such pre-modified criteria; and
                                  (III) after the effective 
                                date of such modification, the 
                                State, at a minimum, applies 
                                the criteria for determining 
                                whether an individual requires 
                                the level of care provided in a 
                                hospital, a nursing facility, 
                                or an intermediate care 
                                facility for the mentally 
                                retarded under the State plan 
                                or under any waiver of such 
                                plan which applied prior to the 
                                application of the more 
                                stringent criteria developed 
                                under subparagraph (B).
                  (E) Independent evaluation and assessment.--
                          (i) Eligibility determination.--The 
                        State uses an independent evaluation 
                        for making the determinations described 
                        in subparagraphs (A) and (B).
                          (ii) Assessment.--In the case of an 
                        individual who is determined to be 
                        eligible for home and community-based 
                        services, the State uses an independent 
                        assessment, based on the needs of the 
                        individual to--
                                  (I) determine a necessary 
                                level of services and supports 
                                to be provided, consistent with 
                                an individual's physical and 
                                mental capacity;
                                  (II) prevent the provision of 
                                unnecessary or inappropriate 
                                care; and
                                  (III) establish an 
                                individualized care plan for 
                                the individual in accordance 
                                with subparagraph (G).
                  (F) Assessment.--The independent assessment 
                required under subparagraph (E)(ii) shall 
                include the following:
                          (i) An objective evaluation of an 
                        individual's inability to perform 2 or 
                        more activities of daily living (as 
                        defined in section 7702B(c)(2)(B) of 
                        the Internal Revenue Code of 1986) or 
                        the need for significant assistance to 
                        perform such activities.
                          (ii) A face-to-face evaluation of the 
                        individual by an individual trained in 
                        the assessment and evaluation of 
                        individuals whose physical or mental 
                        conditions trigger a potential need for 
                        home and community-based services.
                          (iii) Where appropriate, consultation 
                        with the individual's family, spouse, 
                        guardian, or other responsible 
                        individual.
                          (iv) Consultation with appropriate 
                        treating and consulting health and 
                        support professionals caring for the 
                        individual.
                          (v) An examination of the 
                        individual's relevant history, medical 
                        records, and care and support needs, 
                        guided by best practices and research 
                        on effective strategies that result in 
                        improved health and quality of life 
                        outcomes.
                          (vi) If the State offers individuals 
                        the option to self-direct the purchase 
                        of, or control the receipt of, home and 
                        community-based service, an evaluation 
                        of the ability of the individual or the 
                        individual's representative to self-
                        direct the purchase of, or control the 
                        receipt of, such services if the 
                        individual so elects.
                  (G) Individualized care plan.--
                          (i) In general.--In the case of an 
                        individual who is determined to be 
                        eligible for home and community-based 
                        services, the State uses the 
                        independent assessment required under 
                        subparagraph (E)(ii) to establish a 
                        written individualized care plan for 
                        the individual.
                          (ii) Plan requirements.--The State 
                        ensures that the individualized care 
                        plan for an individual--
                                  (I) is developed--
                                          (aa) in consultation 
                                        with the individual, 
                                        the individual's 
                                        treating physician, 
                                        health care or support 
                                        professional, or other 
                                        appropriate 
                                        individuals, as defined 
                                        by the State, and, 
                                        where appropriate the 
                                        individual's family, 
                                        caregiver, or 
                                        representative; and
                                          (bb) taking into 
                                        account the extent of, 
                                        and need for, any 
                                        family or other 
                                        supports for the 
                                        individual;
                                  (II) identifies the necessary 
                                home and community-based 
                                services to be furnished to the 
                                individual (or, if the 
                                individual elects to self-
                                direct the purchase of, or 
                                control the receipt of, such 
                                services, funded for the 
                                individual); and
                                  (III) is reviewed at least 
                                annually and as needed when 
                                there is a significant change 
                                in the individual's 
                                circumstances.
                          (iii) state option to offer election 
                        for self-directed services.--
                                  (I) Individual choice.--At 
                                the option of the State, the 
                                State may allow an individual 
                                or the individual's 
                                representative to elect to 
                                receive self-directed home and 
                                community-based services in a 
                                manner which gives them the 
                                most control over such services 
                                consistent with the 
                                individual's abilities and the 
                                requirements of subclauses (II) 
                                and (III).
                                  (II) Self-directed 
                                services.--The term ``self-
                                directed'' means, with respect 
                                to the home and community-based 
                                services offered under the 
                                State plan amendment, such 
                                services for the individual 
                                which are planned and purchased 
                                under the direction and control 
                                of such individual or the 
                                individual's authorized 
                                representative, including the 
                                amount, duration, scope, 
                                provider, and location of such 
                                services, under the State plan 
                                consistent with the following 
                                requirements:
                                          (aa) Assessment.--
                                        There is an assessment 
                                        of the needs, 
                                        capabilities, and 
                                        preferences of the 
                                        individual with respect 
                                        to such services.
                                          (bb) Service plan.--
                                        Based on such 
                                        assessment, there is 
                                        developed jointly with 
                                        such individual or the 
                                        individual's authorized 
                                        representative a plan 
                                        for such services for 
                                        such individual that is 
                                        approved by the State 
                                        and that satisfies the 
                                        requirements of 
                                        subclause (III).
                                  (III) Plan requirements.--For 
                                purposes of subclause (II)(bb), 
                                the requirements of this 
                                subclause are that the plan--
                                          (aa) specifies those 
                                        services which the 
                                        individual or the 
                                        individual's authorized 
                                        representative would be 
                                        responsible for 
                                        directing;
                                          (bb) identifies the 
                                        methods by which the 
                                        individual or the 
                                        individual's authorized 
                                        representative will 
                                        select, manage, and 
                                        dismiss providers of 
                                        such services;
                                          (cc) specifies the 
                                        role of family members 
                                        and others whose 
                                        participation is sought 
                                        by the individual or 
                                        the individual's 
                                        authorized 
                                        representative with 
                                        respect to such 
                                        services;
                                          (dd) is developed 
                                        through a person-
                                        centered process that 
                                        is directed by the 
                                        individual or the 
                                        individual's authorized 
                                        representative, builds 
                                        upon the individual's 
                                        capacity to engage in 
                                        activities that promote 
                                        community life and that 
                                        respects the 
                                        individual's 
                                        preferences, choices, 
                                        and abilities, and 
                                        involves families, 
                                        friends, and 
                                        professionals as 
                                        desired or required by 
                                        the individual or the 
                                        individual's authorized 
                                        representative;
                                          (ee) includes 
                                        appropriate risk 
                                        management techniques 
                                        that recognize the 
                                        roles and sharing of 
                                        responsibilities in 
                                        obtaining services in a 
                                        self-directed manner 
                                        and assure the 
                                        appropriateness of such 
                                        plan based upon the 
                                        resources and 
                                        capabilities of the 
                                        individual or the 
                                        individual's authorized 
                                        representative; and
                                          (ff) may include an 
                                        individualized budget 
                                        which identifies the 
                                        dollar value of the 
                                        services and supports 
                                        under the control and 
                                        direction of the 
                                        individual or the 
                                        individual's authorized 
                                        representative.
                                  (IV) Budget process.--With 
                                respect to individualized 
                                budgets described in subclause 
                                (III)(ff), the State plan 
                                amendment--
                                          (aa) describes the 
                                        method for calculating 
                                        the dollar values in 
                                        such budgets based on 
                                        reliable costs and 
                                        service utilization;
                                          (bb) defines a 
                                        process for making 
                                        adjustments in such 
                                        dollar values to 
                                        reflect changes in 
                                        individual assessments 
                                        and service plans; and
                                          (cc) provides a 
                                        procedure to evaluate 
                                        expenditures under such 
                                        budgets.
                  (H) Quality assurance; conflict of interest 
                standards.--
                          (i) Quality assurance.--The State 
                        ensures that the provision of home and 
                        community-based services meets Federal 
                        and State guidelines for quality 
                        assurance.
                          (ii) Conflict of interest 
                        standards.--The State establishes 
                        standards for the conduct of the 
                        independent evaluation and the 
                        independent assessment to safeguard 
                        against conflicts of interest.
                  (I) Redeterminations and appeals.--The State 
                allows for at least annual redeterminations of 
                eligibility, and appeals in accordance with the 
                frequency of, and manner in which, 
                redeterminations and appeals of eligibility are 
                made under the State plan.
                  (J) Presumptive eligibility for assessment.--
                The State, at its option, elects to provide for 
                a period of presumptive eligibility (not to 
                exceed a period of 60 days) only for those 
                individuals that the State has reason to 
                believe may be eligible for home and community-
                based services. Such presumptive eligibility 
                shall be limited to medical assistance for 
                carrying out the independent evaluation and 
                assessment under subparagraph (E) to determine 
                an individual's eligibility for such services 
                and if the individual is so eligible, the 
                specific home and community-based services that 
                the individual will receive.
          (2) Definition of individual's representative.--In 
        this section, the term ``individual's representative'' 
        means, with respect to an individual, a parent, a 
        family member, or a guardian of the individual, an 
        advocate for the individual, or any other individual 
        who is authorized to represent the individual.
          (3) Nonapplication.--A State may elect in the State 
        plan amendment approved under this section to not 
        comply with the requirements of section 1902(a)(10)(B) 
        (relating to comparability) and section 
        1902(a)(10)(C)(i)(III) (relating to income and resource 
        rules applicable in the community), but only for 
        purposes of provided home and community-based services 
        in accordance with such amendment. Any such election 
        shall not be construed to apply to the provision of 
        services to an individual receiving medical assistance 
        in an institutionalized setting as a result of a 
        determination that the individual requires the level of 
        care provided in a hospital or a nursing facility or 
        intermediate care facility for the mentally retarded.
          (4) No effect on other waiver authority.--Nothing in 
        this subsection shall be construed as affecting the 
        option of a State to offer home and community-based 
        services under a waiver under subsections (c) or (d) of 
        this section or under section 1115.
          (5) Continuation of federal financial participation 
        for medical assistance provided to individuals as of 
        effective date of state plan amendment.--
        Notwithstanding paragraph (1)(B), Federal financial 
        participation shall continue to be available for an 
        individual who is receiving medical assistance in an 
        institutionalized setting, or home and community-based 
        services provided under a waiver under this section or 
        section 1115 that is in effect as of the effective date 
        of the State plan amendment submitted under this 
        subsection, as a result of a determination that the 
        individual requires the level of care provided in a 
        hospital or a nursing facility or intermediate care 
        facility for the mentally retarded, without regard to 
        whether such individuals satisfy the more stringent 
        eligibility criteria established under that paragraph, 
        until such time as the individual is discharged from 
        the institution or waiver program or no longer requires 
        such level of care.
          (6) State option to provide home and community-based 
        services to individuals eligible for services under a 
        waiver.--
                  (A) In general.--A State that provides home 
                and community-based services in accordance with 
                this subsection to individuals who satisfy the 
                needs-based criteria for the receipt of such 
                services established under paragraph (1)(A) 
                may, in addition to continuing to provide such 
                services to such individuals, elect to provide 
                home and community-based services in accordance 
                with the requirements of this paragraph to 
                individuals who are eligible for home and 
                community-based services under a waiver 
                approved for the State under subsection (c), 
                (d), or (e) or under section 1115 to provide 
                such services, but only for those individuals 
                whose income does not exceed 300 percent of the 
                supplemental security income benefit rate 
                established by section 1611(b)(1).
                  (B) Application of same requirements for 
                individuals satisfying needs-based criteria.--
                Subject to subparagraph (C), a State shall 
                provide home and community-based services to 
                individuals under this paragraph in the same 
                manner and subject to the same requirements as 
                apply under the other paragraphs of this 
                subsection to the provision of home and 
                community-based services to individuals who 
                satisfy the needs-based criteria established 
                under paragraph (1)(A).
                  (C) Authority to offer different type, 
                amount, duration, or scope of home and 
                community-based services.--A State may offer 
                home and community-based services to 
                individuals under this paragraph that differ in 
                type, amount, duration, or scope from the home 
                and community-based services offered for 
                individuals who satisfy the needs-based 
                criteria established under paragraph (1)(A), so 
                long as such services are within the scope of 
                services described in paragraph (4)(B) of 
                subsection (c) for which the Secretary has the 
                authority to approve a waiver and do not 
                include room or board.
          (7) State option to offer home and community-based 
        services to specific, targeted populations.--
                  (A) In general.--A State may elect in a State 
                plan amendment under this subsection to target 
                the provision of home and community-based 
                services under this subsection to specific 
                populations and to differ the type, amount, 
                duration, or scope of such services to such 
                specific populations.
                  (B) 5-year term.--
                          (i) In general.--An election by a 
                        State under this paragraph shall be for 
                        a period of 5 years.
                          (ii) Phase-in of services and 
                        eligibility permitted during initial 5-
                        year period.--A State making an 
                        election under this paragraph may, 
                        during the first 5-year period for 
                        which the election is made, phase-in 
                        the enrollment of eligible individuals, 
                        or the provision of services to such 
                        individuals, or both, so long as all 
                        eligible individuals in the State for 
                        such services are enrolled, and all 
                        such services are provided, before the 
                        end of the initial 5-year period.
                  (C) Renewal.--An election by a State under 
                this paragraph may be renewed for additional 5-
                year terms if the Secretary determines, prior 
                to beginning of each such renewal period, that 
                the State has--
                          (i) adhered to the requirements of 
                        this subsection and paragraph in 
                        providing services under such an 
                        election; and
                          (ii) met the State's objectives with 
                        respect to quality improvement and 
                        beneficiary outcomes.
  (j)(1) A State may provide, as ``medical assistance'', 
payment for part or all of the cost of self-directed personal 
assistance services (other than room and board) under the plan 
which are provided pursuant to a written plan of care to 
individuals with respect to whom there has been a determination 
that, but for the provision of such services, the individuals 
would require and receive personal care services under the 
plan, or home and community-based services provided pursuant to 
a waiver under subsection (c). Self-directed personal 
assistance services may not be provided under this subsection 
to individuals who reside in a home or property that is owned, 
operated, or controlled by a provider of services, not related 
by blood or marriage.
  (2) The Secretary shall not grant approval for a State self-
directed personal assistance services program under this 
section unless the State provides assurances satisfactory to 
the Secretary of the following:
          (A) Necessary safeguards have been taken to protect 
        the health and welfare of individuals provided services 
        under the program, and to assure financial 
        accountability for funds expended with respect to such 
        services.
          (B) The State will provide, with respect to 
        individuals who--
                  (i) are entitled to medical assistance for 
                personal care services under the plan, or 
                receive home and community-based services under 
                a waiver granted under subsection (c);
                  (ii) may require self-directed personal 
                assistance services; and
                  (iii) may be eligible for self-directed 
                personal assistance services,
        an evaluation of the need for personal care under the 
        plan, or personal services under a waiver granted under 
        subsection (c).
          (C) Such individuals who are determined to be likely 
        to require personal care under the plan, or home and 
        community-based services under a waiver granted under 
        subsection (c) are informed of the feasible 
        alternatives, if available under the State's self-
        directed personal assistance services program, at the 
        choice of such individuals, to the provision of 
        personal care services under the plan, or personal 
        assistance services under a waiver granted under 
        subsection (c).
          (D) The State will provide for a support system that 
        ensures participants in the self-directed personal 
        assistance services program are appropriately assessed 
        and counseled prior to enrollment and are able to 
        manage their budgets. Additional counseling and 
        management support may be provided at the request of 
        the participant.
          (E) The State will provide to the Secretary an annual 
        report on the number of individuals served and total 
        expenditures on their behalf in the aggregate. The 
        State shall also provide an evaluation of overall 
        impact on the health and welfare of participating 
        individuals compared to non-participants every three 
        years.
  (3) A State may provide self-directed personal assistance 
services under the State plan without regard to the 
requirements of section 1902(a)(1) and may limit the population 
eligible to receive these services and limit the number of 
persons served without regard to section 1902(a)(10)(B).
  (4)(A) For purposes of this subsection, the term ``self-
directed personal assistance services'' means personal care and 
related services, or home and community-based services 
otherwise available under the plan under this title or 
subsection (c), that are provided to an eligible participant 
under a self-directed personal assistance services program 
under this section, under which individuals, within an approved 
self-directed services plan and budget, purchase personal 
assistance and related services, and permits participants to 
hire, fire, supervise, and manage the individuals providing 
such services.
  (B) At the election of the State--
          (i) a participant may choose to use any individual 
        capable of providing the assigned tasks including 
        legally liable relatives as paid providers of the 
        services; and
          (ii) the individual may use the individual's budget 
        to acquire items that increase independence or 
        substitute (such as a microwave oven or an 
        accessibility ramp) for human assistance, to the extent 
        that expenditures would otherwise be made for the human 
        assistance.
  (5) For purpose of this section, the term ``approved self-
directed services plan and budget'' means, with respect to a 
participant, the establishment of a plan and budget for the 
provision of self-directed personal assistance services, 
consistent with the following requirements:
          (A) Self-direction.--The participant (or in the case 
        of a participant who is a minor child, the 
        participant's parent or guardian, or in the case of an 
        incapacitated adult, another individual recognized by 
        State law to act on behalf of the participant) 
        exercises choice and control over the budget, planning, 
        and purchase of self-directed personal assistance 
        services, including the amount, duration, scope, 
        provider, and location of service provision.
          (B) Assessment of needs.--There is an assessment of 
        the needs, strengths, and preferences of the 
        participants for such services.
          (C) Service plan.--A plan for such services (and 
        supports for such services) for the participant has 
        been developed and approved by the State based on such 
        assessment through a person-centered process that--
                  (i) builds upon the participant's capacity to 
                engage in activities that promote community 
                life and that respects the participant's 
                preferences, choices, and abilities; and
                  (ii) involves families, friends, and 
                professionals in the planning or delivery of 
                services or supports as desired or required by 
                the participant.
          (D) Service budget.--A budget for such services and 
        supports for the participant has been developed and 
        approved by the State based on such assessment and plan 
        and on a methodology that uses valid, reliable cost 
        data, is open to public inspection, and includes a 
        calculation of the expected cost of such services if 
        those services were not self-directed. The budget may 
        not restrict access to other medically necessary care 
        and services furnished under the plan and approved by 
        the State but not included in the budget.
          (E) Application of quality assurance and risk 
        management.--There are appropriate quality assurance 
        and risk management techniques used in establishing and 
        implementing such plan and budget that recognize the 
        roles and responsibilities in obtaining services in a 
        self-directed manner and assure the appropriateness of 
        such plan and budget based upon the participant's 
        resources and capabilities.
  (6) A State may employ a financial management entity to make 
payments to providers, track costs, and make reports under the 
program. Payment for the activities of the financial management 
entity shall be at the administrative rate established in 
section 1903(a).
  (k) State Plan Option To Provide Home and Community-based 
Attendant Services and Supports.--
          (1) In general.--Subject to the succeeding provisions 
        of this subsection, beginning October 1, 2011, a State 
        may provide through a State plan amendment for the 
        provision of medical assistance for home and community-
        based attendant services and supports for individuals 
        who are eligible for medical assistance under the State 
        plan whose income does not exceed 150 percent of the 
        poverty line (as defined in section 2110(c)(5)) or, if 
        greater, the income level applicable for an individual 
        who has been determined to require an institutional 
        level of care to be eligible for nursing facility 
        services under the State plan and with respect to whom 
        there has been a determination that, but for the 
        provision of such services, the individuals would 
        require the level of care provided in a hospital, a 
        nursing facility, an intermediate care facility for the 
        mentally retarded, or an institution for mental 
        diseases, the cost of which could be reimbursed under 
        the State plan, but only if the individual chooses to 
        receive such home and community-based attendant 
        services and supports, and only if the State meets the 
        following requirements:
                  (A) Availability.--The State shall make 
                available home and community-based attendant 
                services and supports to eligible individuals, 
                as needed, to assist in accomplishing 
                activities of daily living, instrumental 
                activities of daily living, and health-related 
                tasks through hands-on assistance, supervision, 
                or cueing--
                          (i) under a person-centered plan of 
                        services and supports that is based on 
                        an assessment of functional need and 
                        that is agreed to in writing by the 
                        individual or, as appropriate, the 
                        individual's representative;
                          (ii) in a home or community setting, 
                        which does not include a nursing 
                        facility, institution for mental 
                        diseases, or an intermediate care 
                        facility for the mentally retarded;
                          (iii) under an agency-provider model 
                        or other model (as defined in paragraph 
                        (6)(C)); and
                          (iv) the furnishing of which--
                                  (I) is selected, managed, and 
                                dismissed by the individual, 
                                or, as appropriate, with 
                                assistance from the 
                                individual's representative;
                                  (II) is controlled, to the 
                                maximum extent possible, by the 
                                individual or where 
                                appropriate, the individual's 
                                representative, regardless of 
                                who may act as the employer of 
                                record; and
                                  (III) provided by an 
                                individual who is qualified to 
                                provide such services, 
                                including family members (as 
                                defined by the Secretary).
                  (B) Included services and supports.--In 
                addition to assistance in accomplishing 
                activities of daily living, instrumental 
                activities of daily living, and health related 
                tasks, the home and community-based attendant 
                services and supports made available include--
                          (i) the acquisition, maintenance, and 
                        enhancement of skills necessary for the 
                        individual to accomplish activities of 
                        daily living, instrumental activities 
                        of daily living, and health related 
                        tasks;
                          (ii) back-up systems or mechanisms 
                        (such as the use of beepers or other 
                        electronic devices) to ensure 
                        continuity of services and supports; 
                        and
                          (iii) voluntary training on how to 
                        select, manage, and dismiss attendants.
                  (C) Excluded services and supports.--Subject 
                to subparagraph (D), the home and community-
                based attendant services and supports made 
                available do not include--
                          (i) room and board costs for the 
                        individual;
                          (ii) special education and related 
                        services provided under the Individuals 
                        with Disabilities Education Act and 
                        vocational rehabilitation services 
                        provided under the Rehabilitation Act 
                        of 1973;
                          (iii) assistive technology devices 
                        and assistive technology services other 
                        than those under (1)(B)(ii);
                          (iv) medical supplies and equipment; 
                        or
                          (v) home modifications.
                  (D) Permissible services and supports.--The 
                home and community-based attendant services and 
                supports may include--
                          (i) expenditures for transition costs 
                        such as rent and utility deposits, 
                        first month's rent and utilities, 
                        bedding, basic kitchen supplies, and 
                        other necessities required for an 
                        individual to make the transition from 
                        a nursing facility, institution for 
                        mental diseases, or intermediate care 
                        facility for the mentally retarded to a 
                        community-based home setting where the 
                        individual resides; and
                          (ii) expenditures relating to a need 
                        identified in an individual's person-
                        centered plan of services that increase 
                        independence or substitute for human 
                        assistance, to the extent that 
                        expenditures would otherwise be made 
                        for the human assistance.
          (2) Increased federal financial participation.--For 
        purposes of payments to a State under section 
        1903(a)(1), with respect to amounts expended by the 
        State to provide medical assistance under the State 
        plan for home and community-based attendant services 
        and supports to eligible individuals in accordance with 
        this subsection during a fiscal year quarter occurring 
        [during the period described in paragraph (1)] on or 
        after the date referred to in paragraph (1) and before 
        January 1, 2020, the Federal medical assistance 
        percentage applicable to the State (as determined under 
        section 1905(b)) shall be increased by 6 percentage 
        points.
          (3) State requirements.--In order for a State plan 
        amendment to be approved under this subsection, the 
        State shall--
                  (A) develop and implement such amendment in 
                collaboration with a Development and 
                Implementation Council established by the State 
                that includes a majority of members with 
                disabilities, elderly individuals, and their 
                representatives and consults and collaborates 
                with such individuals;
                  (B) provide consumer controlled home and 
                community-based attendant services and supports 
                to individuals on a statewide basis, in a 
                manner that provides such services and supports 
                in the most integrated setting appropriate to 
                the individual's needs, and without regard to 
                the individual's age, type or nature of 
                disability, severity of disability, or the form 
                of home and community-based attendant services 
                and supports that the individual requires in 
                order to lead an independent life;
                  (C) with respect to expenditures during the 
                first full fiscal year in which the State plan 
                amendment is implemented, maintain or exceed 
                the level of State expenditures for medical 
                assistance that is provided under section 
                1905(a), section 1915, section 1115, or 
                otherwise to individuals with disabilities or 
                elderly individuals attributable to the 
                preceding fiscal year;
                  (D) establish and maintain a comprehensive, 
                continuous quality assurance system with 
                respect to community- based attendant services 
                and supports that--
                          (i) includes standards for agency-
                        based and other delivery models with 
                        respect to training, appeals for 
                        denials and reconsideration procedures 
                        of an individual plan, and other 
                        factors as determined by the Secretary;
                          (ii) incorporates feedback from 
                        consumers and their representatives, 
                        disability organizations, providers, 
                        families of disabled or elderly 
                        individuals, members of the community, 
                        and others and maximizes consumer 
                        independence and consumer control;
                          (iii) monitors the health and well-
                        being of each individual who receives 
                        home and community-based attendant 
                        services and supports, including a 
                        process for the mandatory reporting, 
                        investigation, and resolution of 
                        allegations of neglect, abuse, or 
                        exploitation in connection with the 
                        provision of such services and 
                        supports; and
                          (iv) provides information about the 
                        provisions of the quality assurance 
                        required under clauses (i) through 
                        (iii) to each individual receiving such 
                        services; and
                  (E) collect and report information, as 
                determined necessary by the Secretary, for the 
                purposes of approving the State plan amendment, 
                providing Federal oversight, and conducting an 
                evaluation under paragraph (5)(A), including 
                data regarding how the State provides home and 
                community-based attendant services and supports 
                and other home and community-based services, 
                the cost of such services and supports, and how 
                the State provides individuals with 
                disabilities who otherwise qualify for 
                institutional care under the State plan or 
                under a waiver the choice to instead receive 
                home and community-based services in lieu of 
                institutional care.
          (4) Compliance with certain laws.--A State shall 
        ensure that, regardless of whether the State uses an 
        agency-provider model or other models to provide home 
        and community-based attendant services and supports 
        under a State plan amendment under this subsection, 
        such services and supports are provided in accordance 
        with the requirements of the Fair Labor Standards Act 
        of 1938 and applicable Federal and State laws 
        regarding--
                  (A) withholding and payment of Federal and 
                State income and payroll taxes;
                  (B) the provision of unemployment and workers 
                compensation insurance;
                  (C) maintenance of general liability 
                insurance; and
                  (D) occupational health and safety.
          (5) Evaluation, data collection, and report to 
        congress.--
                  (A) Evaluation.--The Secretary shall conduct 
                an evaluation of the provision of home and 
                community-based attendant services and supports 
                under this subsection in order to determine the 
                effectiveness of the provision of such services 
                and supports in allowing the individuals 
                receiving such services and supports to lead an 
                independent life to the maximum extent 
                possible; the impact on the physical and 
                emotional health of the individuals who receive 
                such services; and an comparative analysis of 
                the costs of services provided under the State 
                plan amendment under this subsection and those 
                provided under institutional care in a nursing 
                facility, institution for mental diseases, or 
                an intermediate care facility for the mentally 
                retarded.
                  (B) Data collection.--The State shall provide 
                the Secretary with the following information 
                regarding the provision of home and community-
                based attendant services and supports under 
                this subsection for each fiscal year for which 
                such services and supports are provided:
                          (i) The number of individuals who are 
                        estimated to receive home and 
                        community-based attendant services and 
                        supports under this subsection during 
                        the fiscal year.
                          (ii) The number of individuals that 
                        received such services and supports 
                        during the preceding fiscal year.
                          (iii) The specific number of 
                        individuals served by type of 
                        disability, age, gender, education 
                        level, and employment status.
                          (iv) Whether the specific individuals 
                        have been previously served under any 
                        other home and community based services 
                        program under the State plan or under a 
                        waiver.
                  (C) Reports.--Not later than--
                          (i) December 31, 2013, the Secretary 
                        shall submit to Congress and make 
                        available to the public an interim 
                        report on the findings of the 
                        evaluation under subparagraph (A); and
                          (ii) December 31, 2015, the Secretary 
                        shall submit to Congress and make 
                        available to the public a final report 
                        on the findings of the evaluation under 
                        subparagraph (A).
          (6) Definitions.--In this subsection:
                  (A) Activities of daily living.--The term 
                ``activities of daily living'' includes tasks 
                such as eating, toileting, grooming, dressing, 
                bathing, and transferring.
                  (B) Consumer controlled.--The term ``consumer 
                controlled'' means a method of selecting and 
                providing services and supports that allow the 
                individual, or where appropriate, the 
                individual's representative, maximum control of 
                the home and community-based attendant services 
                and supports, regardless of who acts as the 
                employer of record.
                  (C) Delivery models.--
                          (i) Agency-provider model.--The term 
                        ``agency-provider model'' means, with 
                        respect to the provision of home and 
                        community-based attendant services and 
                        supports for an individual, subject to 
                        paragraph (4), a method of providing 
                        consumer controlled services and 
                        supports under which entities contract 
                        for the provision of such services and 
                        supports.
                          (ii) Other models.--The term ``other 
                        models'' means, subject to paragraph 
                        (4), methods, other than an agency-
                        provider model, for the provision of 
                        consumer controlled services and 
                        supports. Such models may include the 
                        provision of vouchers, direct cash 
                        payments, or use of a fiscal agent to 
                        assist in obtaining services.
                  (D) Health-related tasks.--The term ``health-
                related tasks'' means specific tasks related to 
                the needs of an individual, which can be 
                delegated or assigned by licensed health-care 
                professionals under State law to be performed 
                by an attendant.
                  (E) Individual's representative.--The term 
                ``individual's representative'' means a parent, 
                family member, guardian, advocate, or other 
                authorized representative of an individual
                  (F) Instrumental activities of daily 
                living.--The term ``instrumental activities of 
                daily living'' includes (but is not limited to) 
                meal planning and preparation, managing 
                finances, shopping for food, clothing, and 
                other essential items, performing essential 
                household chores, communicating by phone or 
                other media, and traveling around and 
                participating in the community.

           *       *       *       *       *       *       *


       liens, adjustments and recoveries, and transfers of assets

  Sec. 1917. (a)(1) No lien may be imposed against the property 
of any individual prior to his death on account of medical 
assistance paid or to be paid on his behalf under the State 
plan, except--
          (A) pursuant to--
                  (i) the judgment of a court on account of 
                benefits incorrectly paid on behalf of such 
                individual, or
                  (ii) rights acquired by or assigned to the 
                State in accordance with section 1902(a)(25)(H) 
                or section 1912(a)(1)(A), or
          (B) in the case of the real property of an 
        individual--
                  (i) who is an inpatient in a nursing 
                facility, intermediate care facility for the 
                mentally retarded, or other medical 
                institution, if such individual is required, as 
                a condition of receiving services in such 
                institution under the State plan, to spend for 
                costs of medical care all but a minimal amount 
                of his income required for personal needs, and
                  (ii) with respect to whom the State 
                determines, after notice and opportunity for a 
                hearing (in accordance with procedures 
                established by the State), that he cannot 
                reasonably be expected to be discharged from 
                the medical institution and to return home,
        except as provided in paragraph (2).
  (2) No lien may be imposed under paragraph (1)(B) on such 
individual's home if--
          (A) the spouse of such individual,
          (B) such individual's child who is under age 21, or 
        (with respect to States eligible to participate in the 
        State program established under title XVI) is blind or 
        permanently and totally disabled, or (with respect to 
        States which are not eligible to participate in such 
        program) is blind or disabled as defined in section 
        1614, or
          (C) a sibling of such individual (who has an equity 
        interest in such home and who was residing in such 
        individual's home for a period of at least one year 
        immediately before the date of the individual's 
        admission to the medical institution),
is lawfully residing in such home.
  (3) Any lien imposed with respect to an individual pursuant 
to paragraph (1)(B) shall dissolve upon that individual's 
discharge from the medical institution and return home.
  (b)(1) No adjustment or recovery of any medical assistance 
correctly paid on behalf of an individual under the State plan 
may be made, except that the State shall seek adjustment or 
recovery of any medical assistance correctly paid on behalf of 
an individual under the State plan in the case of the following 
individuals:
          (A) In the case of an individual described in 
        subsection (a)(1)(B), the State shall seek adjustment 
        or recovery from the individual's estate or upon sale 
        of the property subject to a lien imposed on account of 
        medical assistance paid on behalf of the individual.
          (B) In the case of an individual who was 55 years of 
        age or older when the individual received such medical 
        assistance, the State shall seek adjustment or recovery 
        from the individual's estate, but only for medical 
        assistance consisting of--
                  (i) nursing facility services, home and 
                community-based services, and related hospital 
                and prescription drug services, or
                  (ii) at the option of the State, any items or 
                services under the State plan (but not 
                including medical assistance for medicare cost-
                sharing or for benefits described in section 
                1902(a)(10)(E)).
          (C)(i) In the case of an individual who has received 
        (or is entitled to receive) benefits under a long-term 
        care insurance policy in connection with which assets 
        or resources are disregarded in the manner described in 
        clause (ii), except as provided in such clause, the 
        State shall seek adjustment or recovery from the 
        individual's estate on account of medical assistance 
        paid on behalf of the individual for nursing facility 
        and other long-term care services.
          (ii) Clause (i) shall not apply in the case of an 
        individual who received medical assistance under a 
        State plan of a State which had a State plan amendment 
        approved as of May 14, 1993, and which satisfies clause 
        (iv), or which has a State plan amendment that provides 
        for a qualified State long-term care insurance 
        partnership (as defined in clause (iii)) which provided 
        for the disregard of any assets or resources--
                  (I) to the extent that payments are made 
                under a long-term care insurance policy; or
                  (II) because an individual has received (or 
                is entitled to receive) benefits under a long-
                term care insurance policy.
          (iii) For purposes of this paragraph, the term 
        ``qualified State long-term care insurance 
        partnership'' means an approved State plan amendment 
        under this title that provides for the disregard of any 
        assets or resources in an amount equal to the insurance 
        benefit payments that are made to or on behalf of an 
        individual who is a beneficiary under a long-term care 
        insurance policy if the following requirements are met:
                  (I) The policy covers an insured who was a 
                resident of such State when coverage first 
                became effective under the policy.
                  (II) The policy is a qualified long-term care 
                insurance policy (as defined in section 
                7702B(b) of the Internal Revenue Code of 1986) 
                issued not earlier than the effective date of 
                the State plan amendment.
                  (III) The policy meets the model regulations 
                and the requirements of the model Act specified 
                in paragraph (5).
                  (IV) If the policy is sold to an individual 
                who--
                          (aa) has not attained age 61 as of 
                        the date of purchase, the policy 
                        provides compound annual inflation 
                        protection;
                          (bb) has attained age 61 but has not 
                        attained age 76 as of such date, the 
                        policy provides some level of inflation 
                        protection; and
                          (cc) has attained age 76 as of such 
                        date, the policy may (but is not 
                        required to) provide some level of 
                        inflation protection.
                  (V) The State Medicaid agency under section 
                1902(a)(5) provides information and technical 
                assistance to the State insurance department on 
                the insurance department's role of assuring 
                that any individual who sells a long-term care 
                insurance policy under the partnership receives 
                training and demonstrates evidence of an 
                understanding of such policies and how they 
                relate to other public and private coverage of 
                long-term care.
                  (VI) The issuer of the policy provides 
                regular reports to the Secretary, in accordance 
                with regulations of the Secretary, that include 
                notification regarding when benefits provided 
                under the policy have been paid and the amount 
                of such benefits paid, notification regarding 
                when the policy otherwise terminates, and such 
                other information as the Secretary determines 
                may be appropriate to the administration of 
                such partnerships.
                  (VII) The State does not impose any 
                requirement affecting the terms or benefits of 
                such a policy unless the State imposes such 
                requirement on long-term care insurance 
                policies without regard to whether the policy 
                is covered under the partnership or is offered 
                in connection with such a partnership.
        In the case of a long-term care insurance policy which 
        is exchanged for another such policy, subclause (I) 
        shall be applied based on the coverage of the first 
        such policy that was exchanged. For purposes of this 
        clause and paragraph (5), the term ``long-term care 
        insurance policy'' includes a certificate issued under 
        a group insurance contract.
          (iv) With respect to a State which had a State plan 
        amendment approved as of May 14, 1993, such a State 
        satisfies this clause for purposes of clause (ii) if 
        the Secretary determines that the State plan amendment 
        provides for consumer protection standards which are no 
        less stringent than the consumer protection standards 
        which applied under such State plan amendment as of 
        December 31, 2005.
          (v) The regulations of the Secretary required under 
        clause (iii)(VI) shall be promulgated after 
        consultation with the National Association of Insurance 
        Commissioners, issuers of long-term care insurance 
        policies, States with experience with long-term care 
        insurance partnership plans, other States, and 
        representatives of consumers of long-term care 
        insurance policies, and shall specify the type and 
        format of the data and information to be reported and 
        the frequency with which such reports are to be made. 
        The Secretary, as appropriate, shall provide copies of 
        the reports provided in accordance with that clause to 
        the State involved.
          (vi) The Secretary, in consultation with other 
        appropriate Federal agencies, issuers of long-term care 
        insurance, the National Association of Insurance 
        Commissioners, State insurance commissioners, States 
        with experience with long-term care insurance 
        partnership plans, other States, and representatives of 
        consumers of long-term care insurance policies, shall 
        develop recommendations for Congress to authorize and 
        fund a uniform minimum data set to be reported 
        electronically by all issuers of long-term care 
        insurance policies under qualified State long-term care 
        insurance partnerships to a secure, centralized 
        electronic query and report-generating mechanism that 
        the State, the Secretary, and other Federal agencies 
        can access.
  (2) Any adjustment or recovery under paragraph (1) may be 
made only after the death of the individual's surviving spouse, 
if any, and only at a time--
          (A) when he has no surviving child who is under age 
        21, or (with respect to States eligible to participate 
        in the State program established under title XVI) is 
        blind or permanently and totally disabled, or (with 
        respect to States which are not eligible to participate 
        in such program) is blind or disabled as defined in 
        section 1614; and
          (B) in the case of a lien on an individual's home 
        under subsection (a)(1)(B), when--
                  (i) no sibling of the individual (who was 
                residing in the individual's home for a period 
                of at least one year immediately before the 
                date of the individual's admission to the 
                medical institution), and
                  (ii) no son or daughter of the individual 
                (who was residing in the individual's home for 
                a period of at least two years immediately 
                before the date of the individual's admission 
                to the medical institution, and who establishes 
                to the satisfaction of the State that he or she 
                provided care to such individual which 
                permitted such individual to reside at home 
                rather than in an institution),
        is lawfully residing in such home who has lawfully 
        resided in such home on a continuous basis since the 
        date of the individual's admission to the medical 
        institution.
  (3)(A) The State agency shall establish procedures (in 
accordance with standards specified by the Secretary) under 
which the agency shall waive the application of this subsection 
(other than paragraph (1)(C)) if such application would work an 
undue hardship as determined on the basis of criteria 
established by the Secretary.
  (B) The standards specified by the Secretary under 
subparagraph (A) shall require that the procedures established 
by the State agency under subparagraph (A) exempt income, 
resources, and property that are exempt from the application of 
this subsection as of April 1, 2003, under manual instructions 
issued to carry out this subsection (as in effect on such date) 
because of the Federal responsibility for Indian Tribes and 
Alaska Native Villages. Nothing in this subparagraph shall be 
construed as preventing the Secretary from providing additional 
estate recovery exemptions under this title for Indians.
  (4) For purposes of this subsection, the term ``estate'', 
with respect to a deceased individual--
          (A) shall include all real and personal property and 
        other assets included within the individual's estate, 
        as defined for purposes of State probate law; and
          (B) may include, at the option of the State (and 
        shall include, in the case of an individual to whom 
        paragraph (1)(C)(i) applies), any other real and 
        personal property and other assets in which the 
        individual had any legal title or interest at the time 
        of death (to the extent of such interest), including 
        such assets conveyed to a survivor, heir, or assign of 
        the deceased individual through joint tenancy, tenancy 
        in common, survivorship, life estate, living trust, or 
        other arrangement.
  (5)(A) For purposes of clause (iii)(III), the model 
regulations and the requirements of the model Act specified in 
this paragraph are:
          (i) In the case of the model regulation, the 
        following requirements:
                  (I) Section 6A (relating to guaranteed 
                renewal or noncancellability), other than 
                paragraph (5) thereof, and the requirements of 
                section 6B of the model Act relating to such 
                section 6A.
                  (II) Section 6B (relating to prohibitions on 
                limitations and exclusions) other than 
                paragraph (7) thereof.
                  (III) Section 6C (relating to extension of 
                benefits).
                  (IV) Section 6D (relating to continuation or 
                conversion of coverage).
                  (V) Section 6E (relating to discontinuance 
                and replacement of policies).
                  (VI) Section 7 (relating to unintentional 
                lapse).
                  (VII) Section 8 (relating to disclosure), 
                other than sections 8F, 8G, 8H, and 8I thereof.
                  (VIII) Section 9 (relating to required 
                disclosure of rating practices to consumer).
                  (IX) Section 11 (relating to prohibitions 
                against post-claims underwriting).
                  (X) Section 12 (relating to minimum 
                standards).
                  (XI) Section 14 (relating to application 
                forms and replacement coverage).
                  (XII) Section 15 (relating to reporting 
                requirements).
                  (XIII) Section 22 (relating to filing 
                requirements for marketing).
                  (XIV) Section 23 (relating to standards for 
                marketing), including inaccurate completion of 
                medical histories, other than paragraphs (1), 
                (6), and (9) of section 23C.
                  (XV) Section 24 (relating to suitability).
                  (XVI) Section 25 (relating to prohibition 
                against preexisting conditions and probationary 
                periods in replacement policies or 
                certificates).
                  (XVII) The provisions of section 26 relating 
                to contingent nonforfeiture benefits, if the 
                policyholder declines the offer of a 
                nonforfeiture provision described in paragraph 
                (4).
                  (XVIII) Section 29 (relating to standard 
                format outline of coverage).
                  (XIX) Section 30 (relating to requirement to 
                deliver shopper's guide).
          (ii) In the case of the model Act, the following:
                  (I) Section 6C (relating to preexisting 
                conditions).
                  (II) Section 6D (relating to prior 
                hospitalization).
                  (III) The provisions of section 8 relating to 
                contingent nonforfeiture benefits.
                  (IV) Section 6F (relating to right to 
                return).
                  (V) Section 6G (relating to outline of 
                coverage).
                  (VI) Section 6H (relating to requirements for 
                certificates under group plans).
                  (VII) Section 6J (relating to policy 
                summary).
                  (VIII) Section 6K (relating to monthly 
                reports on accelerated death benefits).
                  (IX) Section 7 (relating to incontestability 
                period).
  (B) For purposes of this paragraph and paragraph (1)(C)--
          (i) the terms ``model regulation'' and ``model Act'' 
        mean the long-term care insurance model regulation, and 
        the long-term care insurance model Act, respectively, 
        promulgated by the National Association of Insurance 
        Commissioners (as adopted as of October 2000);
          (ii) any provision of the model regulation or model 
        Act listed under subparagraph (A) shall be treated as 
        including any other provision of such regulation or Act 
        necessary to implement the provision; and
          (iii) with respect to a long-term care insurance 
        policy issued in a State, the policy shall be deemed to 
        meet applicable requirements of the model regulation or 
        the model Act if the State plan amendment under 
        paragraph (1)(C)(iii) provides that the State insurance 
        commissioner for the State certifies (in a manner 
        satisfactory to the Secretary) that the policy meets 
        such requirements.
  (C) Not later than 12 months after the National Association 
of Insurance Commissioners issues a revision, update, or other 
modification of a model regulation or model Act provision 
specified in subparagraph (A), or of any provision of such 
regulation or Act that is substantively related to a provision 
specified in such subparagraph, the Secretary shall review the 
changes made to the provision, determine whether incorporating 
such changes into the corresponding provision specified in such 
subparagraph would improve qualified State long-term care 
insurance partnerships, and if so, shall incorporate the 
changes into such provision.
  (c)(1)(A) In order to meet the requirements of this 
subsection for purposes of section 1902(a)(18), the State plan 
must provide that if an institutionalized individual or the 
spouse of such an individual (or, at the option of a State, a 
noninstitutionalized individual or the spouse of such an 
individual) disposes of assets for less than fair market value 
on or after the look-back date specified in subparagraph 
(B)(i), the individual is ineligible for medical assistance for 
services described in subparagraph (C)(i) (or, in the case of a 
noninstitutionalized individual, for the services described in 
subparagraph (C)(ii)) during the period beginning on the date 
specified in subparagraph (D) and equal to the number of months 
specified in subparagraph (E).
  (B)(i) The look-back date specified in this subparagraph is a 
date that is 36 months (or, in the case of payments from a 
trust or portions of a trust that are treated as assets 
disposed of by the individual pursuant to paragraph (3)(A)(iii) 
or (3)(B)(ii) of subsection (d) or in the case of any other 
disposal of assets made on or after the date of the enactment 
of the Deficit Reduction Act of 2005, 60 months) before the 
date specified in clause (ii).
  (ii) The date specified in this clause, with respect to--
          (I) an institutionalized individual is the first date 
        as of which the individual both is an institutionalized 
        individual and has applied for medical assistance under 
        the State plan, or
          (II) a noninstitutionalized individual is the date on 
        which the individual applies for medical assistance 
        under the State plan or, if later, the date on which 
        the individual disposes of assets for less than fair 
        market value.
  (C)(i) The services described in this subparagraph with 
respect to an institutionalized individual are the following:
          (I) Nursing facility services.
          (II) A level of care in any institution equivalent to 
        that of nursing facility services.
          (III) Home or community-based services furnished 
        under a waiver granted under subsection (c) or (d) of 
        section 1915.
  (ii) The services described in this subparagraph with respect 
to a noninstitutionalized individual are services (not 
including any services described in clause (i)) that are 
described in paragraph (7), (22), or (24) of section 1905(a), 
and, at the option of a State, other long-term care services 
for which medical assistance is otherwise available under the 
State plan to individuals requiring long-term care.
  (D)(i) In the case of a transfer of asset made before the 
date of the enactment of the Deficit Reduction Act of 2005, the 
date specified in this subparagraph is the first day of the 
first month during or after which assets have been transferred 
for less than fair market value and which does not occur in any 
other periods of ineligibility under this subsection.
  (ii) In the case of a transfer of asset made on or after the 
date of the enactment of the Deficit Reduction Act of 2005, the 
date specified in this subparagraph is the first day of a month 
during or after which assets have been transferred for less 
than fair market value, or the date on which the individual is 
eligible for medical assistance under the State plan and would 
otherwise be receiving institutional level care described in 
subparagraph (C) based on an approved application for such care 
but for the application of the penalty period, whichever is 
later, and which does not occur during any other period of 
ineligibility under this subsection.
  (E)(i) With respect to an institutionalized individual, the 
number of months of ineligibility under this subparagraph for 
an individual shall be equal to--
          (I) the total, cumulative uncompensated value of all 
        assets transferred by the individual (or individual's 
        spouse) on or after the look-back date specified in 
        subparagraph (B)(i), divided by
          (II) the average monthly cost to a private patient of 
        nursing facility services in the State (or, at the 
        option of the State, in the community in which the 
        individual is institutionalized) at the time of 
        application.
  (ii) With respect to a noninstitutionalized individual, the 
number of months of ineligibility under this subparagraph for 
an individual shall not be greater than a number equal to--
          (I) the total, cumulative uncompensated value of all 
        assets transferred by the individual (or individual's 
        spouse) on or after the look-back date specified in 
        subparagraph (B)(i), divided by
          (II) the average monthly cost to a private patient of 
        nursing facility services in the State (or, at the 
        option of the State, in the community in which the 
        individual is institutionalized) at the time of 
        application.
  (iii) The number of months of ineligibility otherwise 
determined under clause (i) or (ii) with respect to the 
disposal of an asset shall be reduced--
          (I) in the case of periods of ineligibility 
        determined under clause (i), by the number of months of 
        ineligibility applicable to the individual under clause 
        (ii) as a result of such disposal, and
          (II) in the case of periods of ineligibility 
        determined under clause (ii), by the number of months 
        of ineligibility applicable to the individual under 
        clause (i) as a result of such disposal.
  (iv) A State shall not round down, or otherwise disregard any 
fractional period of ineligibility determined under clause (i) 
or (ii) with respect to the disposal of assets.
  (F) For purposes of this paragraph, the purchase of an 
annuity shall be treated as the disposal of an asset for less 
than fair market value unless--
          (i) the State is named as the remainder beneficiary 
        in the first position for at least the total amount of 
        medical assistance paid on behalf of the 
        institutionalized individual under this title; or
          (ii) the State is named as such a beneficiary in the 
        second position after the community spouse or minor or 
        disabled child and is named in the first position if 
        such spouse or a representative of such child disposes 
        of any such remainder for less than fair market value.
  (G) For purposes of this paragraph with respect to a transfer 
of assets, the term ``assets'' includes an annuity purchased by 
or on behalf of an annuitant who has applied for medical 
assistance with respect to nursing facility services or other 
long-term care services under this title unless--
          (i) the annuity is--
                  (I) an annuity described in subsection (b) or 
                (q) of section 408 of the Internal Revenue Code 
                of 1986; or
                  (II) purchased with proceeds from--
                          (aa) an account or trust described in 
                        subsection (a), (c), or (p) of section 
                        408 of such Code;
                          (bb) a simplified employee pension 
                        (within the meaning of section 408(k) 
                        of such Code); or
                          (cc) a Roth IRA described in section 
                        408A of such Code; or
          (ii) the annuity--
                  (I) is irrevocable and nonassignable;
                  (II) is actuarially sound (as determined in 
                accordance with actuarial publications of the 
                Office of the Chief Actuary of the Social 
                Security Administration); and
                  (III) provides for payments in equal amounts 
                during the term of the annuity, with no 
                deferral and no balloon payments made.
  (H) Notwithstanding the preceding provisions of this 
paragraph, in the case of an individual (or individual's 
spouse) who makes multiple fractional transfers of assets in 
more than 1 month for less than fair market value on or after 
the applicable look-back date specified in subparagraph (B), a 
State may determine the period of ineligibility applicable to 
such individual under this paragraph by--
          (i) treating the total, cumulative uncompensated 
        value of all assets transferred by the individual (or 
        individual's spouse) during all months on or after the 
        look-back date specified in subparagraph (B) as 1 
        transfer for purposes of clause (i) or (ii) (as the 
        case may be) of subparagraph (E); and
          (ii) beginning such period on the earliest date which 
        would apply under subparagraph (D) to any of such 
        transfers.
  (I) For purposes of this paragraph with respect to a transfer 
of assets, the term ``assets'' includes funds used to purchase 
a promissory note, loan, or mortgage unless such note, loan, or 
mortgage--
          (i) has a repayment term that is actuarially sound 
        (as determined in accordance with actuarial 
        publications of the Office of the Chief Actuary of the 
        Social Security Administration);
          (ii) provides for payments to be made in equal 
        amounts during the term of the loan, with no deferral 
        and no balloon payments made; and
          (iii) prohibits the cancellation of the balance upon 
        the death of the lender.
In the case of a promissory note, loan, or mortgage that does 
not satisfy the requirements of clauses (i) through (iii), the 
value of such note, loan, or mortgage shall be the outstanding 
balance due as of the date of the individual's application for 
medical assistance for services described in subparagraph (C).
  (J) For purposes of this paragraph with respect to a transfer 
of assets, the term ``assets'' includes the purchase of a life 
estate interest in another individual's home unless the 
purchaser resides in the home for a period of at least 1 year 
after the date of the purchase.
  (2) An individual shall not be ineligible for medical 
assistance by reason of paragraph (1) to the extent that--
          (A) the assets transferred were a home and title to 
        the home was transferred to--
                  (i) the spouse of such individual;
                  (ii) a child of such individual who (I) is 
                under age 21, or (II) (with respect to States 
                eligible to participate in the State program 
                established under title XVI) is blind or 
                permanently and totally disabled, or (with 
                respect to States which are not eligible to 
                participate in such program) is blind or 
                disabled as defined in section 1614;
                  (iii) a sibling of such individual who has an 
                equity interest in such home and who was 
                residing in such individual's home for a period 
                of at least one year immediately before the 
                date the individual becomes an 
                institutionalized individual; or
                  (iv) a son or daughter of such individual 
                (other than a child described in clause (ii)) 
                who was residing in such individual's home for 
                a period of at least two years immediately 
                before the date the individual becomes an 
                institutionalized individual, and who (as 
                determined by the State) provided care to such 
                individual which permitted such individual to 
                reside at home rather than in such an 
                institution or facility;
          (B) the assets--
                  (i) were transferred to the individual's 
                spouse or to another for the sole benefit of 
                the individual's spouse,
                  (ii) were transferred from the individual's 
                spouse to another for the sole benefit of the 
                individual's spouse,
                  (iii) were transferred to, or to a trust 
                (including a trust described in subsection 
                (d)(4)) established solely for the benefit of, 
                the individual's child described in 
                subparagraph (A)(ii)(II), or
                  (iv) were transferred to a trust (including a 
                trust described in subsection (d)(4)) 
                established solely for the benefit of an 
                individual under 65 years of age who is 
                disabled (as defined in section 1614(a)(3));
          (C) a satisfactory showing is made to the State (in 
        accordance with regulations promulgated by the 
        Secretary) that (i) the individual intended to dispose 
        of the assets either at fair market value, or for other 
        valuable consideration, (ii) the assets were 
        transferred exclusively for a purpose other than to 
        qualify for medical assistance, or (iii) all assets 
        transferred for less than fair market value have been 
        returned to the individual; or
          (D) the State determines, under procedures 
        established by the State (in accordance with standards 
        specified by the Secretary), that the denial of 
        eligibility would work an undue hardship as determined 
        on the basis of criteria established by the Secretary.
        The procedures established under subparagraph (D) shall 
        permit the facility in which the institutionalized 
        individual is residing to file an undue hardship waiver 
        application on behalf of the individual with the 
        consent of the individual or the personal 
        representative of the individual. While an application 
        for an undue hardship waiver is pending under 
        subparagraph (D) in the case of an individual who is a 
        resident of a nursing facility, if the application 
        meets such criteria as the Secretary specifies, the 
        State may provide for payments for nursing facility 
        services in order to hold the bed for the individual at 
        the facility, but not in excess of payments for 30 
        days.
  (3) For purposes of this subsection, in the case of an asset 
held by an individual in common with another person or persons 
in a joint tenancy, tenancy in common, or similar arrangement, 
the asset (or the affected portion of such asset) shall be 
considered to be transferred by such individual when any action 
is taken, either by such individual or by any other person, 
that reduces or eliminates such individual's ownership or 
control of such asset.
  (4) A State (including a State which has elected treatment 
under section 1902(f)) may not provide for any period of 
ineligibility for an individual due to transfer of resources 
for less than fair market value except in accordance with this 
subsection. In the case of a transfer by the spouse of an 
individual which results in a period of ineligibility for 
medical assistance under a State plan for such individual, a 
State shall, using a reasonable methodology (as specified by 
the Secretary), apportion such period of ineligibility (or any 
portion of such period) among the individual and the 
individual's spouse if the spouse otherwise becomes eligible 
for medical assistance under the State plan.
  (5) In this subsection, the term ``resources'' has the 
meaning given such term in section 1613, without regard to the 
exclusion described in subsection (a)(1) thereof.
  (d)(1) For purposes of determining an individual's 
eligibility for, or amount of, benefits under a State plan 
under this title, subject to paragraph (4), the rules specified 
in paragraph (3) shall apply to a trust established by such 
individual.
  (2)(A) For purposes of this subsection, an individual shall 
be considered to have established a trust if assets of the 
individual were used to form all or part of the corpus of the 
trust and if any of the following individuals established such 
trust other than by will:
          (i) The individual.
          (ii) The individual's spouse.
          (iii) A person, including a court or administrative 
        body, with legal authority to act in place of or on 
        behalf of the individual or the individual's spouse.
          (iv) A person, including any court or administrative 
        body, acting at the direction or upon the request of 
        the individual or the individual's spouse.
  (B) In the case of a trust the corpus of which includes 
assets of an individual (as determined under subparagraph (A)) 
and assets of any other person or persons, the provisions of 
this subsection shall apply to the portion of the trust 
attributable to the assets of the individual.
  (C) Subject to paragraph (4), this subsection shall apply 
without regard to--
          (i) the purposes for which a trust is established,
          (ii) whether the trustees have or exercise any 
        discretion under the trust,
          (iii) any restrictions on when or whether 
        distributions may be made from the trust, or
          (iv) any restrictions on the use of distributions 
        from the trust.
  (3)(A) In the case of a revocable trust--
          (i) the corpus of the trust shall be considered 
        resources available to the individual,
          (ii) payments from the trust to or for the benefit of 
        the individual shall be considered income of the 
        individual, and
          (iii) any other payments from the trust shall be 
        considered assets disposed of by the individual for 
        purposes of subsection (c).
  (B) In the case of an irrevocable trust--
          (i) if there are any circumstances under which 
        payment from the trust could be made to or for the 
        benefit of the individual, the portion of the corpus 
        from which, or the income on the corpus from which, 
        payment to the individual could be made shall be 
        considered resources available to the individual, and 
        payments from that portion of the corpus or income--
                  (I) to or for the benefit of the individual, 
                shall be considered income of the individual, 
                and
                  (II) for any other purpose, shall be 
                considered a transfer of assets by the 
                individual subject to subsection (c); and
          (ii) any portion of the trust from which, or any 
        income on the corpus from which, no payment could under 
        any circumstances be made to the individual shall be 
        considered, as of the date of establishment of the 
        trust (or, if later, the date on which payment to the 
        individual was foreclosed) to be assets disposed by the 
        individual for purposes of subsection (c), and the 
        value of the trust shall be determined for purposes of 
        such subsection by including the amount of any payments 
        made from such portion of the trust after such date.
  (4) This subsection shall not apply to any of the following 
trusts:
          (A) A trust containing the assets of an individual 
        under age 65 who is disabled (as defined in section 
        1614(a)(3)) and which is established for the benefit of 
        such individual by the individual, a parent, 
        grandparent, legal guardian of the individual, or a 
        court if the State will receive all amounts remaining 
        in the trust upon the death of such individual up to an 
        amount equal to the total medical assistance paid on 
        behalf of the individual under a State plan under this 
        title.
          (B) A trust established in a State for the benefit of 
        an individual if--
                  (i) the trust is composed only of pension, 
                Social Security, and other income to the 
                individual (and accumulated income in the 
                trust),
                  (ii) the State will receive all amounts 
                remaining in the trust upon the death of such 
                individual up to an amount equal to the total 
                medical assistance paid on behalf of the 
                individual under a State plan under this title, 
                and
                  (iii) the State makes medical assistance 
                available to individuals described in section 
                1902(a)(10)(A)(ii)(V), but does not make such 
                assistance available to individuals for nursing 
                facility services under section 1902(a)(10)(C).
          (C) A trust containing the assets of an individual 
        who is disabled (as defined in section 1614(a)(3)) that 
        meets the following conditions:
                  (i) The trust is established and managed by a 
                nonprofit association.
                  (ii) A separate account is maintained for 
                each beneficiary of the trust, but, for 
                purposes of investment and management of funds, 
                the trust pools these accounts.
                  (iii) Accounts in the trust are established 
                solely for the benefit of individuals who are 
                disabled (as defined in section 1614(a)(3)) by 
                the parent, grandparent, or legal guardian of 
                such individuals, by such individuals, or by a 
                court.
                  (iv) To the extent that amounts remaining in 
                the beneficiary's account upon the death of the 
                beneficiary are not retained by the trust, the 
                trust pays to the State from such remaining 
                amounts in the account an amount equal to the 
                total amount of medical assistance paid on 
                behalf of the beneficiary under the State plan 
                under this title.
  (5) The State agency shall establish procedures (in 
accordance with standards specified by the Secretary) under 
which the agency waives the application of this subsection with 
respect to an individual if the individual establishes that 
such application would work an undue hardship on the individual 
as determined on the basis of criteria established by the 
Secretary.
  (6) The term ``trust'' includes any legal instrument or 
device that is similar to a trust but includes an annuity only 
to such extent and in such manner as the Secretary specifies.
  (e)(1) In order to meet the requirements of this section for 
purposes of section 1902(a)(18), a State shall require, as a 
condition for the provision of medical assistance for services 
described in subsection (c)(1)(C)(i) (relating to long-term 
care services) for an individual, the application of the 
individual for such assistance (including any recertification 
of eligibility for such assistance) shall disclose a 
description of any interest the individual or community spouse 
has in an annuity (or similar financial instrument, as may be 
specified by the Secretary), regardless of whether the annuity 
is irrevocable or is treated as an asset. Such application or 
recertification form shall include a statement that under 
paragraph (2) the State becomes a remainder beneficiary under 
such an annuity or similar financial instrument by virtue of 
the provision of such medical assistance.
  (2)(A) In the case of disclosure concerning an annuity under 
subsection (c)(1)(F), the State shall notify the issuer of the 
annuity of the right of the State under such subsection as a 
preferred remainder beneficiary in the annuity for medical 
assistance furnished to the individual. Nothing in this 
paragraph shall be construed as preventing such an issuer from 
notifying persons with any other remainder interest of the 
State's remainder interest under such subsection.
  (B) In the case of such an issuer receiving notice under 
subparagraph (A), the State may require the issuer to notify 
the State when there is a change in the amount of income or 
principal being withdrawn from the amount that was being 
withdrawn at the time of the most recent disclosure described 
in paragraph (1). A State shall take such information into 
account in determining the amount of the State's obligations 
for medical assistance or in the individual's eligibility for 
such assistance.
  (3) The Secretary may provide guidance to States on 
categories of transactions that may be treated as a transfer of 
asset for less than fair market value.
  (4) Nothing in this subsection shall be construed as 
preventing a State from denying eligibility for medical 
assistance for an individual based on the income or resources 
derived from an annuity described in paragraph (1).
  (f)(1)(A) Notwithstanding any other provision of this title, 
subject to [subparagraphs (B) and (C)] subparagraph (B) of this 
paragraph and paragraph (2), in determining eligibility of an 
individual for medical assistance with respect to nursing 
facility services or other long-term care services, the 
individual shall not be eligible for such assistance if the 
individual's equity interest in the individual's home exceeds 
$500,000.
  [(B) A State may elect, without regard to the requirements of 
section 1902(a)(1) (relating to statewideness) and section 
1902(a)(10)(B) (relating to comparability), to apply 
subparagraph (A) by substituting for ``$500,000'', an amount 
that exceeds such amount, but does not exceed $750,000.]
  [(C)] (B) The [dollar amounts specified in this paragraph] 
dollar amount specified in subparagraph (A) shall be increased, 
beginning with 2011, from year to year based on the percentage 
increase in the consumer price index for all urban consumers 
(all items; United States city average), rounded to the nearest 
$1,000.
  (2) Paragraph (1) shall not apply with respect to an 
individual if--
          (A) the spouse of such individual, or
          (B) such individual's child who is under age 21, or 
        (with respect to States eligible to participate in the 
        State program established under title XVI) is blind or 
        permanently and totally disabled, or (with respect to 
        States which are not eligible to participate in such 
        program) is blind or disabled as defined in section 
        1614,
is lawfully residing in the individual's home.
  (3) Nothing in this subsection shall be construed as 
preventing an individual from using a reverse mortgage or home 
equity loan to reduce the individual's total equity interest in 
the home.
  (4) The Secretary shall establish a process whereby paragraph 
(1) is waived in the case of a demonstrated hardship.
  (g) Treatment of Entrance Fees of Individuals Residing in 
Continuing Care Retirement Communities.--
          (1) In general.--For purposes of determining an 
        individual's eligibility for, or amount of, benefits 
        under a State plan under this title, the rules 
        specified in paragraph (2) shall apply to individuals 
        residing in continuing care retirement communities or 
        life care communities that collect an entrance fee on 
        admission from such individuals.
          (2) Treatment of entrance fee.--For purposes of this 
        subsection, an individual's entrance fee in a 
        continuing care retirement community or life care 
        community shall be considered a resource available to 
        the individual to the extent that--
                  (A) the individual has the ability to use the 
                entrance fee, or the contract provides that the 
                entrance fee may be used, to pay for care 
                should other resources or income of the 
                individual be insufficient to pay for such 
                care;
                  (B) the individual is eligible for a refund 
                of any remaining entrance fee when the 
                individual dies or terminates the continuing 
                care retirement community or life care 
                community contract and leaves the community; 
                and
                  (C) the entrance fee does not confer an 
                ownership interest in the continuing care 
                retirement community or life care community.
  (h) In this section, the following definitions shall apply:
          (1) The term ``assets'', with respect to an 
        individual, includes all income and resources of the 
        individual and of the individual's spouse, including 
        any income or resources which the individual or such 
        individual's spouse is entitled to but does not receive 
        because of action--
                  (A) by the individual or such individual's 
                spouse,
                  (B) by a person, including a court or 
                administrative body, with legal authority to 
                act in place of or on behalf of the individual 
                or such individual's spouse, or
                  (C) by any person, including any court or 
                administrative body, acting at the direction or 
                upon the request of the individual or such 
                individual's spouse.
          (2) The term ``income'' has the meaning given such 
        term in section 1612.
          (3) The term ``institutionalized individual'' means 
        an individual who is an inpatient in a nursing 
        facility, who is an inpatient in a medical institution 
        and with respect to whom payment is made based on a 
        level of care provided in a nursing facility, or who is 
        described in section 1902(a)(10)(A)(ii)(VI).
          (4) The term ``noninstitutionalized individual'' 
        means an individual receiving any of the services 
        specified in subsection (c)(1)(C)(ii).
          (5) The term ``resources'' has the meaning given such 
        term in section 1613, without regard (in the case of an 
        institutionalized individual) to the exclusion 
        described in subsection (a)(1) of such section.

           *       *       *       *       *       *       *


               PRESUMPTIVE ELIGIBILITY FOR PREGNANT WOMEN

  Sec. 1920. (a) A State plan approved under section 1902 may 
provide for making ambulatory prenatal care available to a 
pregnant woman during a presumptive eligibility period.
  (b) For purposes of this section--
          (1) the term ``presumptive eligibility period'' 
        means, with respect to a pregnant woman, the period 
        that--
                  (A) begins with the date on which a qualified 
                provider determines, on the basis of 
                preliminary information, that the family income 
                of the woman does not exceed the applicable 
                income level of eligibility under the State 
                plan, and
                  (B) ends with (and includes) the earlier of--
                          (i) the day on which a determination 
                        is made with respect to the eligibility 
                        of the woman for medical assistance 
                        under the State plan, or
                          (ii) in the case of a woman who does 
                        not file an application by the last day 
                        of the month following the month during 
                        which the provider makes the 
                        determination referred to in 
                        subparagraph (A), such last day; and
          (2) the term ``qualified provider'' means any 
        provider that--
                  (A) is eligible for payments under a State 
                plan approved under this title,
                  (B) provides services of the type described 
                in subparagraph (A) or (B) of section 
                1905(a)(2) or in section 1905(a)(9),
                  (C) is determined by the State agency to be 
                capable of making determinations of the type 
                described in paragraph (1)(A), and
                  (D)(i) receives funds under--
                          (I) section 330 or 330A of the Public 
                        Health Service Act,
                          (II) title V of this Act, or
                          (III) title V of the Indian Health 
                        Care Improvement Act;
                  (ii) participates in a program established 
                under--
                          (I) section 17 of the Child Nutrition 
                        Act of 1966, or
                          (II) section 4(a) of the Agriculture 
                        and Consumer Protection Act of 1973;
                  (iii) participates in a State perinatal 
                program; or
                  (iv) is the Indian Health Service or is a 
                health program or facility operated by a tribe 
                or tribal organization under the Indian Self-
                Determination Act (Public Law 93-638).
The term ``qualified provider'' also includes a qualified 
entity, as defined in section 1920A(b)(3).
  (c)(1) The State agency shall provide qualified providers 
with--
          (A) such forms as are necessary for a pregnant woman 
        to make application for medical assistance under the 
        State plan, and
          (B) information on how to assist such women in 
        completing and filing such forms.
  (2) A qualified provider that determines under subsection 
(b)(1)(A) that a pregnant woman is presumptively eligible for 
medical assistance under a State plan shall--
          (A) notify the State agency of the determination 
        within 5 working days after the date on which 
        determination is made, and
          (B) inform the woman at the time the determination is 
        made that she is required to make application for 
        medical assistance under the State plan by not later 
        than the last day of the month following the month 
        during which the determination is made.
  (3) A pregnant woman who is determined by a qualified 
provider to be presumptively eligible for medical assistance 
under a State plan shall make application for medical 
assistance under such plan by not later than the last day of 
the month following the month during which the determination is 
made, which application may be the application used for the 
receipt of medical assistance by individuals described in 
section 1902(l)(1)(A).
  (d) Notwithstanding any other provision of this title, 
ambulatory prenatal care that--
          (1) is furnished to a pregnant woman--
                  (A) during a presumptive eligibility period,
                  (B) by a provider that is eligible for 
                payments under the State plan; and
          (2) is included in the care and services covered by a 
        State plan;
shall be treated as medical assistance provided by such plan 
for purposes of section 1903.
  (e) If the State has elected the option to provide a 
presumptive eligibility period under this section or section 
1920A, the State may elect to provide a presumptive eligibility 
period (as defined in subsection (b)(1)) for individuals who 
are eligible for medical assistance [under clause (i)(VIII), 
clause (i)(IX), or clause (ii)(XX) of subsection (a)(10)(A)] 
under clause (i)(VIII) or clause (ii)(XX) of section 
1902(a)(10)(A) before January 1, 2020, section 
1902(a)(10)(A)(i)(IX), or section 1931 in the same manner as 
the State provides for such a period under this section or 
section 1920A, subject to such guidance as the Secretary shall 
establish.

           *       *       *       *       *       *       *


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

  Sec. 1923. (a) Implementation of Requirement.--
          (1) A State plan under this title shall not be 
        considered to meet the requirement of section 
        1902(a)(13)(A)(iv) (insofar as it requires payments to 
        hospitals to take into account the situation of 
        hospitals which serve a disproportionate number of low 
        income patients with special needs), as of July 1, 
        1988, unless the State has submitted to the Secretary, 
        by not later than such date, an amendment to such plan 
        that--
                  (A) specifically defines the hospitals so 
                described (and includes in such definition any 
                disproportionate share hospital described in 
                subsection (b)(1) which meets the requirements 
                of subsection (d)), and
                  (B) provides, effective for inpatient 
                hospital services provided not later than July 
                1, 1988, for an appropriate increase in the 
                rate or amount of payment for such services 
                provided by such hospitals, consistent with 
                subsection (c).
          (2)(A) In order to be considered to have met such 
        requirement of section 1902(a)(13)(A) as of July 1, 
        1989, the State must submit to the Secretary by not 
        later than April 1, 1989, the State plan amendment 
        described in paragraph (1), consistent with subsection 
        (c), effective for inpatient hospital services provided 
        on or after July 1, 1989.
          (B) In order to be considered to have met such 
        requirement of section 1902(a)(13)(A) as of July 1, 
        1990, the State must submit to the Secretary by not 
        later than April 1, 1990, the State plan amendment 
        described in paragraph (1), consistent with subsections 
        (c) and (f), effective for inpatient hospital services 
        provided on or after July 1, 1990.
          (C) If a State plan under this title provides for 
        payments for inpatient hospital services on a 
        prospective basis (whether per diem, per case, or 
        otherwise), in order for the plan to be considered to 
        have met such requirement of section 1902(a)(13)(A) as 
        of July 1, 1989, the State must submit to the Secretary 
        by not later than April 1, 1989, a State plan amendment 
        that provides, in the case of hospitals defined by the 
        State as disproportionate share hospitals under 
        paragraph (1)(A), for an outlier adjustment in payment 
        amounts for medically necessary inpatient hospital 
        services provided on or after July 1, 1989, involving 
        exceptionally high costs or exceptionally long lengths 
        of stay for individuals under one year of age.
          (D) A State plan under this title shall not be 
        considered to meet the requirements of section 
        1902(a)(13)(A)(iv) (insofar as it requires payments to 
        hospitals to take into account the situation of 
        hospitals that serve a disproportionate number of low-
        income patients with special needs), as of October 1, 
        1998, unless the State has submitted to the Secretary 
        by such date a description of the methodology used by 
        the State to identify and to make payments to 
        disproportionate share hospitals, including children's 
        hospitals, on the basis of the proportion of low-income 
        and medicaid patients (including such patients who 
        receive benefits through a managed care entity) served 
        by such hospitals. The State shall provide an annual 
        report to the Secretary describing the disproportionate 
        share payments to each such disproportionate share 
        hospital.
          (3) The Secretary shall, not later than 90 days after 
        the date a State submits an amendment under this 
        subsection, review each such amendment for compliance 
        with such requirement and by such date shall approve or 
        disapprove each such amendment. If the Secretary 
        disapproves such an amendment, the State shall 
        immediately submit a revised amendment which meets such 
        requirement.
          (4) The requirement of this subsection may not be 
        waived under section 1915(b)(4).
  (b) Hospitals Deemed Disproportionate Share.--
          (1) For purposes of subsection (a)(1), a hospital 
        which meets the requirements of subsection (d) is 
        deemed to be a disproportionate share hospital if--
                  (A) the hospital's medicaid inpatient 
                utilization rate (as defined in paragraph (2)) 
                is at least one standard deviation above the 
                mean medicaid inpatient utilization rate for 
                hospitals receiving medicaid payments in the 
                State; or
                  (B) the hospital's low-income utilization 
                rate (as defined in paragraph (3)) exceeds 25 
                percent.
          (2) For purposes of paragraph (1)(A), the term 
        ``medicaid inpatient utilization rate'' means, for a 
        hospital, a fraction (expressed as a percentage), the 
        numerator of which is the hospital's number of 
        inpatient days attributable to patients who (for such 
        days) were eligible for medical assistance under a 
        State plan approved under this title in a period 
        (regardless of whether such patients receive medical 
        assistance on a fee-for-service basis or through a 
        managed care entity), and the denominator of which is 
        the total number of the hospital's inpatient days in 
        that period. In this paragraph, the term ``inpatient 
        day'' includes each day in which an individual 
        (including a newborn) is an inpatient in the hospital, 
        whether or not the individual is in a specialized ward 
        and whether or not the individual remains in the 
        hospital for lack of suitable placement elsewhere.
          (3) For purposes of paragraph (1)(B), the term ``low-
        income utilization rate'' means, for a hospital, the 
        sum of--
                  (A) the fraction (expressed as a 
                percentage)--
                          (i) the numerator of which is the sum 
                        (for a period) of (I) the total 
                        revenues paid the hospital for patient 
                        services under a State plan under this 
                        title (regardless of whether the 
                        services were furnished on a fee-for-
                        service basis or through a managed care 
                        entity) and (II) the amount of the cash 
                        subsidies for patient services received 
                        directly from State and local 
                        governments, and
                          (ii) the denominator of which is the 
                        total amount of revenues of the 
                        hospital for patient services 
                        (including the amount of such cash 
                        subsidies) in the period; and
                  (B) a fraction (expressed as a percentage)--
                          (i) the numerator of which is the 
                        total amount of the hospital's charges 
                        for inpatient hospital services which 
                        are attributable to charity care in a 
                        period, less the portion of any cash 
                        subsidies described in clause (i)(II) 
                        of subparagraph (A) in the period 
                        reasonably attributable to inpatient 
                        hospital services, and
                          (ii) the denominator of which is the 
                        total amount of the hospital's charges 
                        for inpatient hospital services in the 
                        hospital in the period.
        The numerator under subparagraph (B)(i) shall not 
        include contractual allowances and discounts (other 
        than for indigent patients not eligible for medical 
        assistance under a State plan approved under this 
        title).
          (4) The Secretary may not restrict a State's 
        authority to designate hospitals as disproportionate 
        share hospitals under this section. The previous 
        sentence shall not be construed to affect the authority 
        of the Secretary to reduce payments pursuant to section 
        1903(w)(1)(A)(iii) if the Secretary determines that, as 
        a result of such designations, there is in effect a 
        hold harmless provision described in section 
        1903(w)(4).
  (c) Payment adjustment.--Subject to subsections (f) and (g), 
in order to be consistent with this subsection, a payment 
adjustment for a disproportionate share hospital must either--
          (1) be in an amount equal to at least the product of 
        (A) the amount paid under the State plan to the 
        hospital for operating costs for inpatient hospital 
        services (of the kind described in section 1886(a)(4)), 
        and (B) the hospital's disproportionate share 
        adjustment percentage (established under section 
        1886(d)(5)(F)(iv));
          (2) provide for a minimum specified additional 
        payment amount (or increased percentage payment) and 
        (without regard to whether the hospital is described in 
        subparagraph (A) or (B) of subsection (b)(1)) for an 
        increase in such a payment amount (or percentage 
        payment) in proportion to the percentage by which the 
        hospital's medicaid utilization rate (as defined in 
        subsection (b)(2)) exceeds one standard deviation above 
        the mean medicaid inpatient utilization rate for 
        hospitals receiving medicaid payments in the State or 
        the hospital's low-income utilization rate (as defined 
        in paragraph (b)(3)); or
          (3) provide for a minimum specified additional 
        payment amount (or increased percentage payment) that 
        varies according to type of hospital under a 
        methodology that--
                  (A) applies equally to all hospitals of each 
                type; and
                  (B) results in an adjustment for each type of 
                hospital that is reasonably related to the 
                costs, volume, or proportion of services 
                provided to patients eligible for medical 
                assistance under a State plan approved under 
                this title or to low-income patients,
        except that, for purposes of paragraphs (1)(B) and 
        (2)(A) of subsection (a), the payment adjustment for a 
        disproportionate share hospital is consistent with this 
        subsection if the appropriate increase in the rate or 
        amount of payment is equal to at least one-third of the 
        increase otherwise applicable under this subsection (in 
        the case of such paragraph (1)(B)) and at least two-
        thirds of such increase (in the case of such paragraph 
        (2)(A)). In the case of a hospital described in 
        subsection (d)(2)(A)(i) (relating to children's 
        hospitals), in computing the hospital's 
        disproportionate share adjustment percentage for 
        purposes of paragraph (1)(B) of this subsection, the 
        disproportionate patient percentage (defined in section 
        1886(d)(5)(F)(vi)) shall be computed by substituting 
        for the fraction described in subclause (I) of such 
        section the fraction described in subclause (II) of 
        that section. If a State elects in a State plan 
        amendment under subsection (a) to provide the payment 
        adjustment described in paragraph (2), the State must 
        include in the amendment a detailed description of the 
        specific methodology to be used in determining the 
        specified additional payment amount (or increased 
        percentage payment) to be made to each hospital 
        qualifying for such a payment adjustment and must 
        publish at least annually the name of each hospital 
        qualifying for such a payment adjustment and the amount 
        of such payment adjustment made for each such hospital.
  (d) Requirements To Qualify as Disproportionate Share 
Hospital.--
          (1) Except as provided in paragraph (2), no hospital 
        may be defined or deemed as a disproportionate share 
        hospital under a State plan under this title or under 
        subsection (b) of this section unless the hospital has 
        at least 2 obstetricians who have staff privileges at 
        the hospital and who have agreed to provide obstetric 
        services to individuals who are entitled to medical 
        assistance for such services under such State plan.
          (2)(A) Paragraph (1) shall not apply to a hospital--
                  (i) the inpatients of which are predominantly 
                individuals under 18 years of age; or
                  (ii) which does not offer nonemergency 
                obstetric services to the general population as 
                of the date of the enactment of this Act.
          (B) In the case of a hospital located in a rural area 
        (as defined for purposes of section 1886), in paragraph 
        (1) the term ``obstetrician'' includes any physician 
        with staff privileges at the hospital to perform 
        nonemergency obstetric procedures.
          (3) No hospital may be defined or deemed as a 
        disproportionate share hospital under a State plan 
        under this title or under subsection (b) or (e) of this 
        section unless the hospital has a medicaid inpatient 
        utilization rate (as defined in subsection (b)(2)) of 
        not less than 1 percent.
  (e) Special Rule.--(1) A State plan shall be considered to 
meet the requirement of section 1902(a)(13)(A)(iv) (insofar as 
it requires payments to hospitals to take into account the 
situation of hospitals which serve a disproportionate number of 
low income patients with special needs) without regard to the 
requirement of subsection (a) if (A)(i) the plan provided for 
payment adjustments based on a pooling arrangement involving a 
majority of the hospitals participating under the plan for 
disproportionate share hospitals as of January 1, 1984, or (ii) 
the plan as of January 1, 1987, provided for payment 
adjustments based on a statewide pooling arrangement involving 
all acute care hospitals and the arrangement provides for 
reimbursement of the total amount of uncompensated care 
provided by each participating hospital, (B) the aggregate 
amount of the payment adjustments under the plan for such 
hospitals is not less than the aggregate amount of such 
adjustments otherwise required to be made under such 
subsection, and (C) the plan meets the requirement of 
subsection (d)(3) and such payment adjustments are made 
consistent with the last sentence of subsection (c).
  (2) In the case of a State that used a health insuring 
organization before January 1, 1986, to administer a portion of 
its plan on a state-wide basis, beginning on July 1, 1988--
          (A) the requirements of subsections (b) and (c) 
        (other than the last sentence of subsection (c)) shall 
        not apply if the aggregate amount of the payment 
        adjustments under the plan for disproportionate share 
        hospitals (as defined under the State plan) is not less 
        than the aggregate amount of payment adjustments 
        otherwise required to be made if such subsections 
        applied,
          (B) subsection (d)(2)(B) shall apply to hospitals 
        located in urban areas, as well as in rural areas,
          (C) subsection (d)(3) shall apply, and
          (D) subsection (g) shall apply.
  (f) Limitation on Federal Financial Participation.--
          (1) In general.--Payment under section 1903(a) shall 
        not be made to a State with respect to any payment 
        adjustment made under this section for hospitals in a 
        State for quarters in a fiscal year in excess of the 
        disproportionate share hospital (in this subsection 
        referred to as ``DSH'') allotment for the State for the 
        fiscal year, as specified in paragraphs (2), (3), and 
        (7).
          (2) State dsh allotments for fiscal years 1998 
        through 2002.--Subject to paragraph (4), the DSH 
        allotment for a State for each fiscal year during the 
        period beginning with fiscal year 1998 and ending with 
        fiscal year 2002 is determined in accordance with the 
        following table:


----------------------------------------------------------------------------------------------------------------
                                                                     DSH Allotment (in millions of dollars)
                      State or District                        -------------------------------------------------
                                                                  FY 98     FY 99     FY 00     FY 01     FY 02
----------------------------------------------------------------------------------------------------------------
 Alabama                                                             293       269       248       246       246
 Alaska                                                               10        10        10         9         9
 Arizona                                                              81        81        81        81        81
 Arkansas                                                              2         2         2         2         2
 California                                                        1,085     1,068       986       931       877
 Colorado                                                             93        85        79        74        74
 Connecticut                                                         200       194       164       160       160
 Delaware                                                              4         4         4         4         4
 District of Columbia                                                 23        23        49        49        49
 Florida                                                             207       203       197       188       160
 Georgia                                                             253       248       241       228       215
 Hawaii                                                                0         0         0         0         0
 Idaho                                                                 1         1         1         1         1
 Illinois                                                            203       199       193       182       172
 Indiana                                                             201       197       191       181       171
 Iowa                                                                  8         8         8         8         8
 Kansas                                                               51        49        42        36        33
 Kentucky                                                            137       134       130       123       116
 Louisiana                                                           880       795       713       658       631
 Maine                                                               103        99        84        84        84
 Maryland                                                             72        70        68        64        61
 Massachusetts                                                       288       282       273       259       244
 Michigan                                                            249       244       237       224       212
 Minnesota                                                            16     \1\16        33        33        33
 Mississippi                                                         143       141       136       129       122
 Missouri                                                            436       423       379       379       379
 Montana                                                             0.2       0.2       0.2       0.2       0.2
 Nebraska                                                              5         5         5         5         5
 Nevada                                                               37        37        37        37        37
 New Hampshire                                                       140       136       130       130       130
 New Jersey                                                          600       582       515       515       515
 New Mexico                                                            5      \2\5         9         9         9
 New York                                                          1,512     1,482     1,436     1,361     1,285
 North Carolina                                                      278       272       264       250       236
 North Dakota                                                          1         1         1         1         1
 Ohio                                                                382       374       363       344       325
 Oklahoma                                                             16        16        16        16        16
 Oregon                                                               20        20        20        20        20
 Pennsylvania                                                        529       518       502       476       449
 Rhode Island                                                         62        60        58        55        52
 South Carolina                                                      313       303       262       262       262
 South Dakota                                                          1         1         1         1         1
 Tennessee                                                             0         0         0         0         0
 Texas                                                               979       950       806       765       765
 Utah                                                                  3         3         3         3         3
 Vermont                                                              18        18        18        18        18
 Virginia                                                             70        68        66        63        59
 Washington                                                          174       171       166       157       148
 West Virginia                                                        64        63        61        58        54
 Wisconsin                                                             7         7         7         7         7
 Wyoming                                                               0      \3\0       0.1       0.1       0.1
----------------------------------------------------------------------------------------------------------------
\1\The DSH allotment for fiscal year 1999 shall be deemed to be $33,000,000 as provided for by section 702 of
  Public Law 105-277 (112 Stat. 2681-389).
\2\The DSH allotment for fiscal year 1999 shall be deemed to be $9,000,000 as provided for by section 703 of
  Public Law 105-277 (112 Stat. 2681-389).
\1\The DSH allotment for fiscal year 1999 shall be deemed to be $95,000 as provided for by section 704 of Public
  Law 105-277 (112 Stat. 2681-389).

          (3) State dsh allotments for fiscal year 2003 and 
        thereafter.--
                  (A) In general.--Except as provided in 
                paragraphs (6), (7), and (8) 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.
                  (B) Limitation.--The DSH allotment for a 
                State shall not be increased under subparagraph 
                (A) for a fiscal year to the extent that such 
                an increase would result in the DSH allotment 
                for the year exceeding the greater of--
                          (i) the DSH allotment for the 
                        previous year, or
                          (ii) 12 percent of the total amount 
                        of expenditures under the State plan 
                        for medical assistance during the 
                        fiscal year.
                  (C) Special, temporary increase in allotments 
                on a one-time, non-cumulative basis.--The DSH 
                allotment for any State (other than a State 
                with a DSH allotment determined under paragraph 
                (5))--
                          (i) for fiscal year 2004 is equal to 
                        116 percent of the DSH allotment for 
                        the State for fiscal year 2003 under 
                        this paragraph, notwithstanding 
                        subparagraph (B); and
                          (ii) for each succeeding fiscal year 
                        is equal to the DSH allotment for the 
                        State for fiscal year 2004 or, in the 
                        case of fiscal years beginning with the 
                        fiscal year specified in subparagraph 
                        (D) for that State, the DSH allotment 
                        for the State for the previous fiscal 
                        year increased by the percentage change 
                        in the consumer price index for all 
                        urban consumers (all items; U.S. city 
                        average), for the previous fiscal year.
                  (D) Fiscal year specified.--For purposes of 
                subparagraph (C)(ii), the fiscal year specified 
                in this subparagraph for a State is the first 
                fiscal year for which the Secretary estimates 
                that the DSH allotment for that State will 
                equal (or no longer exceed) the DSH allotment 
                for that State under the law as in effect 
                before the date of the enactment of this 
                subparagraph.
                  (E) Temporary increase in allotments during 
                recession.--
                          (i) In general.--Subject to clause 
                        (ii), the DSH allotment for any State--
                                  (I) for fiscal year 2009 is 
                                equal to 102.5 percent of the 
                                DSH allotment that would be 
                                determined under this paragraph 
                                for the State for fiscal year 
                                2009 without application of 
                                this subparagraph, 
                                notwithstanding subparagraphs 
                                (B) and (C);
                                  (II) for fiscal year 2010 is 
                                equal to 102.5 percent of the 
                                DSH allotment for the State for 
                                fiscal year 2009, as determined 
                                under subclause (I); and
                                  (III) for each succeeding 
                                fiscal year is equal to the DSH 
                                allotment for the State under 
                                this paragraph determined 
                                without applying subclauses (I) 
                                and (II).
                          (ii) Application.--Clause (i) shall 
                        not apply to a State for a year in the 
                        case that the DSH allotment for such 
                        State for such year under this 
                        paragraph determined without applying 
                        clause (i) would grow higher than the 
                        DSH allotment specified under clause 
                        (i) for the State for such year.
          (4) Special rule for fiscal years 2001 and 2002.--
                  (A) In general.--Notwithstanding paragraph 
                (2), the DSH allotment for any State for--
                          (i) fiscal year 2001, shall be the 
                        DSH allotment determined under 
                        paragraph (2) for fiscal year 2000 
                        increased, subject to subparagraph (B) 
                        and paragraph (5), by the percentage 
                        change in the consumer price index for 
                        all urban consumers (all items; U.S. 
                        city average) for fiscal year 2000; and
                          (ii) fiscal year 2002, shall be the 
                        DSH allotment determined under clause 
                        (i) increased, subject to subparagraph 
                        (B) and paragraph (5), by the 
                        percentage change in the consumer price 
                        index for all urban consumers (all 
                        items; U.S. city average) for fiscal 
                        year 2001.
                  (B) Limitation.--Subparagraph (B) of 
                paragraph (3) shall apply to subparagraph (A) 
                of this paragraph in the same manner as that 
                subparagraph (B) applies to paragraph (3)(A).
                  (C) No application to allotments after fiscal 
                year 2002.--The DSH allotment for any State for 
                fiscal year 2003 or any succeeding fiscal year 
                shall be determined under paragraph (3) without 
                regard to the DSH allotments determined under 
                subparagraph (A) of this paragraph.
          (5) Special rule for low dsh states.--
                  (A) For fiscal years 2001 through 2003 for 
                extremely low dsh states.--In the case of a 
                State in which the total expenditures under the 
                State plan (including Federal and State shares) 
                for disproportionate share hospital adjustments 
                under this section for fiscal year 1999, as 
                reported to the Administrator of the Health 
                Care Financing Administration as of August 31, 
                2000, is greater than 0 but less than 1 percent 
                of the State's total amount of expenditures 
                under the State plan for medical assistance 
                during the fiscal year, the DSH allotment for 
                fiscal year 2001 shall be increased to 1 
                percent of the State's total amount of 
                expenditures under such plan for such 
                assistance during such fiscal year. In 
                subsequent fiscal years before fiscal year 
                2004, such increased allotment is subject to an 
                increase for inflation as provided in paragraph 
                (3)(A).
                  (B) For fiscal year 2004 and subsequent 
                fiscal years.--In the case of a State in which 
                the total expenditures under the State plan 
                (including Federal and State shares) for 
                disproportionate share hospital adjustments 
                under this section for fiscal year 2000, as 
                reported to the Administrator of the Centers 
                for Medicare & Medicaid Services as of August 
                31, 2003, is greater than 0 but less than 3 
                percent of the State's total amount of 
                expenditures under the State plan for medical 
                assistance during the fiscal year, the DSH 
                allotment for the State with respect to--
                          (i) fiscal year 2004 shall be the DSH 
                        allotment for the State for fiscal year 
                        2003 increased by 16 percent;
                          (ii) each succeeding fiscal year 
                        before fiscal year 2009 shall be the 
                        DSH allotment for the State for the 
                        previous fiscal year increased by 16 
                        percent; and
                          (iii) fiscal year 2009 and any 
                        subsequent fiscal year, shall be the 
                        DSH allotment for the State for the 
                        previous year subject to an increase 
                        for inflation as provided in paragraph 
                        (3)(A).
          (6) Allotment adjustments.--
                  (A) Tennessee.--
                          (i) In general.--Only with respect to 
                        fiscal year 2007, the DSH allotment for 
                        Tennessee for such fiscal year, 
                        notwithstanding the table set forth in 
                        paragraph (2) or the terms of the 
                        TennCare Demonstration Project in 
                        effect for the State, shall be the 
                        greater of--
                                  (I) the amount that the 
                                Secretary determines is equal 
                                to the Federal medical 
                                assistance percentage component 
                                attributable to 
                                disproportionate share hospital 
                                payment adjustments for the 
                                demonstration year ending in 
                                2006 that is reflected in the 
                                budget neutrality provision of 
                                the TennCare Demonstration 
                                Project; and
                                  (II) $280,000,000.
                        Only with respect to fiscal years 2008, 
                        2009, 2010, and 2011, the DSH allotment 
                        for Tennessee for the fiscal year, 
                        notwithstanding such table or terms, 
                        shall be the amount specified in the 
                        previous sentence for fiscal year 2007. 
                        Only with respect to fiscal year 2012 
                        for the period ending on December 31, 
                        2011, the DSH allotment for Tennessee 
                        for such portion of the fiscal year, 
                        notwithstanding such table or terms, 
                        shall be \1/4\ of the amount specified 
                        in the first sentence for fiscal year 
                        2007.
                          (ii) Limitation on amount of payment 
                        adjustments eligible for federal 
                        financial participation.--Payment under 
                        section 1903(a) shall not be made to 
                        Tennessee with respect to the aggregate 
                        amount of any payment adjustments made 
                        under this section for hospitals in the 
                        State for fiscal year 2007, 2008, 2009, 
                        2010, 2011, or for period in fiscal 
                        year 2012 described in clause (i) that 
                        is in excess of 30 percent of the DSH 
                        allotment for the State for such fiscal 
                        year or period determined pursuant to 
                        clause (i).
                          (iii) State plan amendment.--The 
                        Secretary shall permit Tennessee to 
                        submit an amendment to its State plan 
                        under this title that describes the 
                        methodology to be used by the State to 
                        identify and make payments to 
                        disproportionate share hospitals, 
                        including children's hospitals and 
                        institutions for mental diseases or 
                        other mental health facilities. The 
                        Secretary may not approve such plan 
                        amendment unless the methodology 
                        described in the amendment is 
                        consistent with the requirements under 
                        this section for making payment 
                        adjustments to disproportionate share 
                        hospitals. For purposes of 
                        demonstrating budget neutrality under 
                        the TennCare Demonstration Project, 
                        payment adjustments made pursuant to a 
                        State plan amendment approved in 
                        accordance with this subparagraph shall 
                        be considered expenditures under such 
                        project.
                          (iv) Offset of federal share of 
                        payment adjustments for fiscal years 
                        2007 through 2011 and the first 
                        calendar quarter of fiscal year 2012 
                        against essential access hospital 
                        supplemental pool payments under the 
                        tenncare demonstration project.--
                                  (I) The total amount of 
                                Essential Access Hospital 
                                supplemental pool payments that 
                                may be made under the TennCare 
                                Demonstration Project for 
                                fiscal year 2007, 2008, 2009, 
                                2010, 2011, or for a period in 
                                fiscal year 2012 described in 
                                clause (i) shall be reduced on 
                                a dollar for dollar basis by 
                                the amount of any payments made 
                                under section 1903(a) to 
                                Tennessee with respect to 
                                payment adjustments made under 
                                this section for hospitals in 
                                the State for such fiscal year 
                                or period.
                                  (II) The sum of the total 
                                amount of payments made under 
                                section 1903(a) to Tennessee 
                                with respect to payment 
                                adjustments made under this 
                                section for hospitals in the 
                                State for fiscal year 2007, 
                                2008, 2009, 2010, 2011, or for 
                                a period in fiscal year 2012 
                                described in clause (i) and the 
                                total amount of Essential 
                                Access Hospital supplemental 
                                pool payments made under the 
                                TennCare Demonstration Project 
                                for such fiscal year or period 
                                shall not exceed the State's 
                                DSH allotment for such fiscal 
                                or period year established 
                                under clause (i).
                          (v) Allotment for 2d, 3rd, and 4th 
                        quarters of fiscal year 2012 and for 
                        fiscal year 2013.--Notwithstanding the 
                        table set forth in paragraph (2):
                                  (I) 2d, 3rd, and 4th quarters 
                                of fiscal year 2012.--In the 
                                case of a State that has a DSH 
                                allotment of $0 for the 2d, 
                                3rd, and 4th quarters of fiscal 
                                year 2012, the DSH allotment 
                                shall be $47,200,000 for such 
                                quarters.
                                  (II) Fiscal year 2013.--In 
                                the case of a State that has a 
                                DSH allotment of $0 for fiscal 
                                year 2013, the DSH allotment 
                                shall be $53,100,000 for such 
                                fiscal year.
                          (vi) Allotment for fiscal years 2015 
                        through 2025.--Notwithstanding any 
                        other provision of this subsection, any 
                        other provision of law, or the terms of 
                        the TennCare Demonstration Project in 
                        effect for the State, the DSH allotment 
                        for Tennessee for fiscal year 2015, and 
                        for each fiscal year thereafter through 
                        fiscal year 2025, shall be $53,100,000 
                        for each such fiscal year.
                  (B) Hawaii.--
                          (i) In general.--Only with respect to 
                        each of fiscal years 2007 through 2011, 
                        the DSH allotment for Hawaii for such 
                        fiscal year, notwithstanding the table 
                        set forth in paragraph (2), shall be 
                        $10,000,000. Only with respect to 
                        fiscal year 2012 for the period ending 
                        on December 31, 2011, the DSH allotment 
                        for Hawaii for such portion of the 
                        fiscal year, notwithstanding the table 
                        set forth in paragraph (2), shall be 
                        $2,500,000.
                          (ii) State plan amendment.--The 
                        Secretary shall permit Hawaii to submit 
                        an amendment to its State plan under 
                        this title that describes the 
                        methodology to be used by the State to 
                        identify and make payments to 
                        disproportionate share hospitals, 
                        including children's hospitals and 
                        institutions for mental diseases or 
                        other mental health facilities. The 
                        Secretary may not approve such plan 
                        amendment unless the methodology 
                        described in the amendment is 
                        consistent with the requirements under 
                        this section for making payment 
                        adjustments to disproportionate share 
                        hospitals.
                          (iii) Allotment for 2d, 3rd, and 4th 
                        quarter of fiscal year 2012, fiscal 
                        year 2013, and succeeding fiscal 
                        years.--Notwithstanding the table set 
                        forth in paragraph (2):
                                  (I) 2d, 3rd, and 4th quarter 
                                of fiscal year 2012.--The DSH 
                                allotment for Hawaii for the 
                                2d, 3rd, and 4th quarters of 
                                fiscal year 2012 shall be 
                                $7,500,000.
                                  (II) Treatment as a low-dsh 
                                state for fiscal year 2013 and 
                                succeeding fiscal years.--With 
                                respect to fiscal year 2013, 
                                and each fiscal year 
                                thereafter, the DSH allotment 
                                for Hawaii shall be increased 
                                in the same manner as 
                                allotments for low DSH States 
                                are increased for such fiscal 
                                year under clause (iii) of 
                                paragraph (5)(B).
                                  (III) Certain hospital 
                                payments.--The Secretary may 
                                not impose a limitation on the 
                                total amount of payments made 
                                to hospitals under the QUEST 
                                section 1115 Demonstration 
                                Project except to the extent 
                                that such limitation is 
                                necessary to ensure that a 
                                hospital does not receive 
                                payments in excess of the 
                                amounts described in subsection 
                                (g), or as necessary to ensure 
                                that such payments under the 
                                waiver and such payments 
                                pursuant to the allotment 
                                provided in this clause do not, 
                                in the aggregate in any year, 
                                exceed the amount that the 
                                Secretary determines is equal 
                                to the Federal medical 
                                assistance percentage component 
                                attributable to 
                                disproportionate share hospital 
                                payment adjustments for such 
                                year that is reflected in the 
                                budget neutrality provision of 
                                the QUEST Demonstration 
                                Project.
          (7) Medicaid dsh reductions.--
                  (A) Reductions.--
                          (i) In general.--For each of fiscal 
                        years 2018 through [2025] 2019 the 
                        Secretary shall effect the following 
                        reductions:
                                  (I) Reduction in dsh 
                                allotments.--The Secretary 
                                shall reduce DSH allotments to 
                                States in the amount specified 
                                under the DSH health reform 
                                methodology under subparagraph 
                                (B) for the State for the 
                                fiscal year.
                                  (II) Reductions in 
                                payments.--The Secretary shall 
                                reduce payments to States under 
                                section 1903(a) for each 
                                calendar quarter in the fiscal 
                                year, in the manner specified 
                                in clause (iii), in an amount 
                                equal to \1/4\ of the DSH 
                                allotment reduction under 
                                subclause (I) for the State for 
                                the fiscal year.
                          (ii) Aggregate reductions.--The 
                        aggregate reductions in DSH allotments 
                        for all States under clause (i)(I) 
                        shall be equal to--
                                  (I) $2,000,000,000 for fiscal 
                                year 2018; and
                                  (II) $3,000,000,000 for 
                                fiscal year 2019[;].
                                  [(III) $4,000,000,000 for 
                                fiscal year 2020;
                                  [(IV) $5,000,000,000 for 
                                fiscal year 2021;
                                  [(V) $6,000,000,000 for 
                                fiscal year 2022;
                                  [(VI) $7,000,000,000 for 
                                fiscal year 2023;
                                  [(VII) $8,000,000,000 for 
                                fiscal year 2024; and
                                  [(VIII) $8,000,000,000 for 
                                fiscal year 2025.]
                          (iii) Manner of payment reduction.--
                        The amount of the payment reduction 
                        under clause (i)(II) for a State for a 
                        quarter shall be deemed an overpayment 
                        to the State under this title to be 
                        disallowed against the State's regular 
                        quarterly draw for all spending under 
                        section 1903(d)(2). Such a disallowance 
                        is not subject to a reconsideration 
                        under subsections (d) and (e) of 
                        section 1116.
                          (iv) Definition.--In this paragraph, 
                        the term ``State'' means the 50 States 
                        and the District of Columbia.
                          (v) Distribution of aggregate 
                        reductions.--The Secretary shall 
                        distribute the aggregate reductions 
                        under clause (ii) among States in 
                        accordance with subparagraph (B).
                  (B) DSH health reform methodology.--The 
                Secretary shall carry out subparagraph (A) 
                through use of a DSH Health Reform methodology 
                that meets the following requirements:
                          (i) The methodology imposes the 
                        largest percentage reductions on the 
                        States that--
                                  (I) have the lowest 
                                percentages of uninsured 
                                individuals (determined on the 
                                basis of data from the Bureau 
                                of the Census, audited hospital 
                                cost reports, and other 
                                information likely to yield 
                                accurate data) during the most 
                                recent year for which such data 
                                are available; or
                                  (II) do not target their DSH 
                                payments on--
                                          (aa) hospitals with 
                                        high volumes of 
                                        Medicaid inpatients (as 
                                        defined in subsection 
                                        (b)(1)(A)); and
                                          (bb) hospitals that 
                                        have high levels of 
                                        uncompensated care 
                                        (excluding bad debt).
                          (ii) The methodology imposes a 
                        smaller percentage reduction on low DSH 
                        States described in paragraph (5)(B).
                          (iii) The methodology takes into 
                        account the extent to which the DSH 
                        allotment for a State was included in 
                        the budget neutrality calculation for a 
                        coverage expansion approved under 
                        section 1115 as of July 31, 2009.
                  (C) Exemption from exemption for non-
                expansion states.--
                          (i) In general.--In the case of a 
                        State that is a non-expansion State for 
                        a fiscal year, subparagraph (A)(i) 
                        shall not apply to the DSH allotment 
                        for such State and fiscal year.
                          (ii) No change in reduction for 
                        expansion states.--In the case of a 
                        State that is an expansion State for a 
                        fiscal year, the DSH allotment for such 
                        State and fiscal year shall be 
                        determined as if clause (i) did not 
                        apply.
                          (iii) Non-expansion and expansion 
                        state defined.--
                                  (I) The term ``expansion 
                                State'' means with respect to a 
                                fiscal year, a State that, as 
                                of July 1 of the preceding 
                                fiscal year, provides for 
                                eligibility under clause 
                                (i)(VIII) or (ii)(XX) of 
                                section 1902(a)(10)(A) for 
                                medical assistance under this 
                                title (or a waiver of the State 
                                plan approved under section 
                                1115).
                                  (II) The term ``non-expansion 
                                State'' means, with respect to 
                                a fiscal year, a State that is 
                                not an expansion State.
          (8) Calculation of DSH allotments after reductions 
        period.--The DSH allotment for a State for fiscal years 
        after [fiscal year 2025] fiscal year 2019 shall be 
        calculated under paragraph (3) without regard to 
        paragraph (7).
          (9) Definition of state.--In this subsection, the 
        term ``State'' means the 50 States and the District of 
        Columbia.
  (g) Limit on Amount of Payment to Hospital.--
          (1) Amount of adjustment subject to uncompensated 
        costs.--
                  (A) In general.--A payment adjustment during 
                a fiscal year shall not be considered to be 
                consistent with subsection (c) with respect to 
                a hospital if the payment adjustment exceeds 
                the costs incurred during the year of 
                furnishing hospital services (as determined by 
                the Secretary and net of payments under this 
                title, other than under this section, and by 
                uninsured patients) by the hospital to 
                individuals who either are eligible for medical 
                assistance under the State plan or have no 
                health insurance (or other source of third 
                party coverage) for services provided during 
                the year. For purposes of the preceding 
                sentence, payments made to a hospital for 
                services provided to indigent patients made by 
                a State or a unit of local government within a 
                State shall not be considered to be a source of 
                third party payment.
                  (B) Limit to public hospitals during 
                transition period.--With respect to payment 
                adjustments during a State fiscal year that 
                begins before January 1, 1995, subparagraph (A) 
                shall apply only to hospitals owned or operated 
                by a State (or by an instrumentality or a unit 
                of government within a State).
                  (C) Modifications for private hospitals.--
                With respect to hospitals that are not owned or 
                operated by a State (or by an instrumentality 
                or a unit of government within a State), the 
                Secretary may make such modifications to the 
                manner in which the limitation on payment 
                adjustments is applied to such hospitals as the 
                Secretary considers appropriate.
          (2) Additional amount during transition period for 
        certain hospitals with high disproportionate share.--
                  (A) In general.--In the case of a hospital 
                with high disproportionate share (as defined in 
                subparagraph (B)), a payment adjustment during 
                a State fiscal year that begins before January 
                1, 1995, shall be considered consistent with 
                subsection (c) if the payment adjustment does 
                not exceed 200 percent of the costs of 
                furnishing hospital services described in 
                paragraph (1)(A) during the year, but only if 
                the Governor of the State certifies to the 
                satisfaction of the Secretary that the 
                hospital's applicable minimum amount is used 
                for health services during the year. In 
                determining the amount that is used for such 
                services during a year, there shall be excluded 
                any amounts received under the Public Health 
                Service Act, title V, title XVIII, or from 
                third party payors (not including the State 
                plan under this title) that are used for 
                providing such services during the year.
                  (B) Hospitals with high disproportionate 
                share defined.--In subparagraph (A), a hospital 
                is a ``hospital with high disproportionate 
                share'' if--
                          (i) the hospital is owned or operated 
                        by a State (or by an instrumentality or 
                        a unit of government within a State); 
                        and
                          (ii) the hospital--
                                  (I) meets the requirement 
                                described in subsection 
                                (b)(1)(A), or
                                  (II) has the largest number 
                                of inpatient days attributable 
                                to individuals entitled to 
                                benefits under the State plan 
                                of any hospital in such State 
                                for the previous State fiscal 
                                year.
                  (C) Applicable minimum amount defined.--In 
                subparagraph (A), the ``applicable minimum 
                amount'' for a hospital for a fiscal year is 
                equal to the difference between the amount of 
                the hospital's payment adjustment for the 
                fiscal year and the costs to the hospital of 
                furnishing hospital services described in 
                paragraph (1)(A) during the fiscal year.
  (h) Limitation on Certain State DSH Expenditures.--
          (1) In general.--Payment under section 1903(a) shall 
        not be made to a State with respect to any payment 
        adjustments made under this section for quarters in a 
        fiscal year (beginning with fiscal year 1998) to 
        institutions for mental diseases or other mental health 
        facilities, to the extent the aggregate of such 
        adjustments in the fiscal year exceeds the lesser of 
        the following:
                  (A)  1995 imd dsh payment adjustments.--The 
                total State DSH expenditures that are 
                attributable to fiscal year 1995 for payments 
                to institutions for mental diseases and other 
                mental health facilities (based on reporting 
                data specified by the State on HCFA Form 64 as 
                mental health DSH, and as approved by the 
                Secretary).
                  (B) Applicable percentage of 1995 total dsh 
                payment allotment.--The amount of such payment 
                adjustments which are equal to the applicable 
                percentage of the Federal share of payment 
                adjustments made to hospitals in the State 
                under subsection (c) that are attributable to 
                the 1995 DSH allotment for the State for 
                payments to institutions for mental diseases 
                and other mental health facilities (based on 
                reporting data specified by the State on HCFA 
                Form 64 as mental health DSH, and as approved 
                by the Secretary).
          (2) Applicable percentage.--
                  (A) In general.--For purposes of paragraph 
                (1), the applicable percentage with respect 
                to--
                          (i) each of fiscal years 1998, 1999, 
                        and 2000, is the percentage determined 
                        under subparagraph (B); or
                          (ii) a succeeding fiscal year is the 
                        lesser of the percentage determined 
                        under subparagraph (B) or the following 
                        percentage:
                                  (I) For fiscal year 2001, 50 
                                percent.
                                  (II) For fiscal year 2002, 40 
                                percent.
                                  (III) For each succeeding 
                                fiscal year, 33 percent.
                  (B)  1995 percentage.--The percentage 
                determined under this subparagraph is the ratio 
                (determined as a percentage) of--
                          (i) the Federal share of payment 
                        adjustments made to hospitals in the 
                        State under subsection (c) that are 
                        attributable to the 1995 DSH allotment 
                        for the State (as reported by the State 
                        not later than January 1, 1997, on HCFA 
                        Form 64, and as approved by the 
                        Secretary) for payments to institutions 
                        for mental diseases and other mental 
                        health facilities, to
                          (ii) the State 1995 DSH spending 
                        amount.
                  (C) State 1995 dsh spending amount.--For 
                purposes of subparagraph (B)(ii), the ``State 
                1995 DSH spending amount'', with respect to a 
                State, is the Federal medical assistance 
                percentage (for fiscal year 1995) of the 
                payment adjustments made under subsection (c) 
                under the State plan that are attributable to 
                the fiscal year 1995 DSH allotment for the 
                State (as reported by the State not later than 
                January 1, 1997, on HCFA Form 64, and as 
                approved by the Secretary).
  (i) Requirement for Direct Payment.--
          (1) In general.--No payment may be made under section 
        1903(a)(1) with respect to a payment adjustment made 
        under this section, for services furnished by a 
        hospital on or after October 1, 1997, with respect to 
        individuals eligible for medical assistance under the 
        State plan who are enrolled with a managed care entity 
        (as defined in section 1932(a)(1)(B)) or under any 
        other managed care arrangement unless a payment, equal 
        to the amount of the payment adjustment--
                  (A) is made directly to the hospital by the 
                State; and
                  (B) is not used to determine the amount of a 
                prepaid capitation payment under the State plan 
                to the entity or arrangement with respect to 
                such individuals.
          (2) Exception for current arrangements.--Paragraph 
        (1) shall not apply to a payment adjustment provided 
        pursuant to a payment arrangement in effect on July 1, 
        1997.
  (j) Annual Reports and Other Requirements Regarding Payment 
Adjustments.--With respect to fiscal year 2004 and each fiscal 
year thereafter, the Secretary shall require a State, as a 
condition of receiving a payment under section 1903(a)(1) with 
respect to a payment adjustment made under this section, to do 
the following:
          (1) Report.--The State shall submit an annual report 
        that includes the following:
                  (A) An identification of each 
                disproportionate share hospital that received a 
                payment adjustment under this section for the 
                preceding fiscal year and the amount of the 
                payment adjustment made to such hospital for 
                the preceding fiscal year.
                  (B) Such other information as the Secretary 
                determines necessary to ensure the 
                appropriateness of the payment adjustments made 
                under this section for the preceding fiscal 
                year.
          (2) Independent certified audit.--The State shall 
        annually submit to the Secretary an independent 
        certified audit that verifies each of the following:
                  (A) The extent to which hospitals in the 
                State have reduced their uncompensated care 
                costs to reflect the total amount of claimed 
                expenditures made under this section.
                  (B) Payments under this section to hospitals 
                that comply with the requirements of subsection 
                (g).
                  (C) Only the uncompensated care costs of 
                providing inpatient hospital and outpatient 
                hospital services to individuals described in 
                paragraph (1)(A) of such subsection are 
                included in the calculation of the hospital-
                specific limits under such subsection.
                  (D) The State included all payments under 
                this title, including supplemental payments, in 
                the calculation of such hospital-specific 
                limits.
                  (E) The State has separately documented and 
                retained a record of all of its costs under 
                this title, claimed expenditures under this 
                title, uninsured costs in determining payment 
                adjustments under this section, and any 
                payments made on behalf of the uninsured from 
                payment adjustments under this section.

   ADJUSTMENT IN PAYMENT FOR SERVICES OF SAFETY NET PROVIDERS IN NON-
                            EXPANSION STATES

  Sec. 1923A. (a) In General.--Subject to the limitations of 
this section, for each year during the period beginning with 
2018 and ending with 2021, each State that is one of the 50 
States or the District of Columbia and that, as of July 1 of 
the preceding year, did not provide for eligibility under 
clause (i)(VIII) or (ii)(XX) of section 1902(a)(10)(A) for 
medical assistance under this title (or a waiver of the State 
plan approved under section 1115) (each such State or District 
referred to in this section for the year as a ``non-expansion 
State'') may adjust the payment amounts otherwise provided 
under the State plan under this title (or a waiver of such 
plan) to health care providers that provide health care 
services to individuals enrolled under this title (in this 
section referred to as ``eligible providers'').
  (b) Increase in Applicable FMAP.--Notwithstanding section 
1905(b), the Federal medical assistance percentage applicable 
with respect to expenditures attributable to a payment 
adjustment under subsection (a) for which payment is permitted 
under subsection (c) shall be equal to--
          (1) 100 percent for calendar quarters in calendar 
        years 2018, 2019, 2020, and 2021; and
          (2) 95 percent for calendar quarters in calendar year 
        2022.
  (c) Limitations; Disqualification of States.--
          (1) Annual allotment limitation.--Payment under 
        section 1903(a) shall not be made to a State with 
        respect to any payment adjustment made under this 
        section for all calendar quarters in a year in excess 
        of the $2,000,000,000 multiplied by the ratio of--
                  (A) the population of the State with income 
                below 138 percent of the poverty line in 2015 
                (as determined based the table entitled 
                ``Health Insurance Coverage Status and Type by 
                Ratio of Income to Poverty Level in the Past 12 
                Months by Age'' for the universe of the 
                civilian noninstitutionalized population for 
                whom poverty status is determined based on the 
                2015 American Community Survey 1-Year 
                Estimates, as published by the Bureau of the 
                Census), to
                  (B) the sum of the populations under 
                subparagraph (A) for all non-expansion States.
          (2) Limitation on payment adjustment amount for 
        individual providers.--The amount of a payment 
        adjustment under subsection (a) for an eligible 
        provider may not exceed theprovider's costs incurred in 
        furnishing health care services (as determined by the 
        Secretary and net of payments under this title, other 
        than under this section, and by uninsured patients) to 
        individuals who either are eligible for medical 
        assistance under the State plan (or under a waiver of 
        such plan) or have no health insurance or health plan 
        coverage for such services.
  (d) Disqualification in Case of State Coverage Expansion.--If 
a State is a non-expansion for a year and provides eligibility 
for medical assistance described in subsection (a) during the 
year, the State shall no longer be treated as a non-expansion 
State under this section for any subsequent years.

           *       *       *       *       *       *       *


                 state flexibility in benefit packages

  Sec. 1937. (a) State Option of Providing Benchmark 
Benefits.--
          (1) Authority.--
                  (A) In general.--Notwithstanding section 
                1902(a)(1) (relating to statewideness), section 
                1902(a)(10)(B) (relating to comparability) and 
                any other provision of this title which would 
                be directly contrary to the authority under 
                this section and subject to subsection (E), a 
                State, at its option as a State plan amendment, 
                may provide for medical assistance under this 
                title to individuals within one or more groups 
                of individuals specified by the State through 
                coverage that--
                          (i) provides benchmark coverage 
                        described in subsection (b)(1) or 
                        benchmark equivalent coverage described 
                        in subsection (b)(2); and
                          (ii) for any individual described in 
                        section 1905(a)(4)(B) who is eligible 
                        under the State plan in accordance with 
                        paragraphs (10) and (17) of section 
                        1902(a), consists of the items and 
                        services described in section 
                        1905(a)(4)(B) (relating to early and 
                        periodic screening, diagnostic, and 
                        treatment services defined in section 
                        1905(r)) and provided in accordance 
                        with the requirements of section 
                        1902(a)(43).
                  (B) Limitation.--The State may only exercise 
                the option under subparagraph (A) for an 
                individual eligible under subclause (VIII) of 
                section 1902(a)(10)(A)(i) or under an 
                eligibility category that had been established 
                under the State plan on or before the date of 
                the enactment of this section.
                  (C) Option of additional benefits.--In the 
                case of coverage described in subparagraph (A), 
                a State, at its option, may provide such 
                additional benefits as the State may specify.
                  (D) Treatment as medical assistance.--Payment 
                of premiums for such coverage under this 
                subsection shall be treated as payment of other 
                insurance premiums described in the third 
                sentence of section 1905(a).
                  (E) Rule of construction.--Nothing in this 
                paragraph shall be construed as--
                          (i) requiring a State to offer all or 
                        any of the items and services required 
                        by subparagraph (A)(ii) through an 
                        issuer of benchmark coverage described 
                        in subsection (b)(1) or benchmark 
                        equivalent coverage described in 
                        subsection (b)(2);
                          (ii) preventing a State from offering 
                        all or any of the items and services 
                        required by subparagraph (A)(ii) 
                        through an issuer of benchmark coverage 
                        described in subsection (b)(1) or 
                        benchmark equivalent coverage described 
                        in subsection (b)(2); or
                          (iii) affecting a child's entitlement 
                        to care and services described in 
                        subsections (a)(4)(B) and (r) of 
                        section 1905 and provided in accordance 
                        with section 1902(a)(43) whether 
                        provided through benchmark coverage, 
                        benchmark equivalent coverage, or 
                        otherwise.
          (2) Application.--
                  (A) In general.--Except as provided in 
                subparagraph (B), a State may require that a 
                full-benefit eligible individual (as defined in 
                subparagraph (C)) within a group obtain 
                benefits under this title through enrollment in 
                coverage described in paragraph (1)(A). A State 
                may apply the previous sentence to individuals 
                within 1 or more groups of such individuals.
                  (B) Limitation on application.--A State may 
                not require under subparagraph (A) an 
                individual to obtain benefits through 
                enrollment described in paragraph (1)(A) if the 
                individual is within one of the following 
                categories of individuals:
                          (i) Mandatory pregnant women.--The 
                        individual is a pregnant woman who is 
                        required to be covered under the State 
                        plan under section 1902(a)(10)(A)(i).
                          (ii) Blind or disabled individuals.--
                        The individual qualifies for medical 
                        assistance under the State plan on the 
                        basis of being blind or disabled (or 
                        being treated as being blind or 
                        disabled) without regard to whether the 
                        individual is eligible for supplemental 
                        security income benefits under title 
                        XVI on the basis of being blind or 
                        disabled and including an individual 
                        who is eligible for medical assistance 
                        on the basis of section 1902(e)(3).
                          (iii) Dual eligibles.--The individual 
                        is entitled to benefits under any part 
                        of title XVIII.
                          (iv) Terminally ill hospice 
                        patients.--The individual is terminally 
                        ill and is receiving benefits for 
                        hospice care under this title.
                          (v) Eligible on basis of 
                        institutionalization.--The individual 
                        is an inpatient in a hospital, nursing 
                        facility, intermediate care facility 
                        for the mentally retarded, or other 
                        medical institution, and is required, 
                        as a condition of receiving services in 
                        such institution under the State plan, 
                        to spend for costs of medical care all 
                        but a minimal amount of the 
                        individual's income required for 
                        personal needs.
                          (vi) Medically frail and special 
                        medical needs individuals.--The 
                        individual is medically frail or 
                        otherwise an individual with special 
                        medical needs (as identified in 
                        accordance with regulations of the 
                        Secretary).
                          (vii) Beneficiaries qualifying for 
                        long-term care services.--The 
                        individual qualifies based on medical 
                        condition for medical assistance for 
                        long-term care services described in 
                        section 1917(c)(1)(C).
                          (viii) Children in foster care 
                        receiving child welfare services and 
                        children receiving foster care or 
                        adoption assistance.--The individual is 
                        an individual with respect to whom 
                        child welfare services are made 
                        available under part B of title IV on 
                        the basis of being a child in foster 
                        care or with respect to whom adoption 
                        or foster care assistance is made 
                        available under part E of such title, 
                        without regard to age, or the 
                        individual qualifies for medical 
                        assistance on the basis of section 
                        1902(a)(10)(A)(i)(IX).
                          (ix) TANF and section 1931 parents.--
                        The individual qualifies for medical 
                        assistance on the basis of eligibility 
                        to receive assistance under a State 
                        plan funded under part A of title IV 
                        (as in effect on or after the welfare 
                        reform effective date defined in 
                        section 1931(i)).
                          (x) Women in the breast or cervical 
                        cancer program.--The individual is a 
                        woman who is receiving medical 
                        assistance by virtue of the application 
                        of sections 1902(a)(10)(A)(ii)(XVIII) 
                        and 1902(aa).
                          (xi) Limited services 
                        beneficiaries.--The individual--
                                  (I) qualifies for medical 
                                assistance on the basis of 
                                section 
                                1902(a)(10)(A)(ii)(XII); or
                                  (II) is not a qualified alien 
                                (as defined in section 431 of 
                                the Personal Responsibility and 
                                Work Opportunity Reconciliation 
                                Act of 1996) and receives care 
                                and services necessary for the 
                                treatment of an emergency 
                                medical condition in accordance 
                                with section 1903(v).
                  (C) Full-benefit eligible individuals.--
                          (i) In general.--For purposes of this 
                        paragraph, subject to clause (ii), the 
                        term ``full-benefit eligible 
                        individual'' means for a State for a 
                        month an individual who is determined 
                        eligible by the State for medical 
                        assistance for all services defined in 
                        section 1905(a) which are covered under 
                        the State plan under this title for 
                        such month under section 1902(a)(10)(A) 
                        or under any other category of 
                        eligibility for medical assistance for 
                        all such services under this title, as 
                        determined by the Secretary.
                          (ii) Exclusion of medically needy and 
                        spend-down populations.--Such term 
                        shall not include an individual 
                        determined to be eligible by the State 
                        for medical assistance under section 
                        1902(a)(10)(C) or by reason of section 
                        1902(f) or otherwise eligible based on 
                        a reduction of income based on costs 
                        incurred for medical or other remedial 
                        care.
  (b) Benchmark Benefit Packages.--
          (1) In general.--For purposes of subsection (a)(1), 
        subject to paragraphs (5) and (6), each of the 
        following coverages shall be considered to be benchmark 
        coverage:
                  (A) FEHBP-equivalent health insurance 
                coverage.--The standard Blue Cross/Blue Shield 
                preferred provider option service benefit plan, 
                described in and offered under section 8903(1) 
                of title 5, United States Code.
                  (B) State employee coverage.--A health 
                benefits coverage plan that is offered and 
                generally available to State employees in the 
                State involved.
                  (C) Coverage offered through hmo.--The health 
                insurance coverage plan that--
                          (i) is offered by a health 
                        maintenance organization (as defined in 
                        section 2791(b)(3) of the Public Health 
                        Service Act), and
                          (ii) has the largest insured 
                        commercial, non-medicaid enrollment of 
                        covered lives of such coverage plans 
                        offered by such a health maintenance 
                        organization in the State involved.
                  (D) Secretary-approved coverage.--Any other 
                health benefits coverage that the Secretary 
                determines, upon application by a State, 
                provides appropriate coverage for the 
                population proposed to be provided such 
                coverage.
          (2) Benchmark-equivalent coverage.--For purposes of 
        subsection (a)(1), subject to paragraphs (5) and (6) 
        coverage that meets the following requirement shall be 
        considered to be benchmark-equivalent coverage:
                  (A) Inclusion of basic services.--The 
                coverage includes benefits for items and 
                services within each of the following 
                categories of basic services:
                          (i) Inpatient and outpatient hospital 
                        services.
                          (ii) Physicians' surgical and medical 
                        services.
                          (iii) Laboratory and x-ray services.
                          (iv) Coverage of prescription drugs.
                          (v) Mental health services.
                          (vi) Well-baby and well-child care, 
                        including age-appropriate 
                        immunizations.
                          (vii) Other appropriate preventive 
                        services, as designated by the 
                        Secretary.
                  (B) Aggregate actuarial value equivalent to 
                benchmark package.--The coverage has an 
                aggregate actuarial value that is at least 
                actuarially equivalent to one of the benchmark 
                benefit packages described in paragraph (1).
                  (C) Substantial actuarial value for 
                additional services included in benchmark 
                package.--With respect to each of the following 
                categories of additional services for which 
                coverage is provided under the benchmark 
                benefit package used under subparagraph (B), 
                the coverage has an actuarial value that is 
                equal to at least 75 percent of the actuarial 
                value of the coverage of that category of 
                services in such package:
                          (i) Vision services.
                          (ii) Hearing services.
          (3) Determination of actuarial value.--The actuarial 
        value of coverage of benchmark benefit packages shall 
        be set forth in an actuarial opinion in an actuarial 
        report that has been prepared--
                  (A) by an individual who is a member of the 
                American Academy of Actuaries;
                  (B) using generally accepted actuarial 
                principles and methodologies;
                  (C) using a standardized set of utilization 
                and price factors;
                  (D) using a standardized population that is 
                representative of the population involved;
                  (E) applying the same principles and factors 
                in comparing the value of different coverage 
                (or categories of services);
                  (F) without taking into account any 
                differences in coverage based on the method of 
                delivery or means of cost control or 
                utilization used; and
                  (G) taking into account the ability of a 
                State to reduce benefits by taking into account 
                the increase in actuarial value of benefits 
                coverage offered under this title that results 
                from the limitations on cost sharing under such 
                coverage.
        The actuary preparing the opinion shall select and 
        specify in the memorandum the standardized set and 
        population to be used under subparagraphs (C) and (D).
          (4) Coverage of rural health clinic and fqhc 
        services.--Notwithstanding the previous provisions of 
        this section, a State may not provide for medical 
        assistance through enrollment of an individual with 
        benchmark coverage or benchmark equivalent coverage 
        under this section unless--
                  (A) the individual has access, through such 
                coverage or otherwise, to services described in 
                subparagraphs (B) and (C) of section 
                1905(a)(2); and
                  (B) payment for such services is made in 
                accordance with the requirements of section 
                1902(bb).
          (5) Minimum standards.--Effective January 1, 2014, 
        any benchmark benefit package under paragraph (1) or 
        benchmark equivalent coverage under paragraph (2) must 
        provide at least essential health benefits as described 
        in section 1302(b) of the Patient Protection and 
        Affordable Care Act. This paragraph shall not apply 
        after December 31, 2019.
          (6) Mental health services parity.--
                  (A) In general.--In the case of any benchmark 
                benefit package under paragraph (1) or 
                benchmark equivalent coverage under paragraph 
                (2) that is offered by an entity that is not a 
                medicaid managed care organization and that 
                provides both medical and surgical benefits and 
                mental health or substance use disorder 
                benefits, the entity shall ensure that the 
                financial requirements and treatment 
                limitations applicable to such mental health or 
                substance use disorder benefits comply with the 
                requirements of section 2705(a) of the Public 
                Health Service Act in the same manner as such 
                requirements apply to a group health plan.
                  (B) Deemed compliance.--Coverage provided 
                with respect to an individual described in 
                section 1905(a)(4)(B) and covered under the 
                State plan under section 1902(a)(10)(A) of the 
                services described in section 1905(a)(4)(B) 
                (relating to early and periodic screening, 
                diagnostic, and treatment services defined in 
                section 1905(r)) and provided in accordance 
                with section 1902(a)(43), shall be deemed to 
                satisfy the requirements of subparagraph (A).
          (7) Coverage of family planning services and 
        supplies.--Notwithstanding the previous provisions of 
        this section, a State may not provide for medical 
        assistance through enrollment of an individual with 
        benchmark coverage or benchmark-equivalent coverage 
        under this section unless such coverage includes for 
        any individual described in section 1905(a)(4)(C), 
        medical assistance for family planning services and 
        supplies in accordance with such section.
  (c) Publication of Provisions Affected.--With respect to a 
State plan amendment to provide benchmark benefits in 
accordance with subsections (a) and (b) that is approved by the 
Secretary, the Secretary shall publish on the Internet website 
of the Centers for Medicare & Medicaid Services, a list of the 
provisions of this title that the Secretary has determined do 
not apply in order to enable the State to carry out the plan 
amendment and the reason for each such determination on the 
date such approval is made, and shall publish such list in the 
Federal Register and not later than 30 days after such date of 
approval.

           *       *       *       *       *       *       *


              TITLE XXII--PATIENT AND STATE STABILITY FUND

SEC. 2201. ESTABLISHMENT OF PROGRAM.

  There is hereby established the ``Patient and State Stability 
Fund'' to be administered by the Secretary of Health and Human 
Services, acting through the Administrator of the Centers for 
Medicare & Medicaid Services (in this section referred to as 
the ``Administrator''), to provide funding, in accordance with 
this title, to the 50 States and the District of Columbia (each 
referred to in this section as a ``State'') during the period, 
subject to section 2204(c), beginning on January 1, 2018, and 
ending on December 31, 2026, for the purposes described in 
section 2202.

SEC. 2202. USE OF FUNDS.

  A State may use the funds allocated to the State under this 
title for any of the following purposes:
          (1) Helping, through the provision of financial 
        assistance, high-risk individuals who do not have 
        access to health insurance coverage offered through an 
        employer enroll in health insurance coverage in the 
        individual market in the State, as such market is 
        defined by the State (whether through the establishment 
        of a new mechanism or maintenance of an existing 
        mechanism for such purpose).
          (2) Providing incentives to appropriate entities to 
        enter into arrangements with the State to help 
        stabilize premiums for health insurance coverage in the 
        individual market, as such markets are defined by the 
        State.
          (3) Reducing the cost for providing health insurance 
        coverage in the individual market and small group 
        market, as such markets are defined by the State, to 
        individuals who have, or are projected to have, a high 
        rate of utilization of health services (as measured by 
        cost).
          (4) Promoting participation in the individual market 
        and small group market in the State and increasing 
        health insurance options available through such market.
          (5) Promoting access to preventive services; dental 
        care services (whether preventive or medically 
        necessary); vision care services (whether preventive or 
        medically necessary); prevention, treatment, or 
        recovery support services for individuals with mental 
        or substance use disorders; or any combination of such 
        services.
          (6) Providing payments, directly or indirectly, to 
        health care providers for the provision of such health 
        care services as are specified by the Administrator.
          (7) Providing assistance to reduce out-of-pocket 
        costs, such as copayments, coinsurance, premiums, and 
        deductibles, of individuals enrolled in health 
        insurance coverage in the State.

SEC. 2203. STATE ELIGIBILITY AND APPROVAL; DEFAULT SAFEGUARD.

  (a) Encouraging State Options for Allocations.--
          (1) In general.--To be eligible for an allocation of 
        funds under this title for a year during the period 
        described in section 2201 for use for one or more 
        purposes described in section 2202, a State shall 
        submit to the Administrator an application at such time 
        (but, in the case of allocations for 2018, not later 
        than 45 days after the date of the enactment of this 
        title and, in the case of allocations for a subsequent 
        year, not later than March 31 of the previous year) and 
        in such form and manner as specified by the 
        Administrator and containing--
                  (A) a description of how the funds will be 
                used for such purposes;
                  (B) a certification that the State will make, 
                from non-Federal funds, expenditures for such 
                purposes in an amount that is not less than the 
                State percentage required for the year under 
                section 2204(e)(1); and
                  (C) such other information as the 
                Administrator may require.
          (2) Automatic approval.--An application so submitted 
        is approved unless the Administrator notifies the State 
        submitting the application, not later than 60 days 
        after the date of the submission of such application, 
        that the application has been denied for not being in 
        compliance with any requirement of this title and of 
        the reason for such denial.
          (3) One-time application.--If an application of a 
        State is approved for a year, with respect to a purpose 
        described in section 2202, such application shall be 
        treated as approved, with respect to such purpose, for 
        each subsequent year through 2026.
          (4) Treatment as a state health care program.--Any 
        program receiving funds from an allocation for a State 
        under this title, including pursuant to subsection (b), 
        shall be considered to be a ``State health care 
        program'' for purposes of sections 1128, 1128A, and 
        1128B.
  (b) Default Federal Safeguard.--
          (1) In general.--
                  (A) 2018.--For allocations made under this 
                title for 2018, in the case of a State that 
                does not submit an application under subsection 
                (a) by the 45-day submission date applicable to 
                such year under subsection (a)(1) and in the 
                case of a State that does submit such an 
                application by such date that is not approved, 
                subject to section 2204(e), the Administrator, 
                in consultation with the State insurance 
                commissioner, shall use the allocation that 
                would otherwise be provided to the State under 
                this title for such year, in accordance with 
                paragraph (2), for such State.
                  (B) 2019 through 2026.--In the case of a 
                State that does not have in effect an approved 
                application under this section for 2019 or a 
                subsequent year beginning during the period 
                described in section 2201, subject to section 
                2204(e), the Administrator, in consultation 
                with the State insurance commissioner, shall 
                use the allocation that would otherwise be 
                provided to the State under this title for such 
                year, in accordance with paragraph (2), for 
                such State.
          (2) Required use for market stabilization payments to 
        issuers.--Subject to section 2204(a), an allocation for 
        a State made pursuant to paragraph (1) for a year shall 
        be used to carry out the purpose described in section 
        2202(2) in such State by providing payments to 
        appropriate entities described in such section with 
        respect to claims that exceed $50,000 (or, with respect 
        to allocations made under this title for 2020 or a 
        subsequent year during the period specified in section 
        2201, such dollar amount specified by the 
        Administrator), but do not exceed $350,000 (or, with 
        respect to allocations made under this title for 2020 
        or a subsequent year during such period, such dollar 
        amount specified by the Administrator), in an amount 
        equal to 75 percent (or, with respect to allocations 
        made under this title for 2020 or a subsequent year 
        during such period, such percentage specified by the 
        Administrator) of the amount of such claims.

SEC. 2204. ALLOCATIONS.

  (a) Appropriation.--For the purpose of providing allocations 
for States (including pursuant to section 2203(b)) under this 
title there is appropriated, out of any money in the Treasury 
not otherwise appropriated--
          (1) for 2018, $15,000,000,000;
          (2) for 2019, $15,000,000,000;
          (3) for 2020, $10,000,000,000;
          (4) for 2021, $10,000,000,000;
          (5) for 2022, $10,000,000,000;
          (6) for 2023, $10,000,000,000;
          (7) for 2024, $10,000,000,000;
          (8) for 2025, $10,000,000,000; and
          (9) for 2026, $10,000,000,000.
  (b) Allocations.--
          (1) Payment.--
                  (A) In general.--From amounts appropriated 
                under subsection (a) for a year, the 
                Administrator shall, with respect to a State 
                and not later than the date specified under 
                subparagraph (B) for such year, allocate, 
                subject to subsection (e), for such State 
                (including pursuant to section 2203(b)) the 
                amount determined for such State and year under 
                paragraph (2).
                  (B) Specified date.--For purposes of 
                subparagraph (A), the date specified in this 
                subparagraph is--
                          (i) for 2018, the date that is 45 
                        days after the date of the enactment of 
                        this title; and
                          (ii) for 2019 and subsequent years, 
                        January 1 of the respective year.
          (2) Allocation amount determinations.--
                  (A) For 2018 and 2019.--
                          (i) In general.--For purposes of 
                        paragraph (1), the amount determined 
                        under this paragraph for 2018 and 2019 
                        for a State is an amount equal to the 
                        sum of--
                                  (I) the relative incurred 
                                claims amount described in 
                                clause (ii) for such State and 
                                year; and
                                  (II) the relative uninsured 
                                and issuer participation amount 
                                described in clause (iv) for 
                                such State and year.
                          (ii) Relative incurred claims 
                        amount.--For purposes of clause (i), 
                        the relative incurred claims amount 
                        described in this clause for a State 
                        for 2018 and 2019 is the product of--
                                  (I) 85 percent of the amount 
                                appropriated under subsection 
                                (a) for the year; and
                                  (II) the relative State 
                                incurred claims proportion 
                                described in clause (iii) for 
                                such State and year.
                          (iii) Relative state incurred claims 
                        proportion.--The relative State 
                        incurred claims proportion described in 
                        this clause for a State and year is the 
                        amount equal to the ratio of--
                                  (I) the adjusted incurred 
                                claims by the State, as 
                                reported through the medical 
                                loss ratio annual reporting 
                                under section 2718 of the 
                                Public Health Service Act for 
                                the third previous year; to
                                  (II) the sum of such adjusted 
                                incurred claims for all States, 
                                as so reported, for such third 
                                previous year.
                          (iv) Relative uninsured and issuer 
                        participation amount.--For purposes of 
                        clause (i), the relative uninsured and 
                        issuer participation amount described 
                        in this clause for a State for 2018 and 
                        2019 is the product of--
                                  (I) 15 percent of the amount 
                                appropriated under subsection 
                                (a) for the year; and
                                  (II) the relative State 
                                uninsured and issuer 
                                participation proportion 
                                described in clause (v) for 
                                such State and year.
                          (v) Relative state uninsured and 
                        issuer participation proportion.--The 
                        relative State uninsured and issuer 
                        participation proportion described in 
                        this clause for a State and year is--
                                  (I) in the case of a State 
                                not described in clause (vi) 
                                for such year, 0; and
                                  (II) in the case of a State 
                                described in clause (vi) for 
                                such year, the amount equal to 
                                the ratio of--
                                          (aa) the number of 
                                        individuals residing in 
                                        such State who for the 
                                        third preceding year 
                                        were not enrolled in a 
                                        health plan or 
                                        otherwise did not have 
                                        health insurance 
                                        coverage (including 
                                        through a Federal or 
                                        State health program) 
                                        and whose income is 
                                        below 100 percent of 
                                        the poverty line 
                                        applicable to a family 
                                        of the size involved; 
                                        to
                                          (bb) the sum of the 
                                        number of such 
                                        individuals for all 
                                        States described in 
                                        clause (vi) for the 
                                        third preceding year.
                          (vi) States described.--For purposes 
                        of clause (v), a State is described in 
                        this clause, with respect to 2018 and 
                        2019, if the State satisfies either of 
                        the following criterion:
                                  (I) The number of individuals 
                                residing in such State and 
                                described in clause (v)(II)(aa) 
                                was higher in 2015 than 2013.
                                  (II) The State have fewer 
                                than three health insurance 
                                issuers offering qualified 
                                health plans through the 
                                Exchange for 2017.
                  (B) For 2020 through 2026.--For purposes of 
                paragraph (1), the amount determined under this 
                paragraph for a year (beginning with 2020) 
                during the period described in section 2201 for 
                a State is an amount determined in accordance 
                with an allocation methodology specified by the 
                Administrator which--
                          (i) takes into consideration the 
                        adjusted incurred claims of such State, 
                        the number of residents of such State 
                        who for the previous year were not 
                        enrolled in a health plan or otherwise 
                        did not have health insurance coverage 
                        (including through a Federal or State 
                        health program) and whose income is 
                        below 100 percent of the poverty line 
                        applicable to a family of the size 
                        involved, and the number of health 
                        insurance issuers participating in the 
                        insurance market in such State for such 
                        year;
                          (ii) is established after 
                        consultation with health care 
                        consumers, health insurance issuers, 
                        State insurance commissioners, and 
                        other stakeholders and after taking 
                        into consideration additional cost and 
                        risk factors that may inhibit health 
                        care consumer and health insurance 
                        issuer participation; and
                          (iii) reflects the goals of improving 
                        the health insurance risk pool, 
                        promoting a more competitive health 
                        insurance market, and increasing choice 
                        for health care consumers.
  (c) Annual Distribution of Previous Year's Remaining Funds.-- 
In carrying out subsection (b), the Administrator shall, with 
respect to a year (beginning with 2020 and ending with 2027), 
not later than March 31 of such year--
          (1) determine the amount of funds, if any, from the 
        amounts appropriated under subsection (a) for the 
        previous year but not allocated for such previous year; 
        and
          (2) if the Administrator determines that any funds 
        were not so allocated for such previous year, allocate 
        such remaining funds, in accordance with the allocation 
        methodology specified pursuant to subsection 
        (b)(2)(B)--
                  (A) to States that have submitted an 
                application approved under section 2203(a) for 
                such previous year for any purpose for which 
                such an application was approved; and
                  (B) for States for which allocations were 
                made pursuant to section 2203(b) for such 
                previous year, to be used by the Administrator 
                for such States, to carry out the purpose 
                described in section 2202(2) in such States by 
                providing payments to appropriate entities 
                described in such section with respect to 
                claims that exceed $1,000,000;
        with, respect to a year before 2027, any remaining 
        funds being made available for allocations to States 
        for the subsequent year.
  (d) Availability.--Amounts appropriated under subsection (a) 
for a year and allocated to States in accordance with this 
section shall remain available for expenditure through December 
31, 2027.
  (e) Conditions for and Limitations on Receipt of Funds.--The 
Secretary may not make an allocation under this title for a 
State, with respect to a purpose described in section 2202--
          (1) in the case of an allocation that would be made 
        to a State pursuant to section 2203(a), if the State 
        does not agree that the State will make available non-
        Federal contributions towards such purpose in an amount 
        equal to--
                  (A) for 2020, 7 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  (B) for 2021, 14 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  (C) for 2022, 21 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  (D) for 2023, 28 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  (E) for 2024, 35 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  (F) for 2025, 42 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose; and
                  (G) for 2026, 50 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
          (2) in the case of an allocation that would be made 
        for a State pursuant to section 2203(b), if the State 
        does not agree that the State will make available non-
        Federal contributions towards such purpose in an amount 
        equal to--
                  (A) for 2020, 10 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  (B) for 2021, 20 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose; and
                  (C) for 2022, 30 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  (D) for 2023, 40 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  (E) for 2024, 50 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  (F) for 2025, 50 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose; and
                  (G) for 2026, 50 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose; or
          (3) if such an allocation for such purpose would not 
        be permitted under subsection (c)(7) of section 2105 if 
        such allocation were payment made under such section.
                              ----------                              


PUBLIC HEALTH SERVICE ACT

           *       *       *       *       *       *       *


    TITLE XXVII--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

              PART A--INDIVIDUAL AND GROUP MARKET REFORMS

                       Subpart I--General Reform

SEC. 2701. FAIR HEALTH INSURANCE PREMIUMS.

  (a) Prohibiting Discriminatory Premium Rates.--
          (1) In general.--With respect to the premium rate 
        charged by a health insurance issuer for health 
        insurance coverage offered in the individual or small 
        group market--
                  (A) such rate shall vary with respect to the 
                particular plan or coverage involved only by--
                          (i) whether such plan or coverage 
                        covers an individual or family;
                          (ii) rating area, as established in 
                        accordance with paragraph (2);
                          (iii) age, except that such rate 
                        shall not vary by more than 3 to 1 for 
                        adults (consistent with section 
                        2707(c)) or, for plan years beginning 
                        on or after January 1, 2018, as the 
                        Secretary may implement through interim 
                        final regulation, 5 to 1 for adults 
                        (consistent with section 2707(c)) or 
                        such other ratio for adults (consistent 
                        with section 2707(c)) as the State 
                        involved may provide; and
                          (iv) tobacco use, except that such 
                        rate shall not vary by more than 1.5 to 
                        1; and
                  (B) [such rate] subject to section 2710A, 
                such rate shall not vary with respect to the 
                particular plan or coverage involved by any 
                other factor not described in subparagraph (A).
          (2) Rating area.--
                  (A) In general.--Each State shall establish 1 
                or more rating areas within that State for 
                purposes of applying the requirements of this 
                title.
                  (B) Secretarial review.--The Secretary shall 
                review the rating areas established by each 
                State under subparagraph (A) to ensure the 
                adequacy of such areas for purposes of carrying 
                out the requirements of this title. If the 
                Secretary determines a State's rating areas are 
                not adequate, or that a State does not 
                establish such areas, the Secretary may 
                establish rating areas for that State.
          (3) Permissible age bands.--The Secretary, in 
        consultation with the National Association of Insurance 
        Commissioners, shall define the permissible age bands 
        for rating purposes under paragraph (1)(A)(iii).
          (4) Application of variations based on age or tobacco 
        use.--With respect to family coverage under a group 
        health plan or health insurance coverage, the rating 
        variations permitted under clauses (iii) and (iv) of 
        paragraph (1)(A) shall be applied based on the portion 
        of the premium that is attributable to each family 
        member covered under the plan or coverage.
          (5) Special rule for large group market.--If a State 
        permits health insurance issuers that offer coverage in 
        the large group market in the State to offer such 
        coverage through the State Exchange (as provided for 
        under section 1312(f)(2)(B) of the Patient Protection 
        and Affordable Care Act), the provisions of this 
        subsection shall apply to all coverage offered in such 
        market (other than self-insured group health plans 
        offered in such market) in the State.

           *       *       *       *       *       *       *


SEC. [2709]  2710. DISCLOSURE OF INFORMATION.

  (a) Disclosure of Information by Health Plan Issuers.--In 
connection with the offering of any health insurance coverage 
to a small employer or an individual, a health insurance 
issuer--
          (1) shall make a reasonable disclosure to such 
        employer,, or individual, as applicable, as part of its 
        solicitation and sales materials, of the availability 
        of information described in subsection (b), and
          (2) upon request of such a employer, or individual, 
        as applicable,, or individual, as applicable, provide 
        such information.
  (b) Information Described.--
          (1) In general.--Subject to paragraph (3), with 
        respect to a health insurance issuer offering health 
        insurance coverage to a employer, or individual, as 
        applicable,, information described in this subsection 
        is information concerning--
                  (A) the provisions of such coverage 
                concerning issuer's right to change premium 
                rates and the factors that may affect changes 
                in premium rates; and
                  (B) the benefits and premiums available under 
                all health insurance coverage for which the 
                employer, or individual, as applicable, is 
                qualified.
          (2) Form of information.--Information under this 
        subsection shall be provided to employers, or 
        individuals, as applicable, in a manner determined to 
        be understandable by the average employer, or 
        individual, as applicable,, and shall be sufficient to 
        reasonably inform employers, or individuals, as 
        applicable, of their rights and obligations under the 
        health insurance coverage.
          (3) Exception.--An issuer is not required under this 
        section to disclose any information that is proprietary 
        and trade secret information under applicable law.

SEC. 2710A. ENCOURAGING CONTINUOUS HEALTH INSURANCE COVERAGE.

  (a) Penalty Applied.--
          (1) In general.--Notwithstanding section 2701, 
        subject to the succeeding provisions of this section, a 
        health insurance issuer offering health insurance 
        coverage in the individual or small group market shall, 
        in the case of an individual who is an applicable 
        policyholder of such coverage with respect to an 
        enforcement period applicable to enrollments for a plan 
        year beginning with plan year 2019 (or, in the case of 
        enrollments during a special enrollment period, 
        beginning with plan year 2018), increase the monthly 
        premium rate otherwise applicable to such individual 
        for such coverage during each month of such period, by 
        an amount determined under paragraph (2).
          (2) Amount of penalty.--The amount determined under 
        this paragraph for an applicable policyholder enrolling 
        in health insurance coverage described in paragraph (1) 
        for a plan year, with respect to each month during the 
        enforcement period applicable to enrollments for such 
        plan year, is the amount that is equal to 30 percent of 
        the monthly premium rate otherwise applicable to such 
        applicable policyholder for such coverage during such 
        month.
  (b) Definitions.--For purposes of this section:
          (1) Applicable policyholder.--The term ``applicable 
        policyholder'' means, with respect to months of an 
        enforcement period and health insurance coverage, an 
        individual who--
                  (A) is a policyholder of such coverage for 
                such months;
                  (B) cannot demonstrate (through presentation 
                of certifications described in section 2704(e) 
                or in such other manner as may be specified in 
                regulations, such as a return or statement made 
                under section 6055(d) or 36 of the Internal 
                Revenue Code of 1986), during the look-back 
                period that is with respect to such enforcement 
                period, there was not a period of at least 63 
                continuous days during which the individual did 
                not have creditable coverage (as defined in 
                paragraph (1) of section 2704(c) and credited 
                in accordance with paragraphs (2) and (3) of 
                such section); and
                  (C) in the case of an individual who had been 
                enrolled under dependent coverage under a group 
                health plan or health insurance coverage by 
                reason of section 2714 and such dependent 
                coverage of such individual ceased because of 
                the age of such individual, is not enrolling 
                during the first open enrollment period 
                following the date on which such coverage so 
                ceased.
          (2) Look-back period.--The term ``look-back period'' 
        means, with respect to an enforcement period applicable 
        to an enrollment of an individual for a plan year 
        beginning with plan year 2019 (or, in the case of an 
        enrollment of an individual during a special enrollment 
        period, beginning with plan year 2018) in health 
        insurance coverage described in subsection (a)(1), the 
        12-month period ending on the date the individual 
        enrolls in such coverage for such plan year.
          (3) Enforcement period.--The term ``enforcement 
        period'' means--
                  (A) with respect to enrollments during a 
                special enrollment period for plan year 2018, 
                the period beginning with the first month that 
                is during such plan year and that begins 
                subsequent to such date of enrollment, and 
                ending with the last month of such plan year; 
                and
                  (B) with respect to enrollments for plan year 
                2019 or a subsequent plan year, the 12-month 
                period beginning on the first day of the 
                respective plan year.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    Committee Democrats adamantly and unanimously oppose the 
Committee's Reconciliation recommendations. Democrats voted in 
opposition to the Reconciliation recommendations during their 
consideration in the Committee on March 8 through March 9, 
2017. We believe the recommendations will rip coverage away 
from millions, weaken consumer protections, and increase costs, 
particularly for older and sicker Americans. The 
recommendations raise costs for working families in order to 
provide billions of dollars in tax cuts to the wealthiest 
individuals and corporations. The legislative recommendations 
drastically alter the structure of the Medicaid program by 
harshly cutting federal funding, capping benefits, and 
ultimately shifting enormous costs to the states. We believe 
the recommendations would turn back the clock on efforts to 
transform the United States health care system from a system 
based on the treatment of disease to a system based on disease 
prevention. The Reconciliation instructions would also harm 
women's health and place politicians between women and their 
trusted health care provider by restricting access to the 
quality health services provided by Planned Parenthood.
    The combination of Medicaid cuts, ending the Medicaid 
expansion, and providing less generous financial assistance for 
low and moderate income Americans to purchase health insurance 
in the individual market will result in millions of Americans 
losing health insurance coverage. Although the nonpartisan 
Congressional Budget Office (CBO) did not provide an analysis 
or score prior to the markup, independent estimates suggest 
that the repeal legislation could result in 15 million or more 
Americans losing coverage.\1\ This legislation will leave 
Americans less healthy, less financially secure, and less able 
to access the healthcare they need.
---------------------------------------------------------------------------
    \1\Loren Adler and Matthew Fiedler, Expect the CBO to estimate 
large coverage losses from the GOP health care plan, Brookings 
Institution (Mar. 9, 2017).
---------------------------------------------------------------------------
    Despite the wide-ranging, serious implications of this 
legislation for the health and financial security of all 
Americans, the Committee did not hold a single hearing on the 
details and effect of the legislation. Notably, stakeholders 
have not had the ability to weigh in on the impacts of the bill 
to the health care system. In fact, the Committee received 
letters from hospitals, doctors, and patient and advocacy 
groups all outlining their significant concerns with the 
legislation. Additionally, despite Speaker Ryan's claims that 
the bill would be considered through regular order and through 
a transparent process, the repeal bill was drafted in secret 
and introduced less than two days before markup. The minority 
is deeply concerned by the decision to proceed to markup 
without first receiving the views of the CBO on the impact of 
this legislation on health insurance coverage, costs, and the 
federal budget. Given the likelihood that millions of Americans 
will lose their health insurance as a result of this 
legislation, proceeding to markup without a CBO score is highly 
irresponsible and deprives Committee members of a full 
understanding of the implications of the legislation before 
voting on it.

ELIMINATING THE PREVENTION AND PUBLIC HEALTH FUND WILL HARM EFFORTS TO 
            BEND THE COST CURVE AND IMPROVE AMERICA'S HEALTH

    The Reconciliation recommendations would repeal the 
Prevention and Public Health Fund (Prevention Fund) and rescind 
$15.1 billion from fiscal year 2019 through fiscal year 2028, 
and $2 billion each year thereafter. As a result, that funding 
would not be available to invest in critical preventive and 
public health programs such as efforts to reduce tobacco use, 
increase physical activity, expand mental health and injury 
prevention, and improve nutrition. The Prevention Fund is 
needed to invest in these types of efforts that bend the cost 
curve and improve America's health through the prevention and 
control of chronic disease.
    Today in America, chronic disease, such as heart disease, 
diabetes, and cancer, are among the nation's most common, 
costly, and preventable health problems. Unsurprisingly, 
spending on chronic disease alone accounts for roughly 86 
percent of all health care expenditures in the United 
States.\2\ Chronic diseases also take a toll on American lives. 
In fact, chronic diseases account for 7 out of 10 deaths in the 
United States. Yet, despite the harms caused by chronic 
diseases, only a small percentage of government health 
expenditures are directed at preventing these diseases before 
they happen.
---------------------------------------------------------------------------
    \2\Centers for Disease Control and Prevention (CDC), Chronic 
Disease Prevention and Health Promotion (Nov. 2016) (https://
www.cdc.gov/chronicdisease/index.htm).
---------------------------------------------------------------------------
    The Prevention Fund is the federal government's only 
dedicated investment in prevention and the nation's largest 
single investment in prevention. Since its creation, most 
Prevention Fund dollars have gone directly to states, 
communities, and tribal community organizations to improve the 
health and wellness of Americans. It has funded such programs 
as the highly successful Tips from Former Smokers national 
campaign. A recent study published in the Lancet found that the 
first three months of the national ad campaign led an estimated 
1.6 million smokers to attempt to quit smoking and helped more 
than 100,000 Americans quit smoking permanently.\3\ Another 
study published in the American Journal of Preventive Medicine 
found that the campaign prevented more than 17,000 premature 
deaths in the United States.\4\
---------------------------------------------------------------------------
    \3\Tim McAfee, et al, Effect of the First Federally Funded US 
Antismoking National Media Campaign, The Lancet (Sept. 9, 2013).
    \4\Xin Xu, et al, A Cost-Effectiveness Analysis of the First 
Federally Funded Antismoking Campaign, American Journal of Preventive 
Medicine (Dec. 9, 2014).
---------------------------------------------------------------------------
    In addition to improving health, we know such investments 
save money. According to a study by Trust for America's Health, 
every $1 spent on proven, community-based interventions to 
increase physical activity, improve nutrition, and prevent 
smoking--generates a return of $5.60.\5\ A study by the Urban 
Institute estimates that proven community-based diabetes 
prevention programs can save as much as $191 billion over 10 
years.\6\ Another study by Trust for America's Health found 
that a reduction of body mass index rates by 5 percent would 
save over $158 billion in 10 years and almost $612 billion in 
20 years.\7\ Those are just some of the types of programs we 
invest in through the Prevention Fund.
---------------------------------------------------------------------------
    \5\Trust for America's Health, Prevention for a Healthier America: 
Investments in Disease Prevention Yield Significant Savings, Stronger 
Communities (Feb. 2009) (http://healthyamericans.org/reports/
prevention08/Prevention08.pdf).
    \6\Urban Institute, How We Can Play for Health Care Reform (July 
29, 2009) (http://www.urban.org/research/publication/how-we-can-pay-
health-reform).
    \7\Trust for America's Health, Bending the Obesity Cost Curve (Feb. 
2012) (http://healthyamericans.org/report/93/).
---------------------------------------------------------------------------
    Bending the United States health care cost curve and 
improving America's health demands that we expand rather than 
eliminate prevention efforts. Unfortunately, the Republican 
plan does the opposite. The Republican plan will eliminate the 
Prevention Fund's dedicated investment in prevention efforts 
and limit our ability to prevent and control chronic disease. 
Thus rather than save money and lives, the Republican plan will 
cost us more in the end.

   DENYING FUNDING TO PLANNED PARENTHOOD RESTRICTS WOMEN'S ACCESS TO 
 ESSENTIAL PREVENTIVE CARE AND BLOCKS PATIENTS FROM THEIR PROVIDERS OF 
                                 CHOICE

    The Reconciliation recommendations deny mandatory funding 
to Planned Parenthood for one year, including reimbursements 
from Medicaid, as well as funding provided through the 
Children's Health Insurance Program, Maternal and Child Health 
Services Block Grants, and Social Services Block Grants. While 
the bill notably does not mention Planned Parenthood by name, 
it denies funding to a designated class of providers that 
appear to be only applicable to Planned Parenthood-affiliated 
health centers. When questioned whether other providers could 
be subject to the bill, majority counsel was unable to 
specifically name any other providers besides Planned 
Parenthood that would meet these criteria.
    As a result, millions of patients could lose access to 
essential care based solely on Republicans' ideological 
opposition to abortion, despite Planned Parenthood already 
receiving no federal funding for abortion services provided at 
some affiliated health centers.
    Denying Medicaid reimbursements and other funding to 
Planned Parenthood would restrict patients' access to quality 
preventive care services, including screenings for breast and 
cervical cancer, sexually transmitted infection (STI) 
screenings, and contraception counseling and care. In 2014, 
Planned Parenthood-affiliated health centers saw 2.5 million 
patients and provided more than 4 million STI tests and 
treatments, more than 360,000 breast exams, more than 270,000 
Pap tests, and contraception for over 2 million people.\8\ 
These services help to further the public health goals of 
detecting cancer, stopping the spread of STIs, and preventing 
unintended pregnancy.
---------------------------------------------------------------------------
    \8\Planned Parenthood Federation of America, 2014-2015 Annual 
Report, 28 (https://www.plannedparenthood.org/files/2114/5089/0863/
2014-2015_PPFA_Annual_Report_.pdf).
---------------------------------------------------------------------------
    While the Reconciliation recommendations provide additional 
funding to other safety-net providers, specifically community 
health centers, experts agree that community health centers 
cannot fill the gap in care if funding is denied to Planned 
Parenthood. One public health expert noted that ``the assertion 
that community health centers could step into a breach of this 
magnitude is simply wrong and displays a fundamental 
misunderstanding of how the health care system works.''\9\ 
Additionally, CBO previously estimated that 15 percent of 
Planned Parenthood's patient population, or roughly 390,000 
patients, would lose access to care if affiliated health 
centers were denied federal funding, and up to an additional 25 
percent of individuals, or approximately 650,000 patients, 
could face reduced access.\10\
---------------------------------------------------------------------------
    \9\Sara Rosenbaum, Planned Parenthood, Community Health Centers, 
and Women's Health: Getting the Facts Right, Health Affairs Blog (Sept. 
2, 2015) (http://healthaffairs.org/blog/2015/09/02/planned-parenthood-
community-health-centers-and-womens-health-getting-the-facts-right/).
    \10\Congressional Budget Office, Cost Estimate, H.R. 3762 Restoring 
Americans' Healthcare Freedom Reconciliation Act of 2015 (Oct. 20, 
2015) (https://www.cbo.gov/sites/default/files/114th-congress-2015-
2016/costestimate/hr3762.pdf).
---------------------------------------------------------------------------
    Approximately 60 percent of the patients served by Planned 
Parenthood receive benefits through public health coverage 
programs, including Medicaid.\11\ Under federal law, Medicaid 
beneficiaries generally have the right to obtain medical 
services ``from any institution, agency, community pharmacy, or 
person, qualified to perform the service or services required . 
. . who undertakes to provide . . . such services.\12\ For 
decades, this ``any willing provider'' provision has served as 
a cornerstone of the Medicaid program and has ensured that 
patients enrolled in Medicaid are afforded the same basic 
rights and privileges as those with private coverage when 
choosing from whom to receive covered health services, 
including family planning and reproductive health care. The 
bill reneges on this principle and contradicts longstanding 
guidance and law prohibiting discrimination against certain 
providers based on reasons other than their ability to perform 
the required services.\13\
---------------------------------------------------------------------------
    \11\Planned Parenthood Federation of America, The Urgent Need for 
Planned Parenthood Health Centers (https://www.plannedparenthood.org/
files/4314/8183/5009/20161207_Defunding_fs_d01_1.pdf).
    \12\Social Security Act, Sec. 1902(a)(23).
    \13\Centers for Medicare and Medicaid Services, Re: Clarifying 
``Free Choice of Provider'' Requirement in Conjunction with State 
Authority to Take Action against Medicaid Providers (Apr. 19, 2016).
---------------------------------------------------------------------------
    Denying funds to Planned Parenthood solely for ideological 
reasons separate than the ability to provide care harms 
patients and restricts women from making their own health care 
decisions about where to access care and from what provider. 
This bill sets a dangerous precedent, and will lead to a 
reduction in access to care and services provided for millions 
of women, men, and adolescents.

RATIONING CARE FOR MILLIONS OF AMERICANS RECEIVING COVERAGE THROUGH THE 
                            MEDICAID PROGRAM

Repeal of the Medicaid expansion
    The Reconciliation legislation effectively ends the 
Medicaid expansion in its current form. While current Medicaid 
expansion enrollees would be grandfathered in at the higher 
matching rate, as of 2020, no new states would be allowed to 
expand, and states would lose the higher matching rate for any 
enrollees who had a break in coverage. Essentially, this ends 
the Medicaid expansion through attrition. States that had taken 
a step forward to cover uninsured residents would be punished 
with cuts to their Medicaid disproportionate share hospital 
(DSH) payments for a period of two years. This policy will hurt 
millions of the lowest income residents, and negatively impact 
many of our state economies.
    Rolling back the Medicaid expansion will result in a loss 
of coverage for many of the nation's lowest income, working, 
individuals. Currently, 31 states and the District of Columbia 
have expanded their Medicaid programs.\14\ Because of the 
Medicaid expansion, more than 14 million individuals have 
gained coverage, 11 million of which would not have been able 
to access coverage prior to the passage of Affordable Care Act 
(ACA).\15\ This new coverage, combined with coverage expansions 
through the Marketplaces and other coverage improvements the 
ACA made, has helped drive the uninsured rate to below 9 
percent--the lowest level in our nation's history.\16\ It is 
undeniable that Medicaid expansion serves a critical role to 
provide health insurance to those who otherwise could not 
afford it and would remain uninsured.
---------------------------------------------------------------------------
    \14\Kaiser Family Foundation, Medicaid Expansion Enrollment (2015) 
(http://kff.org/health-reform/state-indicator/medicaid-expansion-
enrollment/?currentTimeframe=0).
    \15\Id.
    \16\Letter from Andy M. Slavitt, Acting Administrator, Centers for 
Medicare and Medicaid Services (CMS) to Representative Tim Murphy (Jan. 
18, 2017).
---------------------------------------------------------------------------
    Moreover, Medicaid provides high quality coverage that 
improves the lives of its beneficiaries. For individuals 
gaining coverage because of the Medicaid expansion, access to 
primary care and treatment for chronic conditions have 
increased, and rates of skipping medications to save money have 
decreased.\17\ Medicaid expansion has led to as much as a 
$1,000-per-person reduction in medical debt sent to collection, 
and hospitals have seen their uncompensated-care burden drop by 
$10 billion.\18\ Medicaid expansion has improved the 
affordability of care, with the number of low-income adults 
reporting problems paying medical bills down more than 10 
percentage points,\19\ and 86 percent of new Medicaid enrollees 
were optimistic about their new health insurance's ability to 
connect them to the health care they need.\20\ Medicaid has 
made a difference in the lives of millions; the overwhelming 
majority of those gaining coverage because of the expansion 
have said they were better off than before they received 
Medicaid.\21\
---------------------------------------------------------------------------
    \17\Benjamin D. Sommers, et al, Changes in utilization and health 
among low-income adults after Medicaid expansion or expanded private 
insurance, JAMA Internal Medicine (Oct. 2016) (https://
www.ncbi.nlm.nih.gov/pubmed/27532694).
    \18\White House Council of Economic Advisers, The Economic Record 
of the Obama administration: Reforming the Health Care System (Dec. 
2016).
    \19\Letter from Andy M. Slavitt, Acting Administrator, Centers for 
Medicare & Medicaid Services (CMS) to Representative Tim Murphy (Jan. 
18, 2017).
    \20\The Commonwealth Fund, Americans' Experiences with ACA 
Marketplace and Medicaid Coverage: Access to Care and Satisfaction (May 
25, 2016) (http://www.commonwealthfund.org/publications/issue-briefs/
2016/may/aca-tracking-survey-access-to-care-and-satisfaction).
    \21\Id.
---------------------------------------------------------------------------
    Rolling back the Medicaid expansion means rolling back 
gains made in state economies and local jobs. Evidence from 
states that have expanded Medicaid consistently shows that 
expansion generates savings and revenue which can be used to 
finance other state spending priorities or to offset much, if 
not all, of the state costs of expansion. Medicaid expansion 
states see more jobs in the health sector. On average, the 
states that expanded Medicaid in January 2014 saw jobs grow by 
2.4 percent during 2014, while jobs in states that did not 
expand grew by only 1.8 percent in the same year.\22\ Coverage 
expansions are contributing to a national reduction in hospital 
uncompensated care costs. Hospitals' uncompensated care costs 
are estimated to have been $7.4 billion (21 percent) less in 
2014 than they would have been in the absence of coverage 
expansions. In 2014, expansion states saw a reduction in 
uncompensated care costs of 26 percent, compared to a 16 
percent reduction in non-expansion states.\23\ It is worth 
noting that state Medicaid spending grew more slowly in states 
that expanded than in those that did not. State Medicaid 
spending in expansion states grew by half as much as spending 
in non-expansion states.\24\ Medicaid expansion has been a good 
deal both for the individuals gaining coverage, and for the 
financial bottom line of states that have chosen to provide 
that coverage.
---------------------------------------------------------------------------
    \22\Families USA, Medicaid Expansion States See Financial Savings 
and Health Care Jobs Growth (Mar. 2015) (http://familiesusa.org/blog/
2015/03/medicaid-expansion-states-see-financial-savings-and-health-
care-jobs-growth).
    \23\Office of the Assistant Secretary for Planning and Evaluation 
(ASPE), Economic Impact of the Medicaid Expansion (Mar. 23, 2015) 
(https://aspe.hhs.gov/sites/default/files/pdf/139231/
ib_MedicaidExpansion.pdf).
    \24\Kaiser Family Foundation, Medicaid Enrollment & Spending 
Growth: FY 2015 & 2016 (Oct. 2015) (http://kff.org/medicaid/issue-
brief/medicaid-enrollment-spending-growth-fy-2015-2016/).
---------------------------------------------------------------------------
Capping the Medicaid Program
    The Reconciliation legislation would fundamentally alter 
the current Medicaid funding structure, adopting a per capita 
cap per beneficiary construct that will be applied starting in 
FY 2019, but penalizing states beginning in 2020. The policy 
was drafted with no opportunity for comment from key 
stakeholders. This is not acceptable consideration for 
irrevocably changing the health insurance that more than 76 
million Americans, the vast majority of them children, seniors, 
and individuals with disabilities, depend on. The hasty 
consideration of this legislation shows: key implementation 
questions remain from the drafting of this provision and 
further, whether states can even reasonably effectuate such a 
policy if enacted, in what amounts to less than two years' 
time. The consequences of enactment of this policy as drafted 
will be disastrous.
    Under this legislation, it has been estimated that Medicaid 
costs per beneficiary could rise by about 0.2 percentage points 
faster each year than states' capped amounts; thus states would 
get less federal funding than under current law, with the cuts 
growing each year. This policy is a cost shift to states, at 
the expense of our most vulnerable. Under this policy, states 
would be responsible for 100 percent of any costs in excess of 
the per capita cap, whether due to unanticipated health care 
cost growth or to demographic changes that a per capita cap 
wouldn't account for. For example, states would be responsible 
for all costs due to an epidemic, a new treatment, or higher 
costs as seniors on Medicaid move from young-old age to old-old 
age and have much greater medical and long-term care needs and 
costs. In response, states would have to contribute more of 
their own funding or, as is far likelier, substantially cut 
eligibility, benefits, and provider payments, with those cuts 
growing more severe each year. Along with those who have gained 
coverage under the Medicaid expansion who would lose it under 
this legislation, the remaining 63 million children, families, 
seniors, and people with disabilities who rely on Medicaid 
today would face the significant risk of ending up uninsured or 
losing access to needed care.
    This policy is predicated on the concept that Medicaid 
costs are somehow unsustainable, when, in reality, Medicaid is 
the leanest of the federal health programs. This is due, in 
part, to many states' efforts around delivery system reform 
effectuating global reduction in costs while still improving 
the quality of care beneficiaries receive. States need the 
flexible financing construct that Medicaid has today in order 
to continue to design and implement such innovations in the 
future. Medicaid's current financing structure incentivizes and 
supports states to redesign the delivery system in ways that 
are better for their beneficiaries, and for state fiscal 
health.
    Capping the Medicaid program and rationing care is the 
wrong way to ensure Medicaid's long-term financial health. Over 
the past 30 years, Medicaid costs per beneficiary have 
essentially tracked costs in the health care system as a whole, 
public and private. In fact, Medicaid has controlled per 
enrollee costs better than other payers. The per enrollee cost 
of Medicaid coverage grew 1.9 percent annually between 2000 and 
2014, as compared to 5.9 percent growth in private coverage and 
5.1 percent in Medicare.\25\ Congress should build on 
successful state and federal efforts that have led to positive 
outcomes for both the program's financial health and care for 
beneficiaries.
---------------------------------------------------------------------------
    \25\Centers for Medicare and Medicaid Services, National Health 
Expenditure Accounts and MACPAC, Trends in Medicaid Spending.
---------------------------------------------------------------------------
Repeal of the Essential Health Benefits for the Medicaid expansion 
        population
    This legislation will repeal the Essential Health Benefit 
package for the Medicaid expansion population. Under Section 
1902(k)(1) of the Social Security Act, states are required to 
offer newly eligible/expansion Medicaid beneficiaries 
``benchmark benefits.'' Further, Section 1937(b)(5) enumerates 
that benchmark benefits must meet the essential health benefits 
(EHB) requirements.\26\ Today, in practice, the Essential 
Health Benefits (EHB) represent a minimum base assurance of 
benefits covered for the Medicaid Expansion population. Many 
states, given the robust federal participation in the expansion 
population, have chosen to design benefit packages that go 
beyond the basic benchmark.\27\ However, the repeal of this 
basic protection of benefits, coupled with the changes made to 
slowly end the federal financial commitment to the Medicaid 
expansion wholesale over time means that states will most 
likely respond with sharp reductions in benefits to vulnerable 
beneficiaries.
---------------------------------------------------------------------------
    \26\Centers for Medicare and Medicaid Services, Medicaid and 
Children's Health Insurance Programs: Essential Health Benefits in 
Alternative Benefit Plans, Eligibility Notices, Fair Hearing and Appeal 
Processes, and Premiums and Cost Sharing; Exchanges: Eligibility and 
Enrollment (CMS-2334-F) (July 15, 2013).
    \27\The Commonwealth Fund, Medicaid Benefit Designs for Newly 
Eligible Adults: State Approaches (May 11, 2015) (http://
www.commonwealthfund.org/publications/issue-briefs/2015/may/medicaid-
benefit-designs-for-newly-eligible-adults).
---------------------------------------------------------------------------
Presumptive Eligibility repeal
    The bill eliminates the state option for Presumptive 
Eligibility (PE) for the Medicaid expansion population and 
repeals the ability of hospitals to determine Presumptive 
Eligibility in Medicaid. Presumptive Eligibility makes the 
enrollment process easier for eligible people and gets them the 
care they need immediately, which is more efficient, saves 
money and can save lives. We oppose the repeal of such 
policies.
    Presumptive Eligibility is a longstanding state policy 
option in the Medicaid and Children's Health Insurance (CHIP) 
programs, which allows individuals who appear eligible to be 
enrolled quickly and begin receiving vital services while the 
full eligibility determination process is being completed. 
Presumptive eligibility allows individuals to begin receiving 
crucial health care services right away. It helps avert 
situations in which an individual who is eligible for Medicaid 
will have to delay needed care while they wait for their 
Medicaid application to be fully processed. Given that most PE 
determinations are made by health care providers while the 
person is present, forgoing the opportunity to deliver 
necessary care is highly inefficient. The missed opportunity to 
enroll the eligible person in Medicaid can result in 
significantly higher costs being incurred unnecessarily. 
Removing this option for the expansion population stigmatizes 
this population and delays needed care.
    Moreover, hospital presumptive eligibility authority allows 
hospitals to temporarily enroll children, pregnant women, and 
other individuals in Medicaid until their full enrollment 
determination can be made. This policy has allowed hospitals to 
serve as a liaison between patients and state Medicaid programs 
to appropriately cover eligible individuals who would otherwise 
be uninsured, leading to poorer access to care for patients and 
higher uncompensated care for hospitals. This policy is 
particularly important for children; because hospitals are 
often the initial point of contact, they can help follow up to 
increase the likelihood that families complete the enrollment 
process for their uninsured children. This means earlier access 
to needed care for Medicaid eligible children, regardless of 
which state they live in. Outright repeal of this policy is 
problematic for all populations, however, and will result in 
additional barriers to individuals receiving the care they 
need.
Repeal of three-month retroactive coverage
    The ACA allowed for a three-month look back period to cover 
individuals who were eligible, but not covered by Medicaid at 
the time of hospital admission. Ensuring retroactive coverage 
of benefits under Medicaid is very important for eligible 
individuals, including children with special health care needs 
and individuals with disabilities, who may have very high cost 
medical conditions. Retroactive coverage allows Medicaid to 
cover expenses for covered benefits in the three months prior 
to the month of application for individuals who are eligible 
for Medicaid. Without this provision, it would be challenging 
for families who incurred high levels of expense prior to being 
enrolled in the program even though they would have been 
eligible for Medicaid during that period of time. This 
provision is punitive and particularly harmful to very sick 
and/or high-need populations.
Repeal of alignment of children's coverage
    The ACA aligned coverage for more than half a million low-
income, school-aged children in 22 states that were previously 
covered under different programs.\28\ Specifically, the ACA 
required that all states align the minimum threshold for 
Medicaid eligibility for all children under the age of 18 to 
138 percent of the Federal Poverty Level (FPL). This 
legislation repeals this basic protection for children's 
coverage.
---------------------------------------------------------------------------
    \28\Wesley Prater and Joan Alker, Aligning Eligibility for 
Children: Moving the Stairstep Kids to Medicaid, Kaiser Commission on 
Medicaid and the Uninsured (Aug. 2013) (http://ccf.georgetown.edu/wp-
content/uploads/2013/08/stair-step.pdf).
---------------------------------------------------------------------------
    Prior to the ACA's passage, young children under age six 
with family incomes up to 138 percent of the FPL were covered 
in Medicaid, whereas children ages 6-18 were only required to 
be covered up to 100 percent FPL. While states had the option 
to align Medicaid eligibility levels for children of all ages 
at 133 percent FPL or higher, many instead placed the older 
children above the poverty line in separate CHIP. This created 
a `stairstep' coverage structure in many states, where young 
children were in Medicaid while school-aged children, even in 
the same family, received coverage in separate CHIP programs.
    The pediatric benefit in Medicaid--known as the Early and 
Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit--
ensures children can receive the screenings they need to make 
sure their development is on track, and if any illnesses or 
delays are identified, that children receive the treatment they 
need to thrive. Under the proposed legislation, states would be 
able to strip this benefit from school-aged children (6-18 year 
olds) in families with incomes between 100-133 percent of 
poverty. States could also impose premiums and co-pays on this 
population, making it harder for school-aged children to access 
needed services. This provision is a step backwards for the 
health of low-income children.

Mandatory six-month redetermination for expansion population

    The bill would institute a six-month redetermination 
requirement for the Medicaid expansion population. Requiring 
states to redetermine eligibility of beneficiaries eligible 
under the expansion every six months instead of once a year 
would cause adults to lose access to health care, would be 
costly and burdensome for states, and would make it harder for 
health care providers and managed care organizations to 
coordinate care for beneficiaries. Coupled with provisions in 
this legislation to end the enhanced match for the expansion in 
2020, this provision is clearly designed to decrease enrollment 
of adults receiving the enhanced match and shift costs to 
states, who would have to contribute an estimated 2.8 to 5 
times more to cover them.
    The ACA changed Medicaid to a 12-month renewal cycle to 
limit ``churn'' between programs. States have multiple ways to 
ensure program integrity without requiring beneficiaries to 
submit paperwork every six months, such as checking 
unemployment and wage data, sharing data with the Supplemental 
Nutritional Assistance Program and other state programs. When 
these data sources suggest a Medicaid beneficiary is no longer 
eligible, states can follow up and request information from the 
beneficiary. Requiring 6-month renewals limits a state's 
flexibility to run their Medicaid program in a cost-effective 
and efficient manner by imposing burdensome and unnecessary 
mandates.

Repeal of Community First Choice match

    The Community First Choice option was authorized by the ACA 
as part of a host of new options to incentivize states to 
rebalance their Medicaid long-term care programs toward home 
and community based care, helping to keep individuals in their 
homes and communities as long as possible. The ``Community 
First Choice Option'' allows States to provide home and 
community-based attendant services and supports to eligible 
Medicaid enrollees under their state Plan, providing a 6 
percentage point increase in federal matching payments to 
states for service expenditures related to this option. 
Services are provided statewide, with no enrollment caps. 
Currently, eight states provide this important option, yet this 
legislation would remove the federal support, resulting in 
hundreds of millions in cuts in funding for this important 
initiative to each state. This provision would incentivize 
states to drop this important program, endangering the service 
for the elderly and individuals with disabilities and moving 
the program backwards.

  UNRAVELING HEALTH INSURANCE COVERAGE FOR MILLIONS OF AMERICANS AND 
                   FORCING THEM TO PAY MORE FOR LESS

    The minority is opposed to this bill, because it will force 
Americans to pay more for less, by driving up costs for older 
Americans, increasing deductibles, and lowering financial 
assistance to purchase health insurance. The legislation 
implements an ``age tax'' that allows insurers to charge an 
older person five times more than a young person. The 
Affordable Care Act limited insurers to 3:1 age rating, thus 
requiring insurers to charge older Americans no more than three 
times more than younger Americans. This repeal legislation sets 
5:1 age rating as the default, and would allow states to go 
beyond 5:1 to establish any age rating ratio they choose. This 
would raise older Americans' premiums by thousands of dollars a 
year.
    The repeal bill also replaces the ACA's tax credits with a 
wholly inadequate flat tax credit based on age. The ACA's tax 
credits have made health insurance affordable for millions of 
lower and middle income Americans. In 2016, over 85 percent of 
consumers received an advance premium tax credit, which varies 
by an individual's income, family size, and the cost of 
premiums in the area in which they live. The repeal legislation 
will eliminate the ACA's premium assistance and replace them 
with tax credits that vary only by age. These tax credits will 
be substantially lower in value than the ACA's premium tax 
credits. Current enrollees would receive an average tax credit 
in 2020 that is 36 percent less than under the ACA, according 
to the Kaiser Family Foundation. Additionally, these tax 
credits would not keep pace with the cost of healthcare, as 
they are indexed to CPI plus one percent, unlike the ACA's tax 
credits, which are tied to the growth of insurance premiums. 
This coupled with changes to age rating will make health care 
unaffordable for older Americans.
    The repeal bill also eliminates the ACA's cost-sharing 
subsidies, which lower out-of-pocket costs for low-income 
consumers below 250 percent of the federal poverty level and 
help families afford copays and deductibles when seeing their 
doctors. Cost-sharing reductions significantly lower out-of-
pocket costs for consumers, and the majority's decision to 
eliminate them without replacing them with any equivalent 
financial assistance will profoundly impact the ability of low-
income individuals to afford to use their health insurance.
    The repeal bill fails to protect consumers, including up to 
129 million Americans with pre-existing conditions. It 
undermines the ACA's protections for individuals with 
preexisting conditions by implementing a new, 30 percent 
surcharge on enrollees who have had a lapse in coverage. This 
``sick tax'' will make coverage more expensive for consumers 
when they need it most. For instance, according to the American 
Cancer Society, cancer patients are likely to have gaps in 
coverage beyond their control and would therefore be 
disproportionately penalized by the continuous coverage 
requirement.
    Additionally, the minority is concerned that millions of 
Americans will be unable to afford health insurance under the 
repeal legislation, and will therefore be subject to this sick 
tax. The lack of any hardship exemption whatsoever underscores 
the reality that the most vulnerable enrollees, such as the 
very sick and very low-income enrollees, will be 
disproportionately subject to this penalty. Low-income 
enrollees with serious medical conditions, such as chronic 
illnesses and disabilities, could find themselves permanently 
locked out of coverage.
    Moreover, the policies in this bill will likely result in a 
``death spiral'' in the ACA marketplaces, which will raise 
premiums even more for individuals with preexisting conditions. 
The continuous coverage penalty, while onerous to those who are 
sick and need care, is unlikely to incentivize healthy 
Americans to purchase coverage. Many economists, as well as 
health insurers, believe that the young and healthy will 
gamble, and will stay out of the market unless they get sick. 
As the young and healthy pull out of the pool, premiums will go 
up for those left in the individual market.
    The repeal bill also repeals important consumer protections 
in the ACA that ensure that consumers get value for their 
health insurance. It eliminates the actuarial value 
requirements of the ACA, which require insurers to offer 
individual market plans that meet certain standards--bronze, 
silver, gold and platinum. Each actuarial value corresponds to 
an average value to the consumer--higher value plans have lower 
out-of-pocket costs (deductibles, coinsurance, and co-pays), 
while lower value plans have higher out-of-pocket costs. 
Repealing this requirement will send us back to the days before 
the ACA, when insurance companies provided bare bones plans 
that provided very little value for Americans' premium dollars. 
Insurance companies will no longer be required to offer a 
minimum level of benefits, resulting in skinnier plans with 
higher deductibles and higher cost-sharing.
    This legislation creates an ill-defined and inadequate 
``Patient and State Stability Fund'' with zero protections to 
ensure the funding helps consumers access health care. The bill 
allocates $15 billion in 2018 and 2019 and $10 billion each 
year until 2026; there is no additional funding beyond this 
date. This small amount of funding is expected to be used for 
wide-ranging purposes such as high-risk pools, stabilizing 
insurance markets, provider payments, providing preventive 
care, and reducing premium costs for consumers. Majority 
members at the Committee markup further suggested that the 
funds could be used to solve the opioid epidemic, or to allow 
states to expand access to treatment for the mentally ill. The 
minority is concerned that the majority's aspirations for these 
limited dollars are not grounded in reality. Given that 
aggregate premiums in the individual insurance market are 
expected to be around $175 billion in 2026 according to CBO, 
even if the full amount of the fund were used to reduce 
premiums, the overall impact for consumers would be limited. 
Additionally, there is no requirement that the funds actually 
reduce premiums and costs for consumers or expand coverage. 
Under the broad terms listed in the legislation, states could 
use the money to increase payments to providers under state 
health programs, build new hospitals or clinics, or provide flu 
shots. While important, none of these projects would 
necessarily increase access to affordable health insurance.
    Finally, to the extent that states use these funds to set 
up high risk pools, the minority is concerned that quarantining 
the sickest patients in high risk pools is destined to fail and 
will not protect people with pre-existing conditions. Decades 
of experience with high-risk pools has proven that they do not 
work--they are expensive for states to administer, expensive 
for consumers to purchase, and offer poor coverage with high 
premiums and even higher deductibles. High risk pools were 
incredibly expensive for sick patients, sometimes charging up 
to 250 percent of what healthy patients paid for their health 
insurance. Deductibles were sometimes as high as $25,000 with 
annual limits as low as $75,000. Even with inadequate coverage 
and high deductibles, states still had difficulty funding high-
risk pools, resulting in long waiting lists and the rationing 
of care for the sickest patients. Furthermore, as the repeal 
legislation has no federal standards or consumer protections 
associated with these state high risk pools, states would be 
free to impose annual and lifetime limits, coverage exclusions 
associated with a patient's pre-existing conditions, and 
waiting periods.
    For all of these reasons, the Democratic Members of the 
Energy and Commerce Committee strongly oppose the 
Reconciliation bill.
                              SIGNATORIES


                           Frank Pallone, Jr.


                               Bobby Rush


                             Anna G. Eshoo


                             Eliot L. Engel


                               Gene Green


                             Diana DeGette


                               Mike Doyle


                             Jan Schakowsky


                            G.K. Butterfield


                            Doris O. Matsui


                              Kathy Castor


                             John Sarbanes


                             Jerry McNerney


                              Peter Welch


                             Ben Ray Lujan


                             Paul D. Tonko


                            Yvette D. Clarke


                             Dave Loebsack


                             Kurt Schrader


                         Joseph P. Kennedy, III


                             Tony Cardenas


                               Raul Ruiz


                            Scott H. Peters


                             Debbie Dingell



  


                            Committee Print


_______________________________________________________________________

 Budget Reconciliation Legislative Recommendations Relating to Repeal 
   and Replace of the Patient Protection and Affordable Care Act, As 
    Adopted by the Committee on Energy and Commerce on March 9, 2017

_______________________________________________________________________

                      TITLE I--ENERGY AND COMMERCE

          Subtitle A--Patient Access to Public Health Programs

SEC. 101. THE PREVENTION AND PUBLIC HEALTH FUND.

  (a) In General.--Subsection (b) of section 4002 of the 
Patient Protection and Affordable Care Act (42 U.S.C. 300u-11), 
as amended by section 5009 of the 21st Century Cures Act, is 
amended--
          (1) in paragraph (2), by adding ``and'' at the end;
          (2) in paragraph (3)--
                  (A) by striking ``each of fiscal years 2018 
                and 2019'' and inserting ``fiscal year 2018''; 
                and
                  (B) by striking the semicolon at the end and 
                inserting a period; and
          (3) by striking paragraphs (4) through (8).
  (b) Rescission of Unobligated Funds.--Of the funds made 
available by such section 4002, the unobligated balance at the 
end of fiscal year 2018 is rescinded.

SEC. 102. COMMUNITY HEALTH CENTER PROGRAM.

   Effective as if included in the enactment of the Medicare 
Access and CHIP Reauthorization Act of 2015 (Public Law 114-10, 
129 Stat. 87), paragraph (1) of section 221(a) of such Act is 
amended by inserting ``, and an additional $422,000,000 for 
fiscal year 2017'' after ``2017''.

SEC. 103. FEDERAL PAYMENTS TO STATES.

  (a) In General.--Notwithstanding section 504(a), 1902(a)(23), 
1903(a), 2002, 2005(a)(4), 2102(a)(7), or 2105(a)(1) of the 
Social Security Act (42 U.S.C. 704(a), 1396a(a)(23), 1396b(a), 
1397a, 1397d(a)(4), 1397bb(a)(7), 1397ee(a)(1)), or the terms 
of any Medicaid waiver in effect on the date of enactment of 
this Act that is approved under section 1115 or 1915 of the 
Social Security Act (42 U.S.C. 1315, 1396n), for the 1-year 
period beginning on the date of the enactment of this Act, no 
Federal funds provided from a program referred to in this 
subsection that is considered direct spending for any year may 
be made available to a State for payments to a prohibited 
entity, whether made directly to the prohibited entity or 
through a managed care organization under contract with the 
State.
  (b) Definitions.--In this section:
          (1) Prohibited entity.--The term ``prohibited 
        entity'' means an entity, including its affiliates, 
        subsidiaries, successors, and clinics--
                  (A) that, as of the date of enactment of this 
                Act--
                          (i) is an organization described in 
                        section 501(c)(3) of the Internal 
                        Revenue Code of 1986 and exempt from 
                        tax under section 501(a) of such Code;
                          (ii) is an essential community 
                        provider described in section 156.235 
                        of title 45, Code of Federal 
                        Regulations (as in effect on the date 
                        of enactment of this Act), that is 
                        primarily engaged in family planning 
                        services, reproductive health, and 
                        related medical care; and
                          (iii) provides for abortions, other 
                        than an abortion--
                                  (I) if the pregnancy is the 
                                result of an act of rape or 
                                incest; or
                                  (II) in the case where a 
                                woman suffers from a physical 
                                disorder, physical injury, or 
                                physical illness that would, as 
                                certified by a physician, place 
                                the woman in danger of death 
                                unless an abortion is 
                                performed, including a life-
                                endangering physical condition 
                                caused by or arising from the 
                                pregnancy itself; and
                  (B) for which the total amount of Federal and 
                State expenditures under the Medicaid program 
                under title XIX of the Social Security Act in 
                fiscal year 2014 made directly to the entity 
                and to any affiliates, subsidiaries, 
                successors, or clinics of the entity, or made 
                to the entity and to any affiliates, 
                subsidiaries, successors, or clinics of the 
                entity as part of a nationwide health care 
                provider network, exceeded $350,000,000.
          (2) Direct spending.--The term ``direct spending'' 
        has the meaning given that term under section 250(c) of 
        the Balanced Budget and Emergency Deficit Control Act 
        of 1985 (2 U.S.C. 900(c)).

                Subtitle B--Medicaid Program Enhancement

SEC. 111. REPEAL OF MEDICAID PROVISIONS.

  The Social Security Act is amended--
          (1) in section 1902 (42 U.S.C. 1396a)--
                  (A) in subsection (a)(47)(B), by inserting 
                ``and provided that any such election shall 
                cease to be effective on January 1, 2020, and 
                no such election shall be made after that 
                date'' before the semicolon at the end; and
                  (B) in subsection (l)(2)(C), by inserting 
                ``and ending December 31, 2019,'' after 
                ``January 1, 2014,'';
          (2) in section 1915(k)(2) (42 U.S.C. 1396n(k)(2)), by 
        striking ``during the period described in paragraph 
        (1)'' and inserting ``on or after the date referred to 
        in paragraph (1) and before January 1, 2020''; and
          (3) in section 1920(e) (42 U.S.C. 1396r-1(e)), by 
        striking ``under clause (i)(VIII), clause (i)(IX), or 
        clause (ii)(XX) of subsection (a)(10)(A)'' and 
        inserting ``under clause (i)(VIII) or clause (ii)(XX) 
        of section 1902(a)(10)(A) before January 1, 2020, 
        section 1902(a)(10)(A)(i)(IX),''.

SEC. 112. REPEAL OF MEDICAID EXPANSION.

  (a) In General.--Section 1902(a)(10)(A) of the Social 
Security Act (42 U.S.C. 1396a(a)(10)(A)) is amended--
          (1) in clause (i)(VIII), by inserting ``at the option 
        of a State,'' after ``January 1, 2014,''; and
          (2) in clause (ii)(XX), by inserting ``and ending 
        December 31, 2019,'' after ``2014,''.
  (b) Termination of EFMAP for New ACA Expansion Enrollees.--
Section 1905 of the Social Security Act (42 U.S.C. 1396d) is 
amended--
          (1) in subsection (y)(1), in the matter preceding 
        subparagraph (A), by striking ``with respect to'' and 
        all that follows through ``shall be'' and inserting 
        ``with respect to amounts expended before January 1, 
        2020, by such State for medical assistance for newly 
        eligible individuals described in subclause (VIII) of 
        section 1902(a)(10)(A)(i) who are enrolled under the 
        State plan (or a waiver of the plan) before such date 
        and with respect to amounts expended after such date by 
        such State for medical assistance for individuals 
        described in such subclause who were enrolled under 
        such plan (or waiver of such plan) as of December 31, 
        2019, and who do not have a break in eligibility for 
        medical assistance under such State plan (or waiver) 
        for more than one month after such date, shall be''; 
        and
          (2) in subsection (z)(2)--
                  (A) in subparagraph (A), by striking 
                ``medical assistance for individuals'' and all 
                that follows through ``shall be'' and inserting 
                ``amounts expended before January 1, 2020, by 
                such State for medical assistance for 
                individuals described in section 
                1902(a)(10)(A)(i)(VIII) who are nonpregnant 
                childless adults with respect to whom the State 
                may require enrollment in benchmark coverage 
                under section 1937 and who are enrolled under 
                the State plan (or a waiver of the plan) before 
                such date and with respect to amounts expended 
                after such date by such State for medical 
                assistance for individuals described in such 
                section, who are nonpregnant childless adults 
                with respect to whom the State may require 
                enrollment in benchmark coverage under section 
                1937, who were enrolled under such plan (or 
                waiver of such plan) as of December 31, 2019, 
                and who do not have a break in eligibility for 
                medical assistance under such State plan (or 
                waiver) for more than one month after such 
                date, shall be''; and
                  (B) in subparagraph (B)(ii)--
                          (i) in subclause (III), by adding 
                        ``and'' at the end; and
                          (ii) by striking subclauses (IV), 
                        (V), and (VI) and inserting the 
                        following new subclause:
                  ``(IV) 2017 and each subsequent year is 80 
                percent.''.
  (c) Sunset of Essential Health Benefits Requirement.--Section 
1937(b)(5) of the Social Security Act (42 U.S.C. 1396u-7(b)(5)) 
is amended by adding at the end the following: ``This paragraph 
shall not apply after December 31, 2019.''.

SEC. 113. ELIMINATION OF DSH CUTS.

  Section 1923(f) of the Social Security Act (42 U.S.C. 1396r-
4(f)) is amended--
          (1) in paragraph (7)--
                  (A) in subparagraph (A)--
                          (i) in clause (i)--
                                  (I) in the matter preceding 
                                subclause (I), by striking 
                                ``2025'' and inserting 
                                ``2019''; and
                          (ii) in clause (ii)--
                                  (I) in subclause (I), by 
                                adding ``and'' at the end;
                                  (II) in subclause (II), by 
                                striking the semicolon at the 
                                end and inserting a period; and
                                  (III) by striking subclauses 
                                (III) through (VIII); and
                  (B) by adding at the end the following new 
                subparagraph:
                  ``(C) Exemption from exemption for non-
                expansion states.--
                          ``(i) In general.--In the case of a 
                        State that is a non-expansion State for 
                        a fiscal year, subparagraph (A)(i) 
                        shall not apply to the DSH allotment 
                        for such State and fiscal year.
                          ``(ii) No change in reduction for 
                        expansion states.--In the case of a 
                        State that is an expansion State for a 
                        fiscal year, the DSH allotment for such 
                        State and fiscal year shall be 
                        determined as if clause (i) did not 
                        apply.
                          ``(iii) Non-expansion and expansion 
                        state defined.--
                                  ``(I) The term `expansion 
                                State' means with respect to a 
                                fiscal year, a State that, as 
                                of July 1 of the preceding 
                                fiscal year, provides for 
                                eligibility under clause 
                                (i)(VIII) or (ii)(XX) of 
                                section 1902(a)(10)(A) for 
                                medical assistance under this 
                                title (or a waiver of the State 
                                plan approved under section 
                                1115).
                                  ``(II) The term `non-
                                expansion State' means, with 
                                respect to a fiscal year, a 
                                State that is not an expansion 
                                State.''; and
          (2) in paragraph (8), by striking ``fiscal year 
        2025'' and inserting ``fiscal year 2019''.

SEC. 114. REDUCING STATE MEDICAID COSTS.

  (a) Letting States Disenroll High Dollar Lottery Winners.--
          (1) In general.--Section 1902 of the Social Security 
        Act (42 U.S.C. 1396a) is amended--
                  (A) in subsection (a)(17), by striking 
                ``(e)(14), (e)(14)'' and inserting ``(e)(14), 
                (e)(15)''; and
                  (B) in subsection (e)--
                          (i) in paragraph (14) (relating to 
                        modified adjusted gross income), by 
                        adding at the end the following new 
                        subparagraph:
                  ``(J) Treatment of certain lottery winnings 
                and income received as a lump sum.--
                          ``(i) In general.--In the case of an 
                        individual who is the recipient of 
                        qualified lottery winnings (pursuant to 
                        lotteries occurring on or after January 
                        1, 2020) or qualified lump sum income 
                        (received on or after such date) and 
                        whose eligibility for medical 
                        assistance is determined based on the 
                        application of modified adjusted gross 
                        income under subparagraph (A), a State 
                        shall, in determining such eligibility, 
                        include such winnings or income (as 
                        applicable) as income received--
                                  ``(I) in the month in which 
                                such winnings or income (as 
                                applicable) is received if the 
                                amount of such winnings or 
                                income is less than $80,000;
                                  ``(II) over a period of 2 
                                months if the amount of such 
                                winnings or income (as 
                                applicable) is greater than or 
                                equal to $80,000 but less than 
                                $90,000;
                                  ``(III) over a period of 3 
                                months if the amount of such 
                                winnings or income (as 
                                applicable) is greater than or 
                                equal to $90,000 but less than 
                                $100,000; and
                                  ``(IV) over a period of 3 
                                months plus 1 additional month 
                                for each increment of $10,000 
                                of such winnings or income (as 
                                applicable) received, not to 
                                exceed a period of 120 months 
                                (for winnings or income of 
                                $1,260,000 or more), if the 
                                amount of such winnings or 
                                income is greater than or equal 
                                to $100,000.
                          ``(ii) Counting in equal 
                        installments.--For purposes of 
                        subclauses (II), (III), and (IV) of 
                        clause (i), winnings or income to which 
                        such subclause applies shall be counted 
                        in equal monthly installments over the 
                        period of months specified under such 
                        subclause.
                          ``(iii) Hardship exemption.--An 
                        individual whose income, by application 
                        of clause (i), exceeds the applicable 
                        eligibility threshold established by 
                        the State, may continue to be eligible 
                        for medical assistance to the extent 
                        that the State determines, under 
                        procedures established by the State 
                        under the State plan (or in the case of 
                        a waiver of the plan under section 
                        1115, incorporated in such waiver), or 
                        as otherwise established by such State 
                        in accordance with such standards as 
                        may be specified by the Secretary, that 
                        the denial of eligibility of the 
                        individual would cause an undue medical 
                        or financial hardship as determined on 
                        the basis of criteria established by 
                        the Secretary.
                          ``(iv) Notifications and assistance 
                        required in case of loss of 
                        eligibility.--A State shall, with 
                        respect to an individual who loses 
                        eligibility for medical assistance 
                        under the State plan (or a waiver of 
                        such plan) by reason of clause (i), 
                        before the date on which the individual 
                        loses such eligibility, inform the 
                        individual of the date on which the 
                        individual would no longer be 
                        considered ineligible by reason of such 
                        clause to receive medical assistance 
                        under the State plan or under any 
                        waiver of such plan and the date on 
                        which the individual would be eligible 
                        to reapply to receive such medical 
                        assistance.
                          ``(v) Qualified lottery winnings 
                        defined.--In this subparagraph, the 
                        term `qualified lottery winnings' means 
                        winnings from a sweepstakes, lottery, 
                        or pool described in paragraph (3) of 
                        section 4402 of the Internal Revenue 
                        Code of 1986 or a lottery operated by a 
                        multistate or multijurisdictional 
                        lottery association, including amounts 
                        awarded as a lump sum payment.
                          ``(vi) Qualified lump sum income 
                        defined.--In this subparagraph, the 
                        term `qualified lump sum income' means 
                        income that is received as a lump sum 
                        from one of the following sources:
                                  ``(I) Monetary winnings from 
                                gambling (as defined by the 
                                Secretary and including 
                                monetary winnings from gambling 
                                activities described in section 
                                1955(b)(4) of title 18, United 
                                States Code).
                                  ``(II) Income received as 
                                liquid assets from the estate 
                                (as defined in section 
                                1917(b)(4)) of a deceased 
                                individual.''; and
                          (ii) by striking ``(14) Exclusion'' 
                        and inserting ``(15) Exclusion''.
          (2) Rules of construction.--
                  (A) Interception of lottery winnings 
                allowed.--Nothing in the amendment made by 
                paragraph (1)(B)(i) shall be construed as 
                preventing a State from intercepting the State 
                lottery winnings awarded to an individual in 
                the State to recover amounts paid by the State 
                under the State Medicaid plan under title XIX 
                of the Social Security Act for medical 
                assistance furnished to the individual.
                  (B) Applicability limited to eligibility of 
                recipient of lottery winnings or lump sum 
                income.--Nothing in the amendment made by 
                paragraph (1)(B)(i) shall be construed, with 
                respect to a determination of household income 
                for purposes of a determination of eligibility 
                for medical assistance under the State plan 
                under title XIX of the Social Security Act (42 
                U.S.C. 1396 et seq.) (or a waiver of such plan) 
                made by applying modified adjusted gross income 
                under subparagraph (A) of section 1902(e)(14) 
                of such Act (42 U.S.C. 1396a(e)(14)), as 
                limiting the eligibility for such medical 
                assistance of any individual that is a member 
                of the household other than the individual (or 
                the individual's spouse) who received qualified 
                lottery winnings or qualified lump-sum income 
                (as defined in subparagraph (J) of such section 
                1902(e)(14), as added by paragraph (1)(B)(i) of 
                this subsection).
  (b) Repeal of Retroactive Eligibility.--
          (1) In general.--
                  (A) State plan requirements.--Section 
                1902(a)(34) of the Social Security Act (42 
                U.S.C. 1396a(a)(34)) is amended by striking 
                ``in or after the third month before the month 
                in which he made application'' and inserting 
                ``in or after the month in which the individual 
                made application''.
                  (B) Definition of medical assistance.--
                Section 1905(a) of the Social Security Act (42 
                U.S.C. 1396d(a)) is amended by striking ``in or 
                after the third month before the month in which 
                the recipient makes application for 
                assistance'' and inserting ``in or after the 
                month in which the recipient makes application 
                for assistance''.
          (2) Effective date.--The amendments made by paragraph 
        (1) shall apply to medical assistance with respect to 
        individuals whose eligibility for such assistance is 
        based on an application for such assistance made (or 
        deemed to be made) on or after October 1, 2017.
  (c) Ensuring States Are Not Forced to Pay for Individuals 
Ineligible for the Program.--
          (1) In general.--Section 1137(f) of the Social 
        Security Act (42 U.S.C. 1320b-7(f)) is amended--
                  (A) by striking ``Subsections (a)(1) and 
                (d)'' and inserting ``(1) Subsections (a)(1) 
                and (d)''; and
                  (B) by adding at the end the following new 
                paragraph:
  ``(2)(A) Subparagraphs (A) and (B)(ii) of subsection (d)(4) 
shall not apply in the case of an initial determination made on 
or after the date that is 6 months after the date of the 
enactment of this paragraph with respect to the eligibility of 
an alien described in subparagraph (B) for benefits under the 
program listed in subsection (b)(2).
  ``(B) An alien described in this subparagraph is an 
individual declaring to be a citizen or national of the United 
States with respect to whom a State, in accordance with section 
1902(a)(46)(B), requires--
          ``(i) pursuant to 1902(ee), the submission of a 
        social security number; or
          ``(ii) pursuant to 1903(x), the presentation of 
        satisfactory documentary evidence of citizenship or 
        nationality.''.
          (2) No payments for medical assistance provided 
        before presentation of evidence.--Section 1903(i)(22) 
        of the Social Security Act (42 U.S.C. 1396b(i)(22)) is 
        amended--
                  (A) by striking ``with respect to amounts 
                expended'' and inserting ``(A) with respect to 
                amounts expended'';
                  (B) by inserting ``and'' at the end; and
                  (C) by adding at the end the following new 
                subparagraph:
          ``(B) in the case of a State that elects to provide a 
        reasonable period to present satisfactory documentary 
        evidence of such citizenship or nationality pursuant to 
        paragraph (2)(C) of section 1902(ee) or paragraph (4) 
        of subsection (x) of this section, for amounts expended 
        for medical assistance for such an individual (other 
        than an individual described in paragraph (2) of such 
        subsection (x)) during such period;''.
          (3) Conforming amendments.--Section 1137(d)(4) of the 
        Social Security Act (42 U.S.C. 1320b-7(d)(4)) is 
        amended--
                  (A) in subparagraph (A), in the matter 
                preceding clause (i), by inserting ``subject to 
                subsection (f)(2),'' before ``the State''; and
                  (B) in subparagraph (B)(ii), by inserting 
                ``subject to subsection (f)(2),'' before 
                ``pending such verification''.
  (d) Updating Allowable Home Equity Limits in Medicaid.--
          (1) In general.--Section 1917(f)(1) of the Social 
        Security Act (42 U.S.C. 1396p(f)(1)) is amended--
                  (A) in subparagraph (A), by striking 
                ``subparagraphs (B) and (C)'' and inserting 
                ``subparagraph (B)'';
                  (B) by striking subparagraph (B);
                  (C) by redesignating subparagraph (C) as 
                subparagraph (B); and
                  (D) in subparagraph (B), as so redesignated, 
                by striking ``dollar amounts specified in this 
                paragraph'' and inserting ``dollar amount 
                specified in subparagraph (A)''.
          (2) Effective date.--
                  (A) In general.--The amendments made by 
                paragraph (1) shall apply with respect to 
                eligibility determinations made after the date 
                that is 180 days after the date of the 
                enactment of this section.
                  (B) Exception for state legislation.--In the 
                case of a State plan under title XIX of the 
                Social Security Act that the Secretary of 
                Health and Human Services determines requires 
                State legislation in order for the respective 
                plan to meet any requirement imposed by 
                amendments made by this subsection, the 
                respective plan shall not be regarded as 
                failing to comply with the requirements of such 
                title solely on the basis of its failure to 
                meet such an additional requirement before the 
                first day of the first calendar quarter 
                beginning after the close of the first regular 
                session of the State legislature that begins 
                after the date of the enactment of this Act. 
                For purposes of the previous sentence, in the 
                case of a State that has a 2-year legislative 
                session, each year of the session shall be 
                considered to be a separate regular session of 
                the State legislature.

SEC. 115. SAFETY NET FUNDING FOR NON-EXPANSION STATES.

  Title XIX of the Social Security Act is amended by inserting 
after section 1923 (42 U.S.C. 1396r-4) the following new 
section:

  ``ADJUSTMENT IN PAYMENT FOR SERVICES OF SAFETY NET PROVIDERS IN NON-
                            EXPANSION STATES

  ``Sec. 1923A.  (a) In General.--Subject to the limitations of 
this section, for each year during the period beginning with 
2018 and ending with 2021, each State that is one of the 50 
States or the District of Columbia and that, as of July 1 of 
the preceding year, did not provide for eligibility under 
clause (i)(VIII) or (ii)(XX) of section 1902(a)(10)(A) for 
medical assistance under this title (or a waiver of the State 
plan approved under section 1115) (each such State or District 
referred to in this section for the year as a `non-expansion 
State') may adjust the payment amounts otherwise provided under 
the State plan under this title (or a waiver of such plan) to 
health care providers that provide health care services to 
individuals enrolled under this title (in this section referred 
to as `eligible providers').
  ``(b) Increase in Applicable FMAP.--Notwithstanding section 
1905(b), the Federal medical assistance percentage applicable 
with respect to expenditures attributable to a payment 
adjustment under subsection (a) for which payment is permitted 
under subsection (c) shall be equal to--
          ``(1) 100 percent for calendar quarters in calendar 
        years 2018, 2019, 2020, and 2021; and
          ``(2) 95 percent for calendar quarters in calendar 
        year 2022.
  ``(c) Limitations; Disqualification of States.--
          ``(1) Annual allotment limitation.--Payment under 
        section 1903(a) shall not be made to a State with 
        respect to any payment adjustment made under this 
        section for all calendar quarters in a year in excess 
        of the $2,000,000,000 multiplied by the ratio of--
                  ``(A) the population of the State with income 
                below 138 percent of the poverty line in 2015 
                (as determined based the table entitled `Health 
                Insurance Coverage Status and Type by Ratio of 
                Income to Poverty Level in the Past 12 Months 
                by Age' for the universe of the civilian 
                noninstitutionalized population for whom 
                poverty status is determined based on the 2015 
                American Community Survey 1-Year Estimates, as 
                published by the Bureau of the Census), to
                  ``(B) the sum of the populations under 
                subparagraph (A) for all non-expansion States.
          ``(2) Limitation on payment adjustment amount for 
        individual providers.--The amount of a payment 
        adjustment under subsection (a) for an eligible 
        provider may not exceed the provider's costs incurred 
        in furnishing health care services (as determined by 
        the Secretary and net of payments under this title, 
        other than under this section, and by uninsured 
        patients) to individuals who either are eligible for 
        medical assistance under the State plan (or under a 
        waiver of such plan) or have no health insurance or 
        health plan coverage for such services.
  ``(d) Disqualification in Case of State Coverage Expansion.--
If a State is a non-expansion for a year and provides 
eligibility for medical assistance described in subsection (a) 
during the year, the State shall no longer be treated as a non-
expansion State under this section for any subsequent years.''.

SEC. 116. PROVIDING INCENTIVES FOR INCREASED FREQUENCY OF ELIGIBILITY 
                    REDETERMINATIONS.

  (a) In General.--Section 1902(e)(14) of the Social Security 
Act (42 U.S.C. 1396a(e)(14)) (relating to modified adjusted 
gross income), as amended by section 114(a)(1), is further 
amended by adding at the end the following:
                  ``(K) Frequency of eligibility 
                redeterminations.--Beginning on October 1, 
                2017, and notwithstanding subparagraph (H), in 
                the case of an individual whose eligibility for 
                medical assistance under the State plan under 
                this title (or a waiver of such plan) is 
                determined based on the application of modified 
                adjusted gross income under subparagraph (A) 
                and who is so eligible on the basis of clause 
                (i)(VIII) or clause (ii)(XX) of subsection 
                (a)(10)(A), a State shall redetermine such 
                individual's eligibility for such medical 
                assistance no less frequently than once every 6 
                months.''.
  (b) Civil Monetary Penalty.--Section 1128A(a) of the Social 
Security Act (42 U.S.C. 1320a-7a(a)) is amended, in the matter 
following paragraph (10), by striking ``(or, in cases under 
paragraph (3)'' and inserting the following: ``(or, in cases 
under paragraph (1) in which an individual was knowingly 
enrolled on or after October 1, 2017, pursuant to section 
1902(a)(10)(A)(i)(VIII) for medical assistance under the State 
plan under title XIX whose income does not meet the income 
threshold specified in such section or in which a claim was 
presented on or after October 1, 2017, as a claim for an item 
or service furnished to an individual described in such section 
but whose enrollment under such State plan is not made on the 
basis of such individual's meeting the income threshold 
specified in such section, $20,000 for each such individual or 
claim; in cases under paragraph (3)''.
  (c) Increased Administrative Matching Percentage.--For each 
calendar quarter during the period beginning on October 1, 
2017, and ending on December 31, 2019, the Federal matching 
percentage otherwise applicable under section 1903(a) of the 
Social Security Act (42 U.S.C. 1396b(a)) with respect to State 
expenditures during such quarter that are attributable to 
meeting the requirement of section 1902(e)(14) (relating to 
determinations of eligibility using modified adjusted gross 
income) of such Act shall be increased by 5 percentage points 
with respect to State expenditures attributable to activities 
carried out by the State (and approved by the Secretary) to 
increase the frequency of eligibility redeterminations required 
by subparagraph (K) of such section (relating to eligibility 
redeterminations made on a 6-month basis) (as added by 
subsection (a)).

        Subtitle C--Per Capita Allotment for Medical Assistance

SEC. 121. PER CAPITA ALLOTMENT FOR MEDICAL ASSISTANCE.

  Title XIX of the Social Security Act is amended--
          (1) in section 1903 (42 U.S.C. 1396b)--
                  (A) in subsection (a), in the matter before 
                paragraph (1), by inserting ``and section 
                1903A(a)'' after ``except as otherwise provided 
                in this section''; and
                  (B) in subsection (d)(1), by striking ``to 
                which'' and inserting ``to which, subject to 
                section 1903A(a),''; and
          (2) by inserting after such section 1903 the 
        following new section:

``SEC. 1903A. PER CAPITA-BASED CAP ON PAYMENTS FOR MEDICAL ASSISTANCE.

  ``(a) Application of Per Capita Cap on Payments for Medical 
Assistance Expenditures.--
          ``(1) In general.--If a State has excess aggregate 
        medical assistance expenditures (as defined in 
        paragraph (2)) for a fiscal year (beginning with fiscal 
        year 2020), the amount of payment to the State under 
        section 1903(a)(1) for each quarter in the following 
        fiscal year shall be reduced by \1/4\ of the excess 
        aggregate medical assistance payments (as defined in 
        paragraph (3)) for that previous fiscal year. In this 
        section, the term `State' means only the 50 States and 
        the District of Columbia.
          ``(2) Excess aggregate medical assistance 
        expenditures.--In this subsection, the term `excess 
        aggregate medical assistance expenditures' means, for a 
        State for a fiscal year, the amount (if any) by which--
                  ``(A) the amount of the adjusted total 
                medical assistance expenditures (as defined in 
                subsection (b)(1)) for the State and fiscal 
                year; exceeds
                  ``(B) the amount of the target total medical 
                assistance expenditures (as defined in 
                subsection (c)) for the State and fiscal year.
          ``(3) Excess aggregate medical assistance payments.--
        In this subsection, the term `excess aggregate medical 
        assistance payments' means, for a State for a fiscal 
        year, the product of--
                  ``(A) the excess aggregate medical assistance 
                expenditures (as defined in paragraph (2)) for 
                the State for the fiscal year; and
                  ``(B) the Federal average medical assistance 
                matching percentage (as defined in paragraph 
                (4)) for the State for the fiscal year.
          ``(4) Federal average medical assistance matching 
        percentage.--In this subsection, the term `Federal 
        average medical assistance matching percentage' means, 
        for a State for a fiscal year, the ratio (expressed as 
        a percentage) of--
                  ``(A) the amount of the Federal payments that 
                would be made to the State under section 
                1903(a)(1) for medical assistance expenditures 
                for calendar quarters in the fiscal year if 
                paragraph (1) did not apply; to
                  ``(B) the amount of the medical assistance 
                expenditures for the State and fiscal year.
  ``(b) Adjusted Total Medical Assistance Expenditures.--
Subject to subsection (g), the following shall apply:
          ``(1) In general.--In this section, the term 
        `adjusted total medical assistance expenditures' means, 
        for a State--
                  ``(A) for fiscal year 2016, the product of--
                          ``(i) the amount of the medical 
                        assistance expenditures (as defined in 
                        paragraph (2)) for the State and fiscal 
                        year, reduced by the amount of any 
                        excluded expenditures (as defined in 
                        paragraph (3)) for the State and fiscal 
                        year otherwise included in such medical 
                        assistance expenditures; and
                          ``(ii) the 1903A FY16 population 
                        percentage (as defined in paragraph 
                        (4)) for the State; or
                  ``(B) for fiscal year 2019 or a subsequent 
                fiscal year, the amount of the medical 
                assistance expenditures (as defined in 
                paragraph (2)) for the State and fiscal year 
                that is attributable to 1903A enrollees, 
                reduced by the amount of any excluded 
                expenditures (as defined in paragraph (3)) for 
                the State and fiscal year otherwise included in 
                such medical assistance expenditures.
          ``(2) Medical assistance expenditures.--In this 
        section, the term `medical assistance expenditures' 
        means, for a State and fiscal year, the medical 
        assistance payments as reported by medical service 
        category on the Form CMS-64 quarterly expense report 
        (or successor to such a report form, and including 
        enrollment data and subsequent adjustments to any such 
        report, in this section referred to collectively as a 
        `CMS-64 report') that directly result from providing 
        medical assistance under the State plan (including 
        under a waiver of the plan) for which payment is (or 
        may otherwise be) made pursuant to section 1903(a)(1).
          ``(3) Excluded expenditures.--In this section, the 
        term `excluded expenditures' means, for a State and 
        fiscal year, expenditures under the State plan (or 
        under a waiver of such plan) that are attributable to 
        any of the following:
                  ``(A) DSH.--Payment adjustments made for 
                disproportionate share hospitals under section 
                1923.
                  ``(B) Medicare cost-sharing.--Payments made 
                for medicare cost-sharing (as defined in 
                section 1905(p)(3)).
                  ``(C) Safety net provider payment adjustments 
                in non-expansion states.--Payment adjustments 
                under subsection (a) of section 1923A for which 
                payment is permitted under subsection (c) of 
                such section.
          ``(4) 1903A fy 16 population percentage.--In this 
        subsection, the term `1903A FY16 population percentage' 
        means, for a State, the Secretary's calculation of the 
        percentage of the actual medical assistance 
        expenditures, as reported by the State on the CMS-64 
        reports for calendar quarters in fiscal year 2016, that 
        are attributable to 1903A enrollees (as defined in 
        subsection (e)(1)).
  ``(c)  Target Total Medical Assistance Expenditures.--
          ``(1) Calculation.--In this section, the term `target 
        total medical assistance expenditures' means, for a 
        State for a fiscal year, the sum of the products, for 
        each of the 1903A enrollee categories (as defined in 
        subsection (e)(2)), of--
                  ``(A) the target per capita medical 
                assistance expenditures (as defined in 
                paragraph (2)) for the enrollee category, 
                State, and fiscal year; and
                  ``(B) the number of 1903A enrollees for such 
                enrollee category, State, and fiscal year, as 
                determined under subsection (e)(4).
          ``(2) Target per capita medical assistance 
        expenditures.--In this subsection, the term `target per 
        capita medical assistance expenditures' means, for a 
        1903A enrollee category, State, and a fiscal year, an 
        amount equal to--
                  ``(A) the provisional FY19 target per capita 
                amount for such enrollee category (as 
                calculated under subsection (d)(5)) for the 
                State; increased by
                  ``(B) the percentage increase in the medical 
                care component of the consumer price index for 
                all urban consumers (U.S. city average) from 
                September of 2019 to September of the fiscal 
                year involved.
  ``(d) Calculation of FY19 Provisional Target Amount for Each 
1903A Enrollee Category.--Subject to subsection (g), the 
following shall apply:
          ``(1) Calculation of base amounts for fiscal year 
        2016.--For each State the Secretary shall calculate 
        (and provide notice to the State not later than April 
        1, 2018, of) the following:
                  ``(A) The amount of the adjusted total 
                medical assistance expenditures (as defined in 
                subsection (b)(1)) for the State for fiscal 
                year 2016.
                  ``(B) The number of 1903A enrollees for the 
                State in fiscal year 2016 (as determined under 
                subsection (e)(4)).
                  ``(C) The average per capita medical 
                assistance expenditures for the State for 
                fiscal year 2016 equal to--
                          ``(i) the amount calculated under 
                        subparagraph (A); divided by
                          ``(ii) the number calculated under 
                        subparagraph (B).
          ``(2) Fiscal year 2019 average per capita amount 
        based on inflating the fiscal year 2016 amount to 
        fiscal year 2019 by cpi-medical.--The Secretary shall 
        calculate a fiscal year 2019 average per capita amount 
        for each State equal to--
                  ``(A) the average per capita medical 
                assistance expenditures for the State for 
                fiscal year 2016 (calculated under paragraph 
                (1)(C)); increased by
                  ``(B) the percentage increase in the medical 
                care component of the consumer price index for 
                all urban consumers (U.S. city average) from 
                September, 2016 to September, 2019.
          ``(3) Aggregate and average expenditures per capita 
        for fiscal year 2019.--The Secretary shall calculate 
        for each State the following:
                  ``(A) The amount of the adjusted total 
                medical assistance expenditures (as defined in 
                subsection (b)(1)) for the State for fiscal 
                year 2019. 
                  ``(B) The number of 1903A enrollees for the 
                State in fiscal year 2019 (as determined under 
                subsection (e)(4)).
          ``(4) Per capita expenditures for fiscal year 2019 
        for each 1903a enrollee category.--The Secretary shall 
        calculate (and provide notice to each State not later 
        than January 1, 2020, of) the following:
                  ``(A)(i) For each 1903A enrollee category, 
                the amount of the adjusted total medical 
                assistance expenditures (as defined in 
                subsection (b)(1)) for the State for fiscal 
                year 2019 for individuals in the enrollee 
                category, calculated by excluding from medical 
                assistance expenditures those expenditures 
                attributable to expenditures described in 
                clause (iii) or non-DSH supplemental 
                expenditures (as defined in clause (ii)).
                  ``(ii) In this paragraph, the term `non-DSH 
                supplemental expenditure' means a payment to a 
                provider under the State plan (or under a 
                waiver of the plan) that--
                          ``(I) is not made under section 1923;
                          ``(II) is not made with respect to a 
                        specific item or service for an 
                        individual;
                          ``(III) is in addition to any 
                        payments made to the provider under the 
                        plan (or waiver) for any such item or 
                        service; and
                          ``(IV) complies with the limits for 
                        additional payments to providers under 
                        the plan (or waiver) imposed pursuant 
                        to section 1902(a)(30)(A), including 
                        the regulations specifying upper 
                        payment limits under the State plan in 
                        part 447 of title 42, Code of Federal 
                        Regulations (or any successor 
                        regulations).
                  ``(iii) An expenditure described in this 
                clause is an expenditure that meets the 
                criteria specified in subclauses (I), (II), and 
                (III) of clause (ii) and is authorized under 
                section 1115 for the purposes of funding a 
                delivery system reform pool, uncompensated care 
                pool, a designated state health program, or any 
                other similar expenditure (as defined by the 
                Secretary).
                  ``(B) For each 1903A enrollee category, the 
                number of 1903A enrollees for the State in 
                fiscal year 2019 in the enrollee category (as 
                determined under subsection (e)(4)).
                  ``(C) For fiscal year 2016, the State's non-
                DSH supplemental payment percentage is equal to 
                the ratio (expressed as a percentage) of--
                          ``(i) the total amount of non-DSH 
                        supplemental expenditures (as defined 
                        in subparagraph (A)(ii)) for the State 
                        for fiscal year 2016; to
                          ``(ii) the amount described in 
                        subsection (b)(1)(A) for the State for 
                        fiscal year 2016.
                  ``(D) For each 1903A enrollee category an 
                average medical assistance expenditures per 
                capita for the State for fiscal year 2019 for 
                the enrollee category equal to--
                          ``(i) the amount calculated under 
                        subparagraph (A) for the State, 
                        increased by the non-DSH supplemental 
                        payment percentage for the State (as 
                        calculated under subparagraph (C)); 
                        divided by
                          ``(ii) the number calculated under 
                        subparagraph (B) for the State for the 
                        enrollee category.
          ``(5) Provisional fy19 per capita target amount for 
        each 1903a enrollee category.--Subject to subsection 
        (f)(2), the Secretary shall calculate for each State a 
        provisional FY19 per capita target amount for each 
        1903A enrollee category equal to the average medical 
        assistance expenditures per capita for the State for 
        fiscal year 2019 (as calculated under paragraph (4)(D)) 
        for such enrollee category multiplied by the ratio of--
                  ``(A) the product of--
                          ``(i) the fiscal year 2019 average 
                        per capita amount for the State, as 
                        calculated under paragraph (2); and
                          ``(ii) the number of 1903A enrollees 
                        for the State in fiscal year 2019, as 
                        calculated under paragraph (3)(B); to
                  ``(B) the amount of the adjusted total 
                medical assistance expenditures for the State 
                for fiscal year 2019, as calculated under 
                paragraph (3)(A).
  ``(e) 1903A Enrollee; 1903A Enrollee Category.--Subject to 
subsection (g), for purposes of this section, the following 
shall apply:
          ``(1) 1903A enrollee.--The term `1903A enrollee' 
        means, with respect to a State and a month, any 
        Medicaid enrollee (as defined in paragraph (3)) for the 
        month, other than such an enrollee who for such month 
        is in any of the following categories of excluded 
        individuals:
                  ``(A) CHIP.--An individual who is provided, 
                under this title in the manner described in 
                section 2101(a)(2), child health assistance 
                under title XXI.
                  ``(B) IHS.--An individual who receives any 
                medical assistance under this title for 
                services for which payment is made under the 
                third sentence of section 1905(b).
                  ``(C) Breast and cervical cancer services 
                eligible individual.--An individual who is 
                entitled to medical assistance under this title 
                only pursuant to section 
                1902(a)(10)(A)(ii)(XVIII).
                  ``(D) Partial-benefit enrollees.--An 
                individual who--
                          ``(i) is an alien who is entitled to 
                        medical assistance under this title 
                        only pursuant to section 1903(v)(2);
                          ``(ii) is entitled to medical 
                        assistance under this title only 
                        pursuant to subclause (XII) or (XXI) of 
                        section 1902(a)(10)(A)(ii) (or pursuant 
                        to a waiver that provides only 
                        comparable benefits);
                          ``(iii) is a dual eligible individual 
                        (as defined in section 1915(h)(2)(B)) 
                        and is entitled to medical assistance 
                        under this title (or under a waiver) 
                        only for some or all of medicare cost-
                        sharing (as defined in section 
                        1905(p)(3)); or
                          ``(iv) is entitled to medical 
                        assistance under this title and for 
                        whom the State is providing a payment 
                        or subsidy to an employer for coverage 
                        of the individual under a group health 
                        plan pursuant to section 1906 or 
                        section 1906A (or pursuant to a waiver 
                        that provides only comparable 
                        benefits).
          ``(2) 1903A enrollee category.--The term `1903A 
        enrollee category' means each of the following:
                  ``(A) Elderly.--A category of 1903A enrollees 
                who are 65 years of age or older.
                  ``(B) Blind and disabled.--A category of 
                1903A enrollees (not described in the previous 
                subparagraph) who are eligible for medical 
                assistance under this title on the basis of 
                being blind or disabled.
                  ``(C) Children.--A category of 1903A 
                enrollees (not described in a previous 
                subparagraph) who are children under 19 years 
                of age.
                  ``(D) Expansion enrollees.--A category of 
                1903A enrollees (not described in a previous 
                subparagraph) for whom the amounts expended for 
                medical assistance are subject to an increase 
                or change in the Federal medical assistance 
                percentage under subsection (y) or (z)(2), 
                respectively, of section 1905.
                  ``(E) Other nonelderly, nondisabled, non-
                expansion adults.--A category of 1903A 
                enrollees who are not described in any previous 
                subparagraph.
          ``(3) Medicaid enrollee.--The term `Medicaid 
        enrollee' means, with respect to a State for a month, 
        an individual who is eligible for medical assistance 
        for items or services under this title and enrolled 
        under the State plan (or a waiver of such plan) under 
        this title for the month.
          ``(4) Determination of number of 1903a enrollees.--
        The number of 1903A enrollees for a State and fiscal 
        year, and, if applicable, for a 1903A enrollee 
        category, is the average monthly number of Medicaid 
        enrollees for such State and fiscal year (and, if 
        applicable, in such category) that are reported through 
        the CMS-64 report under (and subject to audit under) 
        subsection (h).
  ``(f) Special Payment Rules.--
          ``(1) Application in case of research and 
        demonstration projects and other waivers.--In the case 
        of a State with a waiver of the State plan approved 
        under section 1115, section 1915, or another provision 
        of this title, this section shall apply to medical 
        assistance expenditures and medical assistance payments 
        under the waiver, in the same manner as if such 
        expenditures and payments had been made under a State 
        plan under this title and the limitations on 
        expenditures under this section shall supersede any 
        other payment limitations or provisions (including 
        limitations based on a per capita limitation) otherwise 
        applicable under such a waiver.
          ``(2) Treatment of states expanding coverage after 
        fiscal year 2016.--In the case of a State that did not 
        provide for medical assistance for the 1903A enrollee 
        category described in subsection (e)(2)(D) during 
        fiscal year 2016 but which provides for such assistance 
        for such category in a subsequent year, the provisional 
        FY19 per capita target amount for such enrollee 
        category under subsection (d)(5) shall be equal to the 
        provisional FY19 per capita target amount for the 1903A 
        enrollee category described in subsection (e)(2)(E).
          ``(3) In case of state failure to report necessary 
        data.--If a State for any quarter in a fiscal year 
        (beginning with fiscal year 2019) fails to 
        satisfactorily submit data on expenditures and 
        enrollees in accordance with subsection (h)(1), for 
        such fiscal year and any succeeding fiscal year for 
        which such data are not satisfactorily submitted--
                  ``(A) the Secretary shall calculate and apply 
                subsections (a) through (e) with respect to the 
                State as if all 1903A enrollee categories for 
                which such expenditure and enrollee data were 
                not satisfactorily submitted were a single 
                1903A enrollee category; and
                  ``(B) the growth factor otherwise applied 
                under subsection (c)(2)(B) shall be decreased 
                by 1 percentage point.
  ``(g) Recalculation of Certain Amounts for Data Errors.--The 
amounts and percentage calculated under paragraphs (1) and 
(4)(C) of subsection (d) for a State for fiscal year 2016, and 
the amounts of the adjusted total medical assistance 
expenditures calculated under subsection (b) and the number of 
Medicaid enrollees and 1903A enrollees determined under 
subsection (e)(4) for a State for fiscal year 2016, fiscal year 
2019, and any subsequent fiscal year, may be adjusted by the 
Secretary based upon an appeal (filed by the State in such a 
form, manner, and time, and containing such information 
relating to data errors that support such appeal, as the 
Secretary specifies) that the Secretary determines to be valid, 
except that any adjustment by the Secretary under this 
subsection for a State may not result in an increase of the 
target total medical assistance expenditures exceeding 2 
percent.
  ``(h) Required Reporting and Auditing of CMS-64 Data; 
Transitional Increase in Federal Matching Percentage for 
Certain Administrative Expenses.--
          ``(1) Reporting.--In addition to the data required on 
        form Group VIII on the CMS-64 report form as of January 
        1, 2017, in each CMS-64 report required to be submitted 
        (for each quarter beginning on or after October 1, 
        2018), the State shall include data on medical 
        assistance expenditures within such categories of 
        services and categories of enrollees (including each 
        1903A enrollee category and each category of excluded 
        individuals under subsection (e)(1)) and the numbers of 
        enrollees within each of such enrollee categories, as 
        the Secretary determines are necessary (including 
        timely guidance published as soon as possible after the 
        date of the enactment of this section) in order to 
        implement this section and to enable States to comply 
        with the requirement of this paragraph on a timely 
        basis.
          ``(2) Auditing.--The Secretary shall conduct for each 
        State an audit of the number of individuals and 
        expenditures reported through the CMS-64 report for 
        fiscal year 2016, fiscal year 2019, and each subsequent 
        fiscal year, which audit may be conducted on a 
        representative sample (as determined by the Secretary).
          ``(3) Temporary increase in federal matching 
        percentage to support improved data reporting systems 
        for fiscal years 2018 and 2019.--For amounts expended 
        during calendar quarters beginning on or after October 
        1, 2017, and before October 1, 2019--
                  ``(A) the Federal matching percentage applied 
                under section 1903(a)(3)(A)(i) shall be 
                increased by 10 percentage points to 100 
                percent;
                  ``(B) the Federal matching percentage applied 
                under section 1903(a)(3)(B) shall be increased 
                by 25 percentage points to 100 percent; and
                  ``(C) the Federal matching percentage applied 
                under section 1903(a)(7) shall be increased by 
                10 percentage points to 60 percent but only 
                with respect to amounts expended that are 
                attributable to a State's additional 
                administrative expenditures to implement the 
                data requirements of paragraph (1).''.

    Subtitle D--Patient Relief and Health Insurance Market Stability

SEC. 131. REPEAL OF COST-SHARING SUBSIDY.

  (a) In General.--Section 1402 of the Patient Protection and 
Affordable Care Act is repealed.
  (b) Effective Date.--The repeal made by subsection (a) shall 
apply to cost-sharing reductions (and payments to issuers for 
such reductions) for plan years beginning after December 31, 
2019.

SEC. 132. PATIENT AND STATE STABILITY FUND.

  The Social Security Act (42 U.S.C. 301 et seq.) is amended by 
adding at the end the following new title:

             ``TITLE XXII--PATIENT AND STATE STABILITY FUND

``SEC. 2201. ESTABLISHMENT OF PROGRAM.

  ``There is hereby established the `Patient and State 
Stability Fund' to be administered by the Secretary of Health 
and Human Services, acting through the Administrator of the 
Centers for Medicare & Medicaid Services (in this section 
referred to as the `Administrator'), to provide funding, in 
accordance with this title, to the 50 States and the District 
of Columbia (each referred to in this section as a `State') 
during the period, subject to section 2204(c), beginning on 
January 1, 2018, and ending on December 31, 2026, for the 
purposes described in section 2202.

``SEC. 2202. USE OF FUNDS.

  ``A State may use the funds allocated to the State under this 
title for any of the following purposes:
          ``(1) Helping, through the provision of financial 
        assistance, high-risk individuals who do not have 
        access to health insurance coverage offered through an 
        employer enroll in health insurance coverage in the 
        individual market in the State, as such market is 
        defined by the State (whether through the establishment 
        of a new mechanism or maintenance of an existing 
        mechanism for such purpose).
          ``(2) Providing incentives to appropriate entities to 
        enter into arrangements with the State to help 
        stabilize premiums for health insurance coverage in the 
        individual market, as such markets are defined by the 
        State.
          ``(3) Reducing the cost for providing health 
        insurance coverage in the individual market and small 
        group market, as such markets are defined by the State, 
        to individuals who have, or are projected to have, a 
        high rate of utilization of health services (as 
        measured by cost).
          ``(4) Promoting participation in the individual 
        market and small group market in the State and 
        increasing health insurance options available through 
        such market.
          ``(5) Promoting access to preventive services; dental 
        care services (whether preventive or medically 
        necessary); vision care services (whether preventive or 
        medically necessary); prevention, treatment, or 
        recovery support services for individuals with mental 
        or substance use disorders; or any combination of such 
        services.
          ``(6) Providing payments, directly or indirectly, to 
        health care providers for the provision of such health 
        care services as are specified by the Administrator.
          ``(7) Providing assistance to reduce out-of-pocket 
        costs, such as copayments, coinsurance, premiums, and 
        deductibles, of individuals enrolled in health 
        insurance coverage in the State.

``SEC. 2203. STATE ELIGIBILITY AND APPROVAL; DEFAULT SAFEGUARD.

  ``(a) Encouraging State Options for Allocations.--
          ``(1) In general.--To be eligible for an allocation 
        of funds under this title for a year during the period 
        described in section 2201 for use for one or more 
        purposes described in section 2202, a State shall 
        submit to the Administrator an application at such time 
        (but, in the case of allocations for 2018, not later 
        than 45 days after the date of the enactment of this 
        title and, in the case of allocations for a subsequent 
        year, not later than March 31 of the previous year) and 
        in such form and manner as specified by the 
        Administrator and containing--
                  ``(A) a description of how the funds will be 
                used for such purposes;
                  ``(B) a certification that the State will 
                make, from non-Federal funds, expenditures for 
                such purposes in an amount that is not less 
                than the State percentage required for the year 
                under section 2204(e)(1); and
                  ``(C) such other information as the 
                Administrator may require.
          ``(2) Automatic approval.--An application so 
        submitted is approved unless the Administrator notifies 
        the State submitting the application, not later than 60 
        days after the date of the submission of such 
        application, that the application has been denied for 
        not being in compliance with any requirement of this 
        title and of the reason for such denial.
          ``(3) One-time application.--If an application of a 
        State is approved for a year, with respect to a purpose 
        described in section 2202, such application shall be 
        treated as approved, with respect to such purpose, for 
        each subsequent year through 2026.
          ``(4) Treatment as a state health care program.--Any 
        program receiving funds from an allocation for a State 
        under this title, including pursuant to subsection (b), 
        shall be considered to be a `State health care program' 
        for purposes of sections 1128, 1128A, and 1128B.
  ``(b) Default Federal Safeguard.--
          ``(1) In general.--
                  ``(A) 2018.--For allocations made under this 
                title for 2018, in the case of a State that 
                does not submit an application under subsection 
                (a) by the 45-day submission date applicable to 
                such year under subsection (a)(1) and in the 
                case of a State that does submit such an 
                application by such date that is not approved, 
                subject to section 2204(e), the Administrator, 
                in consultation with the State insurance 
                commissioner, shall use the allocation that 
                would otherwise be provided to the State under 
                this title for such year, in accordance with 
                paragraph (2), for such State.
                  ``(B) 2019 through 2026.--In the case of a 
                State that does not have in effect an approved 
                application under this section for 2019 or a 
                subsequent year beginning during the period 
                described in section 2201, subject to section 
                2204(e), the Administrator, in consultation 
                with the State insurance commissioner, shall 
                use the allocation that would otherwise be 
                provided to the State under this title for such 
                year, in accordance with paragraph (2), for 
                such State.
          ``(2) Required use for market stabilization payments 
        to issuers.--Subject to section 2204(a), an allocation 
        for a State made pursuant to paragraph (1) for a year 
        shall be used to carry out the purpose described in 
        section 2202(2) in such State by providing payments to 
        appropriate entities described in such section with 
        respect to claims that exceed $50,000 (or, with respect 
        to allocations made under this title for 2020 or a 
        subsequent year during the period specified in section 
        2201, such dollar amount specified by the 
        Administrator), but do not exceed $350,000 (or, with 
        respect to allocations made under this title for 2020 
        or a subsequent year during such period, such dollar 
        amount specified by the Administrator), in an amount 
        equal to 75 percent (or, with respect to allocations 
        made under this title for 2020 or a subsequent year 
        during such period, such percentage specified by the 
        Administrator) of the amount of such claims.

``SEC. 2204. ALLOCATIONS.

  ``(a) Appropriation.--For the purpose of providing 
allocations for States (including pursuant to section 2203(b)) 
under this title there is appropriated, out of any money in the 
Treasury not otherwise appropriated--
          ``(1) for 2018, $15,000,000,000;
          ``(2) for 2019, $15,000,000,000;
          ``(3) for 2020, $10,000,000,000;
          ``(4) for 2021, $10,000,000,000;
          ``(5) for 2022, $10,000,000,000;
          ``(6) for 2023, $10,000,000,000;
          ``(7) for 2024, $10,000,000,000;
          ``(8) for 2025, $10,000,000,000; and
          ``(9) for 2026, $10,000,000,000.
  ``(b) Allocations.--
          ``(1) Payment.--
                  ``(A) In general.--From amounts appropriated 
                under subsection (a) for a year, the 
                Administrator shall, with respect to a State 
                and not later than the date specified under 
                subparagraph (B) for such year, allocate, 
                subject to subsection (e), for such State 
                (including pursuant to section 2203(b)) the 
                amount determined for such State and year under 
                paragraph (2).
                  ``(B) Specified date.--For purposes of 
                subparagraph (A), the date specified in this 
                subparagraph is--
                          ``(i) for 2018, the date that is 45 
                        days after the date of the enactment of 
                        this title; and
                          ``(ii) for 2019 and subsequent years, 
                        January 1 of the respective year.
          ``(2) Allocation amount determinations.--
                  ``(A) For 2018 and 2019.--
                          ``(i) In general.--For purposes of 
                        paragraph (1), the amount determined 
                        under this paragraph for 2018 and 2019 
                        for a State is an amount equal to the 
                        sum of--
                                  ``(I) the relative incurred 
                                claims amount described in 
                                clause (ii) for such State and 
                                year; and
                                  ``(II) the relative uninsured 
                                and issuer participation amount 
                                described in clause (iv) for 
                                such State and year.
                          ``(ii) Relative incurred claims 
                        amount.--For purposes of clause (i), 
                        the relative incurred claims amount 
                        described in this clause for a State 
                        for 2018 and 2019 is the product of--
                                  ``(I) 85 percent of the 
                                amount appropriated under 
                                subsection (a) for the year; 
                                and
                                  ``(II) the relative State 
                                incurred claims proportion 
                                described in clause (iii) for 
                                such State and year.
                          ``(iii) Relative state incurred 
                        claims proportion.--The relative State 
                        incurred claims proportion described in 
                        this clause for a State and year is the 
                        amount equal to the ratio of--
                                  ``(I) the adjusted incurred 
                                claims by the State, as 
                                reported through the medical 
                                loss ratio annual reporting 
                                under section 2718 of the 
                                Public Health Service Act for 
                                the third previous year; to
                                  ``(II) the sum of such 
                                adjusted incurred claims for 
                                all States, as so reported, for 
                                such third previous year.
                          ``(iv) Relative uninsured and issuer 
                        participation amount.--For purposes of 
                        clause (i), the relative uninsured and 
                        issuer participation amount described 
                        in this clause for a State for 2018 and 
                        2019 is the product of--
                                  ``(I) 15 percent of the 
                                amount appropriated under 
                                subsection (a) for the year; 
                                and
                                  ``(II) the relative State 
                                uninsured and issuer 
                                participation proportion 
                                described in clause (v) for 
                                such State and year.
                          ``(v) Relative state uninsured and 
                        issuer participation proportion.--The 
                        relative State uninsured and issuer 
                        participation proportion described in 
                        this clause for a State and year is--
                                  ``(I) in the case of a State 
                                not described in clause (vi) 
                                for such year, 0; and
                                  ``(II) in the case of a State 
                                described in clause (vi) for 
                                such year, the amount equal to 
                                the ratio of--
                                          ``(aa) the number of 
                                        individuals residing in 
                                        such State who for the 
                                        third preceding year 
                                        were not enrolled in a 
                                        health plan or 
                                        otherwise did not have 
                                        health insurance 
                                        coverage (including 
                                        through a Federal or 
                                        State health program) 
                                        and whose income is 
                                        below 100 percent of 
                                        the poverty line 
                                        applicable to a family 
                                        of the size involved; 
                                        to
                                          ``(bb) the sum of the 
                                        number of such 
                                        individuals for all 
                                        States described in 
                                        clause (vi) for the 
                                        third preceding year.
                          ``(vi) States described.--For 
                        purposes of clause (v), a State is 
                        described in this clause, with respect 
                        to 2018 and 2019, if the State 
                        satisfies either of the following 
                        criterion:
                                  ``(I) The number of 
                                individuals residing in such 
                                State and described in clause 
                                (v)(II)(aa) was higher in 2015 
                                than 2013.
                                  ``(II) The State have fewer 
                                than three health insurance 
                                issuers offering qualified 
                                health plans through the 
                                Exchange for 2017.
                  ``(B) For 2020 through 2026.--For purposes of 
                paragraph (1), the amount determined under this 
                paragraph for a year (beginning with 2020) 
                during the period described in section 2201 for 
                a State is an amount determined in accordance 
                with an allocation methodology specified by the 
                Administrator which--
                          ``(i) takes into consideration the 
                        adjusted incurred claims of such State, 
                        the number of residents of such State 
                        who for the previous year were not 
                        enrolled in a health plan or otherwise 
                        did not have health insurance coverage 
                        (including through a Federal or State 
                        health program) and whose income is 
                        below 100 percent of the poverty line 
                        applicable to a family of the size 
                        involved, and the number of health 
                        insurance issuers participating in the 
                        insurance market in such State for such 
                        year;
                          ``(ii) is established after 
                        consultation with health care 
                        consumers, health insurance issuers, 
                        State insurance commissioners, and 
                        other stakeholders and after taking 
                        into consideration additional cost and 
                        risk factors that may inhibit health 
                        care consumer and health insurance 
                        issuer participation; and
                          ``(iii) reflects the goals of 
                        improving the health insurance risk 
                        pool, promoting a more competitive 
                        health insurance market, and increasing 
                        choice for health care consumers.
  ``(c) Annual Distribution of Previous Year's Remaining 
Funds.-- In carrying out subsection (b), the Administrator 
shall, with respect to a year (beginning with 2020 and ending 
with 2027), not later than March 31 of such year--
          ``(1) determine the amount of funds, if any, from the 
        amounts appropriated under subsection (a) for the 
        previous year but not allocated for such previous year; 
        and
          ``(2) if the Administrator determines that any funds 
        were not so allocated for such previous year, allocate 
        such remaining funds, in accordance with the allocation 
        methodology specified pursuant to subsection 
        (b)(2)(B)--
                  ``(A) to States that have submitted an 
                application approved under section 2203(a) for 
                such previous year for any purpose for which 
                such an application was approved; and
                  ``(B) for States for which allocations were 
                made pursuant to section 2203(b) for such 
                previous year, to be used by the Administrator 
                for such States, to carry out the purpose 
                described in section 2202(2) in such States by 
                providing payments to appropriate entities 
                described in such section with respect to 
                claims that exceed $1,000,000;
        with, respect to a year before 2027, any remaining 
        funds being made available for allocations to States 
        for the subsequent year.
  ``(d) Availability.--Amounts appropriated under subsection 
(a) for a year and allocated to States in accordance with this 
section shall remain available for expenditure through December 
31, 2027.
  ``(e) Conditions for and Limitations on Receipt of Funds.--
The Secretary may not make an allocation under this title for a 
State, with respect to a purpose described in section 2202--
          ``(1) in the case of an allocation that would be made 
        to a State pursuant to section 2203(a), if the State 
        does not agree that the State will make available non-
        Federal contributions towards such purpose in an amount 
        equal to--
                  ``(A) for 2020, 7 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(B) for 2021, 14 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(C) for 2022, 21 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(D) for 2023, 28 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(E) for 2024, 35 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(F) for 2025, 42 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose; and
                  ``(G) for 2026, 50 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
          ``(2) in the case of an allocation that would be made 
        for a State pursuant to section 2203(b), if the State 
        does not agree that the State will make available non-
        Federal contributions towards such purpose in an amount 
        equal to--
                  ``(A) for 2020, 10 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(B) for 2021, 20 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose; and
                  ``(C) for 2022, 30 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(D) for 2023, 40 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(E) for 2024, 50 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(F) for 2025, 50 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose; and
                  ``(G) for 2026, 50 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose; or
          ``(3) if such an allocation for such purpose would 
        not be permitted under subsection (c)(7) of section 
        2105 if such allocation were payment made under such 
        section.''.

SEC. 133. CONTINUOUS HEALTH INSURANCE COVERAGE INCENTIVE.

  Subpart I of part A of title XXVII of the Public Health 
Service Act is amended--
          (1) in section 2701(a)(1)(B), by striking ``such 
        rate'' and inserting ``subject to section 2710A, such 
        rate'';
          (2) by redesignating the second section 2709 as 
        section 2710; and
          (3) by adding at the end the following new section:

``SEC. 2710A. ENCOURAGING CONTINUOUS HEALTH INSURANCE COVERAGE.

  ``(a) Penalty Applied.--
          ``(1) In general.--Notwithstanding section 2701, 
        subject to the succeeding provisions of this section, a 
        health insurance issuer offering health insurance 
        coverage in the individual or small group market shall, 
        in the case of an individual who is an applicable 
        policyholder of such coverage with respect to an 
        enforcement period applicable to enrollments for a plan 
        year beginning with plan year 2019 (or, in the case of 
        enrollments during a special enrollment period, 
        beginning with plan year 2018), increase the monthly 
        premium rate otherwise applicable to such individual 
        for such coverage during each month of such period, by 
        an amount determined under paragraph (2).
          ``(2) Amount of penalty.--The amount determined under 
        this paragraph for an applicable policyholder enrolling 
        in health insurance coverage described in paragraph (1) 
        for a plan year, with respect to each month during the 
        enforcement period applicable to enrollments for such 
        plan year, is the amount that is equal to 30 percent of 
        the monthly premium rate otherwise applicable to such 
        applicable policyholder for such coverage during such 
        month.
  ``(b) Definitions.--For purposes of this section:
          ``(1) Applicable policyholder.--The term `applicable 
        policyholder' means, with respect to months of an 
        enforcement period and health insurance coverage, an 
        individual who--
                  ``(A) is a policyholder of such coverage for 
                such months;
                  ``(B) cannot demonstrate (through 
                presentation of certifications described in 
                section 2704(e) or in such other manner as may 
                be specified in regulations, such as a return 
                or statement made under section 6055(d) or 36C 
                of the Internal Revenue Code of 1986), during 
                the look-back period that is with respect to 
                such enforcement period, there was not a period 
                of at least 63 continuous days during which the 
                individual did not have creditable coverage (as 
                defined in paragraph (1) of section 2704(c) and 
                credited in accordance with paragraphs (2) and 
                (3) of such section); and
                  ``(C) in the case of an individual who had 
                been enrolled under dependent coverage under a 
                group health plan or health insurance coverage 
                by reason of section 2714 and such dependent 
                coverage of such individual ceased because of 
                the age of such individual, is not enrolling 
                during the first open enrollment period 
                following the date on which such coverage so 
                ceased.
          ``(2) Look-back period.--The term `look-back period' 
        means, with respect to an enforcement period applicable 
        to an enrollment of an individual for a plan year 
        beginning with plan year 2019 (or, in the case of an 
        enrollment of an individual during a special enrollment 
        period, beginning with plan year 2018) in health 
        insurance coverage described in subsection (a)(1), the 
        12-month period ending on the date the individual 
        enrolls in such coverage for such plan year.
          ``(3) Enforcement period.--The term `enforcement 
        period' means--
                  ``(A) with respect to enrollments during a 
                special enrollment period for plan year 2018, 
                the period beginning with the first month that 
                is during such plan year and that begins 
                subsequent to such date of enrollment, and 
                ending with the last month of such plan year; 
                and
                  ``(B) with respect to enrollments for plan 
                year 2019 or a subsequent plan year, the 12-
                month period beginning on the first day of the 
                respective plan year.''.

SEC. 134. INCREASING COVERAGE OPTIONS.

  Section 1302 of the Patient Protection and Affordable Care 
Act (42 U.S.C. 18022) is amended--
          (1) in subsection (a)(3), by inserting ``and with 
        respect to a plan year before plan year 2020'' after 
        ``subsection (e)''; and
          (2) in subsection (d), by adding at the end the 
        following:
          ``(5) Sunset.--The provisions of this subsection 
        shall not apply after December 31, 2019, and after such 
        date any reference to this subsection or level of 
        coverage or plan described in this subsection and any 
        requirement under law applying such a level of coverage 
        or plan shall have no force or effect (and such a 
        requirement shall be applied as if this section had 
        been repealed).''.

SEC. 135. CHANGE IN PERMISSIBLE AGE VARIATION IN HEALTH INSURANCE 
                    PREMIUM RATES.

  Section 2701(a)(1)(A)(iii) of the Public Health Service Act 
(42 U.S.C. 300gg(a)(1)(A)(iii)), as inserted by section 1201(4) 
of the Patient Protection and Affordable Care Act, is amended 
by inserting after ``(consistent with section 2707(c))'' the 
following: ``or, for plan years beginning on or after January 
1, 2018, as the Secretary may implement through interim final 
regulation, 5 to 1 for adults (consistent with section 2707(c)) 
or such other ratio for adults (consistent with section 
2707(c)) as the State involved may provide''.

                          House of Representatives,
                               Committee on Ways and Means,
                                    Washington, DC, March 13, 2017.
Hon. Diane Black,
Chairman, Committee on the Budget,
Washington, DC.
    Dear Chairman Black: Pursuant to section 2002 of S. Con. 
Res. 3, the Fiscal Year 2017 Concurrent Resolution on the 
Budget, as well as section 310 of the Congressional Budget and 
Impoundment Control Act of 1974, I hereby transmit to the House 
Committee on the Budget these recommendations, which were 
approved by vote of the Committee Ways and Means on March 9, 
2017, and the appropriate accompanying material, including 
dissenting views.
            Sincerely,
                                               Kevin Brady,
                                                          Chairman.

  

                                CONTENTS

                                                                   Page
SUBTITLE [A]--REPEAL AND REPLACE OF HEALTH-RELATED TAX POLICY....   367
  I. SUMMARY AND BACKGROUND.........................................367
 II. EXPLANATION OF PROVISIONS......................................370
III. VOTES OF THE COMMITTEE.........................................406
 IV. BUDGET EFFECTS OF THE PROVISIONS...............................412
  V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.....415
 VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION 
     LEGISLATIVE RECOMMENDATIONS, AS TRANSMITTED....................420
VII. DISSENTING VIEWS...............................................421

     SUBTITLE [A]--REPEAL AND REPLACE OF HEALTH-RELATED TAX POLICY

                       I. SUMMARY AND BACKGROUND

                         A. Purpose and Summary

    In fulfillment of the reconciliation instructions included 
in section 2002 of the Concurrent Resolution on the Budget for 
Fiscal Year 2017 (S. Con. Res. 3), the Committee on Ways and 
Means ordered favorably transmitted (with a quorum being 
present) the Budget Reconciliation Legislative Recommendations 
Relating to Repeal and Replace of Health-Related Tax Policy. 
The Committee recommends modification for a transition period, 
followed by repeal, of the premium assistance tax credit and 
the small business tax credit under the Internal Revenue Code 
of 1986, as amended (``Code'');\1\ repeal of various other 
taxes and tax increases imposed by the Patient Protection and 
Affordable Care Act of 2010 (``PPACA''), Pub. L. No. 111-148 
(March 23, 2010), as amended by the Health Care and Education 
Reconciliation Act of 2010 (``HCERA''), Pub. L. No. 111-152 
(March 30, 2010);\2\ enactment of a tax credit for the purchase 
of health insurance in the individual market by taxpayers who 
are not eligible for health coverage from other sources; and 
improvements to the rules governing health savings accounts.
---------------------------------------------------------------------------
    \1\All section references herein are to the Code unless otherwise 
stated.
    \2\PPACA and HCERA are collectively referred to as the Affordable 
Care Act (``ACA'').
---------------------------------------------------------------------------

                 B. Background and Need for Legislation

    In the Committee's pursuit of comprehensive health care 
reform to relieve unnecessary burdens on insurance markets, the 
broader economy, and taxpayers in need of access to quality 
health care, the Committee wishes to take immediate measures to 
stabilize insurance markets, provide relief from taxes imposing 
excessive constraints on choice and innovation, expand access 
to additional health insurance options, and encourage consumer 
awareness of health care costs and effectiveness. The Committee 
believes that transition modifications to the present-law 
premium assistance and small business tax credits, accompanied 
by the repeal of burdensome individual and business taxes and 
expansion of health savings accounts, in combination with 
replacement measures that expand health coverage choices, will 
further these goals.

                         C. Legislative History

Budget resolution
    On January 13, 2017, the House of Representatives approved 
S. Con. Res. 3, the budget resolution for fiscal year 2017. 
Pursuant to section 2002(a)(3) of S. Con. Res. 3, 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 $1,000,000,000 for the period of fiscal 
years 2017 through 2026.
Committee action
    Beginning March 8, 2017, in response to its instructions 
under the budget resolution, the Committee on Ways and Means 
marked up the budget reconciliation legislative recommendations 
relating to repeal and replace of health-related tax policy and 
ordered the legislative recommendations, as amended, favorably 
transmitted (with a quorum being present) on March 9, 2017.
Committee hearings
    Since the 112th Congress, the Committee on Ways and Means 
held a number of hearings on health reform that explored 
various parts of the health system and informed policy 
contained in the American Health Care Act. These hearings 
include:
            Full Committee
     January 26, 2011--Hearing on the Health Care Law's 
Impact on Jobs, Employers, and the Economy.
     February 16, 2011--Hearing on the President's 
Fiscal Year 2012 Budget Proposal with US Department of Health 
and Human Services Secretary Kathleen Sebelius.
     February 28, 2012--Hearing on the President's 
Fiscal Year 2013 Budget Proposal with HHS Secretary Kathleen 
Sebelius.
     July 10, 2012--Hearing on Tax Ramifications of the 
Supreme Court's Ruling on the Democrats' Health Care Law.
     April 12, 2013--The President's Fiscal Year 2014 
Budget Proposal with U.S. Department of Health and Human 
Services Secretary Kathleen Sebelius.
     October 29, 2013--Hearing on The Status of the 
Affordable Care Act Implementation.
     January 28, 2014--The Impact of the Employer 
Mandate's Definition of Full-Time Employee on Jobs and 
Opportunities.
     March 6, 2014--The President's Fiscal Year 2015 
Budget Proposal with U.S. Department of the Treasury Secretary 
Jacob J. Lew.
     March 12, 2014--The President's Fiscal Year 2015 
Budget Proposal with U.S. Department of Health and Human 
Services Secretary Kathleen Sebelius.
     June 10, 2015--Hearing on Obamacare Implementation 
and the Department of Health and Human Services Fiscal Year 
2016 Budget Request.
     February 10, 2016--Hearing on the Department of 
Health and Human Services Fiscal Year 2017 Budget Request.
     March 14, 2016--Hearing on the Tax Treatment of 
Health Care.
            Health Subcommittee
     September 9, 2011--Hearing on Health Care Industry 
Consolidation.
     March 29, 2012--Hearing on the Individual and 
Employer Mandates in the Democrat's Health Care Law.
     September 12, 2012--Hearing on Implementation of 
Health Insurance Exchanges and Related Provisions.
     July 10, 2013--Hearing on The Delay of the 
Employer Mandate.
     July 17, 2013--Hearing on the Delay of the 
Employer Mandate Penalties and Reporting Requirements.
     December 4, 2013--Hearing on the Challenges of the 
Affordable Care Act.
     April 8, 2014--The Treasury Department's Final 
Employer Mandate and Employer Reporting Requirements 
Regulations.
     June 10, 2014--Verification of Income and 
Insurance Information Under the Affordable Care Act.
     September 10, 2014--Hearing on the Status of the 
Affordable Care Act Implementation.
     April 14, 2015--Hearing on the Individual and 
Employer Mandates in the President's Health Care Law.
     November 3, 2015--Hearing on the State of 
Obamacare's CO-OP Program.
     May 17, 2016--Member Day Hearing on Tax-related 
Proposals to Improve Health Care.
     September 14, 2016--Hearing on Exploring the Use 
of Technology and Innovation to Create Efficiencies and Higher 
Quality in Health Care.
            Select Revenue Measures Subcommittee
     March 16, 2011--Hearing on Tax-Related Provisions 
of H.R. 3.
            Human Resources Subcommittee
     June 27, 2012--Hearing on How Welfare and Tax 
Benefits Can Discourage Work.
            Oversight Subcommittee
     March 2, 2011--Hearing on Improving Efforts to 
Combat Health Care Fraud.
     April 25, 2012--Hearing on the Impact of 
Limitations on the Use of Tax-Advantaged Accounts for the 
Purchase of Over-the-Counter Medication.
     September 11, 2012--Hearing on Internal Revenue 
Service's Implementation and Administration of The Democrats 
Health Care Law.
     March 5, 2013--Hearing on Tax-Related Provisions 
in the President's Health Care Law.
     June 10, 2014--Verification of Income and 
Insurance Information Under the Affordable Care Act.
     July 23, 2014--Hearing on the Integrity of the 
Affordable Care Act's Premium Tax Credit.
     May 20, 2015--Hearing on the Use of Administrative 
Action in the ACA Implementation.
     June 24, 2015--Hearing on Rising Health Insurance 
Premiums Under Obamacare.
     July 12, 2016--Hearing on Rising Health Insurance 
Premiums Under the Affordable Care Act.

                     II. EXPLANATION OF PROVISIONS

A. Modifications and Repeal of Premium Tax Credit (secs. _01-_03 of the 
               committee print and sec. 36B of the Code)

                              PRESENT LAW

In general
    A refundable tax credit (the ``premium assistance credit'') 
is provided for eligible individuals and families to subsidize 
the purchase of health insurance plans through an American 
Health Benefit Exchange (``Exchange''), referred to as 
``qualified health plans.''\3\ In general, advance payments 
with respect to the premium assistance credit are made during 
the year directly to the insurer, as discussed below. However, 
eligible individuals may choose to pay their total health 
insurance premiums without advance payments and claim the 
credit at the end of the taxable year.
---------------------------------------------------------------------------
    \3\Under PPACA, an American Health Benefit Exchange is a source 
through which individuals can purchase health insurance coverage.
---------------------------------------------------------------------------
    Qualified health plans generally must meet certain 
requirements.\4\ Special rules apply to certain qualified 
health plans, referred to as ``catastrophic-only'' qualified 
health plans, which are available only to individuals who are 
under age 30 or meet other specified requirements.\5\ The 
premium assistance credit is not available with respect to 
catastrophic-only qualified health plans.\6\ In addition, in 
the case of a qualified health plan that provides coverage for 
abortions for which Federal funds may not be used, no part of 
the premium assistance credit may be used for the portion of 
premiums attributable to that coverage.\7\
---------------------------------------------------------------------------
    \4\Secs. 1301 and 1302 of PPACA.
    \5\Sec. 1302(e) of PPACA.
    \6\Under the Public Health Service Act (``PHSA'') as amended by the 
ACA, health insurance must meet certain requirements. Section 1251 of 
PPACA excepts certain health plans sold at the time of enactment of 
PPACA from some of the PHSA requirements (referred to as 
``grandfathered'' plans). In addition, under guidance provided by the 
Center for Consumer Information & Insurance Oversight (``CCIIO,'' part 
of the Department of Health and Human Services), including a letter 
dated November 14, 2013, to the State Insurance Commissioners and 
subsequent extensions, certain health plans that were sold in the 
individual insurance market as of January 1, 2013, are permitted to be 
sold after January 1, 2014, despite not complying with ACA requirements 
(referred to as ``grandmothered plans''). The premium assistance credit 
is not available with respect to a grandfathered plan or a 
grandmothered plan.
    \7\Sec. 1303(b)(2) of PPACA.
---------------------------------------------------------------------------
    The premium assistance credit is generally 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.\8\ Household income is 
defined as the sum of: (1) the individual's modified adjusted 
gross income, plus (2) the aggregate modified adjusted gross 
incomes of all other individuals taken into account in 
determining the individual's family size (but only if the other 
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 from gross 
income for citizens or residents living abroad,\9\ (2) any tax-
exempt interest received or accrued during the tax year, and 
(3) the portion of the individual's social security benefits 
not included in gross income.\10\ To be eligible for the 
premium assistance credit, individuals who are married must 
file a joint return. Individuals who are listed as dependents 
on a return are not eligible for the premium assistance credit.
---------------------------------------------------------------------------
    \8\Federal poverty level refers to the most recently published 
poverty guidelines determined by the Secretary of Health and Human 
Services (``HHS''). Levels for 2017 and previous years are available at 
https://aspe.hhs.gov/prior-hhs-poverty-guidelines-and-federal-register-
references.
    \9\Sec. 911.
    \10\Under section 86, only a portion of an individual's social 
security benefits are included in gross income.
---------------------------------------------------------------------------
    An individual who is eligible for minimum essential 
coverage from a source other than the individual insurance 
market generally is not eligible for the premium assistance 
credit.\11\ However, an individual who is offered minimum 
essential coverage under an employer-sponsored health plan may 
be eligible for the premium assistance credit if an employee's 
share of the premium for self-only coverage exceeds 9.69 
percent (for 2017) of the employee's household income, or the 
plan's share of total allowed costs of benefits provided under 
the plan is less than 60 percent of such costs (called 
``minimum value''), and the individual declines the employer-
offered coverage. An individual who enrolls in an employer-
sponsored health plan generally is ineligible for the premium 
assistance credit, even if the coverage is considered 
unaffordable or does not provide minimum value.
---------------------------------------------------------------------------
    \11\Minimum essential coverage is defined in section 5000A(f).
---------------------------------------------------------------------------
    As part of the process of enrollment in a qualified health 
plan through an Exchange, an individual may apply and be 
approved for advance payments with respect to a premium 
assistance credit (``advance payments'').\12\ The individual 
must provide information on income, family size, changes in 
marital or family status or income, and citizenship or lawful 
presence status.\13\ Eligibility for advance payments is 
generally based on the individual's income for the tax year 
ending two years prior to the enrollment period. The Exchange 
process includes a system through which information provided by 
the individual is verified using information from the Internal 
Revenue Service (``IRS'') and certain other sources.\14\ If an 
individual is approved for advance payments, the Treasury pays 
the advance amount directly to the issuer of the health plan in 
which the individual is enrolled. The individual then pays to 
the issuer of the plan the difference between the advance 
payment amount and the total premium charged for the plan.
---------------------------------------------------------------------------
    \12\Secs. 1411-1412 of PPACA. Under section 1402 of PPACA, certain 
individuals eligible for advance premium assistance payments are 
eligible also for a reduction in their share of medical costs, such as 
deductibles and copays, under the plan, referred to as reduced cost-
sharing. Eligibility for reduced cost-sharing is also determined as 
part of the Exchange enrollment process. The Department of Health and 
Human Services (``HHS'') is responsible for rules relating to Exchanges 
and the eligibility determination process.
    \13\Under section 1312(f)(3) of PPACA, an individual may not enroll 
in a qualified health plan through an Exchange if the individual is not 
a citizen or national of United States or an alien lawfully present in 
the United States. Thus, such an individual is not eligible for the 
premium assistance credit.
    \14\Under section 6103, returns and return information are 
confidential and may not be disclosed, except as authorized by the 
Code, by the IRS, other Federal employees, State employees, and certain 
others having access to such information. Under section 6103(l)(21), 
upon written request of the Secretary of HHS, the IRS is permitted to 
disclose certain return information for use in determining an 
individual's eligibility for advance premium assistance payments, 
reduced cost-sharing, or certain other State health subsidy programs, 
including a State Medicaid program under title XIX of the Social 
Security Act, a State's Children's Health Insurance Program under title 
XXI of the Social Security Act and a Basic Health Program under section 
1331 of PPACA.
---------------------------------------------------------------------------
Amount of credit
    The premium assistance credit amount is generally the lower 
of (1) the premium for the qualified health plan in which the 
individual or family enrolls and (2) the premium for the second 
lowest cost silver plan in the rating area where the individual 
resides, reduced by the individual's or family's share of 
premiums.\15\ As shown in Table 1 below, an individual's or 
family's share of premiums is a certain percentage of household 
income. For 2017, the percentage is 2.04 percent for household 
income up to 133 percent of FPL and is determined on a sliding 
scale in a linear manner up to 9.69 percent as household income 
rises from 133 percent of FPL to 400 percent of FPL.
---------------------------------------------------------------------------
    \15\The premium assistance amount is determined on a monthly basis 
and the credit for a year is the sum of the monthly amounts.

                                     TABLE 1.--INDIVIDUAL'S SHARE OF PREMIUMS
                                                  (For 2017)\16\
----------------------------------------------------------------------------------------------------------------
                                                                Initial percentage of      Final percentage of
      Household income  (expressed as a percent of FPL)           household income          household income
----------------------------------------------------------------------------------------------------------------
100% up to 133%.............................................                     2.04                      2.04
133% up to 150%.............................................                     3.06                      4.08
150% up to 200%.............................................                     4.08                      6.43
200% up to 250%.............................................                     6.43                      8.21
250% up to 300%.............................................                     8.21                      9.69
300% up to 400%.............................................                     9.69                      9.69
----------------------------------------------------------------------------------------------------------------

Reconciliation of advance payment on return
    An individual on whose behalf advance payments of the 
premium assistance credit for a taxable year are made is 
required to file an income tax return to reconcile the advance 
payments with the credit to which the individual is entitled 
for the taxable year.\17\
---------------------------------------------------------------------------
    \16\Rev. Proc. 2016-24, 2016-18 I.R.B. 677. The percentages 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 under section 1402 of 
PPACA) 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.
    \17\Under section 6055, health insurance issuers are required to 
report to the IRS and to an individual the months during a year for 
which the individual was covered by minimum essential coverage issued 
by the insurer in the individual market. In addition, under section 
36B(f)(3), an Exchange is required to report to the IRS and to an 
individual the months during a year for which the individual was 
covered by a qualified health plan purchased through the Exchange, the 
premiums paid by the individual, and, if applicable, advance premium 
assistance payments made on behalf of the individual.
---------------------------------------------------------------------------
    If the advance payments of the premium assistance credit 
exceed the amount of credit to which the individual is 
entitled, the excess (``excess advance payments'') is treated 
as an additional tax liability on the individual's income tax 
return for the taxable year (referred to as ``recapture''), 
subject to a limit on the amount of additional liability in 
some cases. For an individual with household income below 400 
percent of FPL, liability for the excess advance payments 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 applies 
to an unmarried individual who is not a surviving spouse or 
filing as a head of household.

       TABLE 2.--RECONCILIATION LIMIT ON ADDITIONAL TAX LIABILITY
                             (For 2017)\18\
------------------------------------------------------------------------
                                                       Applicable dollar
  Household income  (expressed as a percent of FPL)          amount
------------------------------------------------------------------------
Less than 200%.......................................               $600
At least 200% but less than 300%.....................             $1,500
At least 300% but less than 400%.....................             $2,550
------------------------------------------------------------------------

    If the advance payments of the premium assistance credit 
for a taxable year are less than the amount of the credit to 
which the individual is entitled, the additional credit amount 
is also reflected on the individual's income tax return for the 
year.
---------------------------------------------------------------------------
    \18\Rev. Proc. 2016-55, 2015-45 I.R.B. 707. The applicable dollar 
amounts are indexed to reflect cost-of-living increases, with the 
amount of any increase rounded down to the next lowest multiple of $50.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The premium assistance tax credit contains basic flaws and 
has contributed to the weakening of the individual insurance 
market and increased inefficiencies in that market. 
Specifically, limiting the credit to health coverage purchased 
through an Exchange has led to segmentation of individual 
insurance markets and limited health plan choices in many 
areas. Denying the credit for catastrophic coverage, which can 
be an affordable option for younger individuals, has 
discouraged younger and healthier individuals from 
participating in insurance markets. Furthermore, the limits on 
recapture of excess advance payments allow some individuals to 
keep funds to which they are not entitled, thereby increasing 
the cost of the credit and Federal deficits. The Committee 
considers repeal and replacement of the premium assistance tax 
credit to be a fundamental element of true health care reform. 
However, the Committee also recognizes that making immediate 
changes can be disruptive for individuals, insurers and health 
care providers. The Committee therefore wishes to remedy the 
flaws of the premium assistance credit while providing a smooth 
transition period.

                        EXPLANATION OF PROVISION

Overview

    The provision makes several modifications to the premium 
assistance credit for a transition period and repeals the 
premium assistance credit at the end of the transition period.

Recapture of excess advance payments

    The provision repeals the present-law provision under 
which, in the case of an individual with household income below 
400 percent of FPL, the additional tax liability resulting from 
excess advance payments is limited to the applicable dollar 
amount. Thus, under the provision, the full amount of excess 
advance payments is treated as an additional tax liability for 
the individual.

Application of credit to additional coverage

    Under the provision, the premium assistance credit is 
available with respect to catastrophic-only qualified health 
plans. In addition, the premium assistance credit is available 
with respect to health plans that otherwise meet the 
requirements relating to qualified health plans, except that 
they are not offered through an Exchange.\19\ Thus, an 
individual who purchases a qualified health plan in the 
individual market, but not through an Exchange, may be eligible 
for the premium assistance credit if the requirements for 
eligibility are otherwise met.\20\
---------------------------------------------------------------------------
    \19\As under present law, the credit is not available with respect 
to a grandfathered plan or grandmothered plan. In addition, as under 
present law, an individual who is not a citizen or national of the 
United States, or an alien lawfully present in the United States, is 
not eligible for the premium assistance credit.
    \20\Advance premium assistance payments are not available with 
respect to a qualified health plan that is not purchased through an 
Exchange. An individual who purchases such a plan must claim the 
premium assistance credit on his or her income tax return. The 
provision amends the present-law reporting requirements under section 
6055 so that additional information related to eligibility for the 
premium assistance credit is reported.
---------------------------------------------------------------------------

Ineligibility of qualified health plans covering abortion

    Under the provision, the premium assistance credit is not 
available with respect to a qualified health plan that includes 
coverage for abortions, other than an abortion necessary to 
save the life of the mother or an abortion with respect to a 
pregnancy that is the result of an act of rape or incest.\21\ 
For this purpose, the treatment of any infection, injury, 
disease, or disorder that has been caused by or exacerbated by 
the performance of an abortion is not considered an abortion.
---------------------------------------------------------------------------
    \21\Nothing in the provision is to be construed as prohibiting any 
individual from purchasing separate coverage for abortions, or a health 
plan that includes those abortions, so long as no premium assistance 
credit is allowed with respect to the premiums for the coverage or 
plan. In addition, nothing in the provision restricts any health 
insurance issuer from offering separate coverage for abortions, or a 
plan that includes abortions, so long as premiums for the separate 
coverage or plan are not paid for with any amount attributable to the 
premium assistance credit (or the amount of any advance payment of the 
credit under section 1412 of PPACA).
---------------------------------------------------------------------------

Changes to individual share of premiums

    The provision revises the schedule under which an 
individual's or family's share of premiums is determined in 
applying the credit for taxable years beginning 2019. As 
revised, the schedule varies with household income and with the 
age of the individual or family members, as shown in Table 3 
below, subject to adjustment as described below.\22\ Initial 
and final percentages refer to percentage of the taxpayer's 
household income.
---------------------------------------------------------------------------
    \22\For purposes of the schedule, an individual's age for a taxable 
year is the age the individual attains before the close of the taxable 
year, and, in the case of a joint return, the age of the older spouse 
is taken into account. As under present law, the applicable percentage 
is determined on a sliding scale in a linear manner as household income 
rises from 133 percent of FPL to 400 percent of FPL.

                                                         TABLE 3--INDIVIDUAL'S SHARE OF PREMIUMS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Up to Age 29          Age 30-39           Age 40-49           Age 50-59          Over Age 59
                                                     ---------------------------------------------------------------------------------------------------
  Household income  (expressed as a percent of FPL)    Initial             Initial             Initial             Initial             Initial
                                                          %      Final %      %      Final %      %      Final %      %      Final %      %      Final %
--------------------------------------------------------------------------------------------------------------------------------------------------------
Up to 133%..........................................       2         2         2         2        2         2          2         2         2         2
133%-150%...........................................       3         4         3         4        3         4          3         4         3         4
150%-200%...........................................       4         4.3       4         5.3      4         6.3        4         7.3       4         8.3
200%-250%...........................................       4.3       4.3       5.3       5.9      6.3       8.05       7.3       9         8.3      10.0
250%-300%...........................................       4.3       4.3       5.9       5.9      8.05      8.35       9        10.5      10        11.5
300%-400%...........................................       4.3       4.3       5.9       5.9      8.35      8.35      10.5      10.5      11.5      11.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    To determine the percentages applicable for taxable years 
beginning in calendar year 2019, the initial and final 
percentages may be subject to two adjustments. The first 
adjustment reflects the excess, if any, of (1) the rate of 
premium growth for the period beginning with calendar year 2013 
and ending with calendar year 2018 over (2) the rate of income 
growth for that period. The second adjustment reflects the 
excess, if any, of (1) the rate of premium growth for calendar 
year 2018 over (2) the rate of growth in the consumer price 
index for calendar year 2018. However, the second adjustment 
applies only if the aggregate amount of premium assistance 
credits and cost-sharing reductions for calendar year 2018 
exceeds 0.504 percent of the gross domestic product for that 
year.

Repeal of premium assistance credit

    The provision terminates the premium assistance credit with 
respect to any coverage month beginning after December 31, 
2019.\23\
---------------------------------------------------------------------------
    \23\The provision generally also repeals the provisions of sections 
1411 and 1412 of PPACA relating to the determination of eligibility for 
advance premium assistance payments.
---------------------------------------------------------------------------

                             EFFECTIVE DATE

    Repeal of the limit on additional tax liability resulting 
from excess advance payments is effective for taxable years 
beginning after December 31, 2017, and before January 1, 2020. 
The other transition modifications to the premium assistance 
credit are generally effective for taxable years beginning 
after December 31, 2017, except that the new schedule for 
determining an individual's or family's share of premiums is 
effective for taxable years beginning after December 31, 
2018.\24\ Repeal of the premium assistance credit is effective 
for months beginning after December 31, 2019, in taxable years 
ending after that date.\25\
---------------------------------------------------------------------------
    \24\The provision specifying that advance premium assistance 
payments are not available with respect to a qualified health plan that 
is not purchased through an Exchange is effective on January 1, 2018. 
The provision amending the present-law reporting requirements under 
section 6055 is effective for coverage provided for months beginning 
after December 31, 2017.
    \25\Repeal of the provisions of sections 1411 and 1412 of PPACA 
relating to the determination of eligibility for advance premium 
assistance payments is effective January 1, 2020.
---------------------------------------------------------------------------

B. Small Business Tax Credit (sec. _04 of the committee print and sec. 
                            45R of the Code)


                              PRESENT LAW

In general

    Present law provides a tax credit for an eligible small 
employer for up to 50 percent of the employer's nonelective 
contributions to purchase health insurance for its employees. 
An eligible small employer for this purpose generally is an 
employer with no more than 25 full-time equivalent employees 
(``FTEs'') during the employer's taxable year, whose average 
annual wages (for 2017) do not exceed $52,400.\26\ The full 
amount of the credit is available only to an employer with 10 
or fewer FTEs whose average annual wages do not exceed (for 
2017) $26,200 and is phased out based on the number of FTEs 
over 10 and average annual wages over $26,200.
---------------------------------------------------------------------------
    \26\Wages for this purpose is defined as under the Federal 
Insurance Contributions Act (``FICA''), sections 3101-3128, without 
regard to the dollar limit on FICA wages under section 3121(a). The 
wage amounts relevant for purposes of the credit are indexed to the 
Consumer Price Index for Urban Consumers (``CPI-U'') for years 
beginning after 2013.
---------------------------------------------------------------------------
    For purposes of the credit, the employer is determined by 
applying the aggregation rules for controlled groups, groups 
under common control, and affiliated service groups.\27\ In 
addition, for purposes of the credit, the term ``employee'' 
includes a leased employee, that is, an individual who is not 
an employee of the employer, who provides services to the 
employer pursuant to an agreement between the employer and 
another person (a ``leasing organization'') and under the 
primary direction or control of the employer, and who has 
performed such services on a substantially full-time basis for 
at least one year.\28\
---------------------------------------------------------------------------
    \27\Section 414(b) provides that, for specified employee benefit 
purposes, employees of corporations that are members of a controlled 
group of corporations are treated as employed by a single employer. 
Similarly, employees of trades or businesses (whether or not 
incorporated) under common control as provided in regulations under 
section 414(c), and employees of members of an affiliated service group 
as defined under section 414(m), are treated as employed by a single 
employer for specified employee benefit purposes. Section 414(o) 
authorizes the Secretary of the Treasury to issue regulations to 
prevent avoidance of the purposes specified in section 414(m).
    \28\Sec. 414(n)(2).
---------------------------------------------------------------------------
    Self-employed individuals (including partners and sole 
proprietors),\29\ two-percent shareholders of an S 
Corporation,\30\ and five-percent owners of the employer\31\ 
are not employees for purposes of the credit with the result 
that they are disregarded in determining number of FTEs, 
average annual wages, and nonelective contributions for 
employees' health insurance. Family members of these 
individuals and any member of the individual's household who is 
a dependent for tax purposes are also not employees for 
purposes of the credit. In addition, the hours of service 
worked by and wages paid to a seasonal worker of an employer 
are not taken into account in determining number of FTEs and 
average annual wages unless the worker works for the employer 
on more than 120 days during the taxable year.
---------------------------------------------------------------------------
    \29\Sec. 401(c).
    \30\Sec. 1372(b).
    \31\Five-percent owner is defined as for purposes of the qualified 
retirement plan top-heavy rules under section 416(i)(1)(B)(i).
---------------------------------------------------------------------------
    The employer contributions must be provided under an 
arrangement that requires the eligible small employer to make, 
on behalf of each employee who enrolls in qualifying health 
insurance offered by the employer, a nonelective contribution 
equal to a uniform percentage (not less than 50 percent) of the 
premium cost of the qualifying health insurance.\32\ The credit 
is available only for nonelective contributions for premiums 
for insurance purchased through a Small Business Health Options 
(``SHOP'') Exchange and is available for a maximum credit 
period of two consecutive taxable years beginning with the 
first taxable year in which the employer (or any predecessor) 
offers coverage to its employees through a SHOP Exchange.\33\
---------------------------------------------------------------------------
    \32\A nonelective contribution is an employer contribution other 
than an employer contribution pursuant to a salary reduction 
arrangement.
    \33\The maximum two-year credit period does not take into account 
any taxable years beginning before 2014.
---------------------------------------------------------------------------
    The credit is available only to offset actual tax liability 
(that is, it is not a refundable credit) and is claimed on the 
employer's tax return. The credit is a general business credit 
and generally can be carried back for one year and carried 
forward for 20 years. The credit is available for tax liability 
under the alternative minimum tax. The dollar amount of the 
credit reduces the amount of employer contributions the 
employer may deduct as a business expense.

Tax-exempt organizations

    A tax-exempt organization\34\ that otherwise qualifies as 
an eligible small employer is eligible to receive the credit. 
For tax-exempt organizations, the applicable credit percentage 
is limited to 35 percent. In addition, for tax-exempt 
organizations, instead of being a general business credit, the 
credit is a refundable credit limited to the amount of the 
payroll taxes of the employer during the calendar year in which 
the taxable year begins. For this purpose, ``payroll taxes'' 
means: (1) the amount of income tax required to be withheld 
from its employees' wages; (2) the amount of hospital insurance 
tax required to be withheld from its employees' wages; and (3) 
the amount of the hospital insurance tax imposed on the 
employer.\35\
---------------------------------------------------------------------------
    \34\A tax-exempt organization is an organization described in 
section 501(c) that is exempt from tax under section 501(a).
    \35\Secs. 3402, 3101(b) and 3102, 3111(b).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The tax credit for health insurance premiums paid by an 
employer was intended to encourage small businesses to provide 
coverage to employees. However, the design of the credit limits 
its usefulness to these employers. The Committee believes that 
other measures to lower the cost of health coverage will 
provide more effective incentive for small employers. The 
Committee therefore wishes to repeal a credit in conjunction 
with providing such other measures.

                        EXPLANATION OF PROVISION

Ineligibility of qualified health plans covering abortion

    Under the provision, the small employer health insurance 
credit is not available with respect to a qualified health plan 
that includes coverage for abortions, other than an abortion 
necessary to save the life of the mother or an abortion with 
respect to a pregnancy that is the result of an act of rape or 
incest.\36\ For this purpose, the treatment of any infection, 
injury, disease, or disorder that has been caused by or 
exacerbated by the performance of an abortion is not considered 
an abortion.
---------------------------------------------------------------------------
    \36\Nothing in the provision is to be construed as prohibiting an 
employer from purchasing for its employees separate coverage for 
abortions, or a health plan that includes abortions, so long as no 
small employer health insurance credit is allowed with respect to the 
employer contributions for the coverage or plan. In addition, nothing 
in the provision restricts any health insurance issuer from offering 
separate coverage for abortions, or a plan that includes abortions, so 
long as the separate coverage or plan is not paid for with any employer 
contribution eligible for the credit.
---------------------------------------------------------------------------

Repeal of the credit

    The provision repeals the small employer health insurance 
credit.

                             EFFECTIVE DATE

    The provision disallowing the credit with respect to a 
qualified health plan that provides coverage with respect to 
abortions is effective for taxable years beginning after 
December 31, 2017. The provision repealing the small employer 
health insurance credit is effective for taxable years 
beginning after December 31, 2019.

  C. Repeal of Individual Mandate Penalty (sec. _05 of the committee 
                   print and sec. 5000A of the Code)


                              PRESENT LAW

    Individuals must be covered by a health plan that provides 
at least minimum essential coverage or be subject to a tax 
(also referred to as a penalty) for failure to maintain the 
coverage (commonly referred to as the ``individual 
mandate'').\37\ Minimum essential coverage includes government-
sponsored programs, eligible employer-sponsored plans, plans in 
the individual market, grandfathered group health plans and 
grandfathered health insurance coverage, and other coverage as 
recognized by the Secretary of Health and Human Services 
(``HHS'') in coordination with the Secretary of the 
Treasury.\38\ The tax is imposed for any month that an 
individual does not have minimum essential coverage unless the 
individual qualifies for an exemption for the month as 
described below.
---------------------------------------------------------------------------
    \37\If an individual is a dependent, as defined in section 152, of 
another taxpayer, the other taxpayer is liable for any tax for failure 
to maintain the required coverage with respect to the individual.
    \38\Minimum essential coverage does not include coverage that 
consists of only certain excepted benefits, such as limited scope 
dental and vision benefits or long-term care insurance offered under a 
separate policy, certificate or contract.
---------------------------------------------------------------------------
    The tax for any calendar month is one-twelfth of the tax 
calculated as an annual amount. The annual amount is equal to 
the greater of a flat dollar amount or an excess income amount. 
The flat dollar amount is the lesser of (1) the sum of the 
individual annual dollar amounts for the members of the 
taxpayer's family and (2) 300 percent of the adult individual 
dollar amount. The individual adult annual dollar amount is 
$695 for 2017.\39\ For an individual who has not attained age 
18, the individual annual dollar amount is one half of the 
adult amount. The excess income amount is 2.5 percent of the 
excess of the taxpayer's household income for the taxable year 
over the threshold amount of income for requiring the taxpayer 
to file an income tax return.\40\ The total annual household 
payment may not exceed the national average annual premium for 
bronze level health plans for the applicable family size 
offered through Exchanges that year.
---------------------------------------------------------------------------
    \39\For years after 2016, the $695 amount is indexed to CPI-U, 
rounded to the next lowest multiple of $50.
    \40\Sec. 6012(a).
---------------------------------------------------------------------------
    Exemptions from the requirement to maintain minimum 
essential coverage are provided for the following: (1) an 
individual for whom coverage is unaffordable because the 
required contribution exceeds eight percent of household 
income, (2) an individual with household income below the 
income tax return filing threshold, (3) a member of an Indian 
tribe, (4) a member of certain recognized religious sects or a 
health sharing ministry, (5) an individual with a coverage gap 
for a continuous period of less than three months, and (6) an 
individual who is determined by the Secretary of HHS to have 
suffered a hardship with respect to the capability to obtain 
coverage.\41\
---------------------------------------------------------------------------
    \41\In addition, certain individuals present or residing outside of 
the United States and bona fide residents of United States territories 
are deemed to maintain minimum essential coverage.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The excise tax for failure to maintain a specific type of 
health coverage overrides personal health care choices, 
interferes in health care markets, and imposes an undue 
financial burden on families that fail to comply. The Committee 
believes that individuals should not be required to purchase 
specific Federally designed and dictated types of health 
insurance coverage to pay for medical care services.

                        EXPLANATION OF PROVISION

    Under the provision, the amount of the tax for failure to 
maintain minimum essential coverage is zero. Thus, the 
provision effectively repeals the individual mandate.

                             EFFECTIVE DATE

    The provision is effective for months beginning after 
December 31, 2015.

D. Repeal of Employer Mandate Penalty (sec. _06 of the committee print 
                      and sec. 4980H of the Code)


                              PRESENT LAW

In general

    An applicable large employer, as defined below, may be 
subject to a tax, called an ``assessable payment,'' for a month 
if one or more of its full-time employees is certified to the 
employer as receiving for the month a premium assistance credit 
with respect to health insurance purchased through an Exchange 
(commonly referred to as the ``employer mandate'').\42\ As 
discussed below, the amount of the assessable payment depends 
on whether the employer offers its full-time employees and 
their dependents the opportunity to enroll in minimum essential 
coverage under a group health plan sponsored by the employer 
and, if it does, whether the coverage offered is affordable and 
provides minimum value.
---------------------------------------------------------------------------
    \42\As discussed in Part A, premium assistance credits under 
section 36B apply with respect to health insurance purchased through an 
Exchange. An employer may also be subject to an assessable payment if 
an employee received reduced cost sharing with respect to coverage 
purchased through an Exchange as discussed in Part A.
---------------------------------------------------------------------------

Definitions of full-time employee and applicable large employer

    Applicable large employer generally means, with respect to 
a calendar year, an employer who employed an average of at 
least 50 full-time employees on business days during the 
preceding calendar year. For purposes of these rules, full-time 
employee means, with respect to any month, an employee who is 
employed on average at least 30 hours of service per week. 
Solely for purposes of determining whether an employer is an 
applicable large employer (that is, whether the employer has at 
least 50 full-time employees), besides the number of full-time 
employees, the employer must include the number of its full-
time equivalent employees for a month, determined by dividing 
the aggregate number of hours of service of employees who are 
not full-time employees for the month by 120. In addition, in 
determining whether an employer is an applicable large 
employer, members of the same controlled group, group under 
common control, and affiliated service group are treated as a 
single employer.\43\ If the group is an applicable large 
employer under this test, each member of the group is an 
applicable large employer even if any member by itself would 
not be an applicable large employer.
---------------------------------------------------------------------------
    \43\The rules for determining controlled group, group under common 
control, and affiliated service group under section 414(b), (c), (m) 
and (o) apply for this purpose.
---------------------------------------------------------------------------

Assessable payments

    If an applicable large employer does not offer its full-
time employees and their dependents minimum essential coverage 
under an employer-sponsored plan and at least one full-time 
employee is so certified to the employer, the employer may be 
subject to an assessable payment (for 2017) of $2,260 (divided 
by 12 and applied on a monthly basis) multiplied by the number 
of its full-time employees in excess of 30, regardless of the 
number of full-time employees so certified.
    Generally an employee who is offered minimum essential 
coverage under an employer-sponsored plan is not eligible for a 
premium assistance credit or reduced cost-sharing unless the 
coverage is unaffordable or fails to provide minimum value.\44\ 
However, if an employer offers its full-time employees and 
their dependents minimum essential coverage under an employer-
sponsored plan and at least one full-time employee is certified 
as receiving a premium assistance credit or reduced cost-
sharing (because the coverage is unaffordable or fails to 
provide minimum value), the employer may be subject to an 
assessable payment (for 2017) of $3,390 (divided by 12 and 
applied on a monthly basis) multiplied by the number of such 
full-time employees. However, the assessable payment in this 
case is capped at the amount that would apply if the employer 
failed to offer its full-time employees and their dependents 
minimum essential coverage.
---------------------------------------------------------------------------
    \44\Coverage under an employer-sponsored plan is unaffordable if 
the employee's share of the premium for self-only coverage exceeds 9.5 
percent of household income, and the coverage fails to provide minimum 
value if the plan's share of total allowed cost of provided benefits is 
less than 60 percent of such costs.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The excise tax imposed on employers whose employees receive 
premium assistance credits or cost-sharing reductions 
interferes with market-driven compensation arrangements, 
encourages employers to cut hours and employees, and stifles 
new job creation. The Committee believes that repealing the 
excise tax will remove an unnecessary impediment preventing job 
creation and lead to more jobs and increased economic growth.

                        EXPLANATION OF PROVISION

    Under the provision, the amount of the assessable penalties 
under the employer mandate is zero. Thus, the provision 
effectively repeals the employer mandate.

                             EFFECTIVE DATE

    The provision is effective for months beginning after 
December 31, 2015.

E. Repeal of Tax on Employee Health Insurance Premiums and Health Plan 
 Benefits (sec. _07 of the committee print and sec. 4980I of the Code)


                              PRESENT LAW

In general

    Effective for taxable years beginning after December 31, 
2019, an excise tax is imposed on the provider of applicable 
employer-sponsored health coverage (the ``coverage provider'') 
if the aggregate cost of the coverage for an employee 
(including a former employee, surviving spouse, or any other 
primary insured individual) exceeds a threshold amount 
(referred to as ``high cost health coverage''). The tax is 40 
percent of the amount by which aggregate cost exceeds the 
threshold amount (the ``excess benefit'').
    The annual threshold amount for 2018 is $10,200 for self-
only coverage and $27,500 for other coverage (such as family 
coverage), multiplied by a one-time health cost adjustment 
percentage.\45\ This threshold is then adjusted annually by an 
age and gender adjusted excess premium amount.\46\ The age and 
gender adjusted excess premium amount is the excess, if any, of 
(1) the premium cost of standard FEHBP coverage for the type of 
coverage provided to an individual if priced for the age and 
gender characteristics of all employees of the employer, over 
(2) the premium cost of standard FEHBP coverage if priced for 
the age and gender characteristics of the national workforce. 
For this purpose, standard FEHBP coverage means the per 
employee cost of Blue Cross/Blue Shield standard benefit 
coverage under the Federal Employees Health Benefit Program.
---------------------------------------------------------------------------
    \45\The health cost adjustment percentage is 100 percent plus the 
excess, if any, of (1) the percentage by which the cost of standard 
FEHBP coverage for 2018 (determined according to specified criteria) 
exceeds the cost of standard FEHBP coverage for 2010, over (2) 55 
percent.
    \46\The 2018 threshold amounts are increased by $1,650 for self-
only coverage or $3,450 for other coverage in the case of certain 
retirees and participants in a plan covering employees in a high-risk 
profession or repair or installation of electrical or 
telecommunications lines. For years after 2018, the threshold amounts 
(after application of the health cost adjustment percentage), and the 
increases for certain retirees and participants in a plan covering 
employees in a high-risk profession or repair or installation of 
electrical or telecommunications lines, are indexed to the Consumer 
Price Index for Urban Consumers (``CPI-U'') (CPI-U increased by one 
percentage point for 2019 only), rounded to the nearest $50.
---------------------------------------------------------------------------
    The excise tax is determined on a monthly basis, by 
reference to the monthly aggregate cost of applicable employer-
sponsored coverage for the month and 1/12 of the annual 
threshold amount.

Applicable employer-sponsored coverage and determination of cost

    Subject to certain exceptions, applicable employer-
sponsored coverage is coverage under any group health plan 
offered to an employee by an employer that is excludible from 
the employee's gross income or that would be excludible if it 
were employer-sponsored coverage.\47\ Thus, applicable 
employer-sponsored coverage includes coverage for which an 
employee pays on an after-tax basis. Applicable employer-
sponsored coverage includes coverage under any group health 
plan established and maintained primarily for its civilian 
employees by the Federal government or any Federal agency or 
instrumentality, or the government of any State or political 
subdivision thereof or any agency or instrumentality of a State 
or political subdivision.
---------------------------------------------------------------------------
    \47\Section 106 provides an exclusion for employer-provided 
coverage.
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    Applicable employer-sponsored coverage includes both 
insured and self-insured health coverage, including coverage in 
the form of reimbursements under a health flexible spending 
account (``health FSA'') or a health reimbursement arrangement 
and contributions to a health savings account (``HSA'') or 
Archer medical savings account (``Archer MSA'').\48\ In the 
case of a self-employed individual, coverage is treated as 
applicable employer-sponsored coverage if the self-employed 
individual is allowed a deduction for all or any portion of the 
cost of coverage.\49\
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    \48\Some types of coverage are not included in applicable employer-
sponsored coverage, such as long-term care coverage, separate insurance 
coverage substantially all the benefits of which are for treatment of 
the mouth (including any organ or structure within the mouth) or of the 
eye, and certain excepted benefits. Excepted benefits for this purpose 
include (whether through insurance or otherwise) coverage only for 
accident, or disability income insurance, or any combination thereof; 
coverage issued as a supplement to liability insurance; liability 
insurance, including general liability insurance and automobile 
liability insurance; workers' compensation or similar insurance; 
automobile medical payment insurance; credit-only insurance; and other 
similar insurance coverage (as specified in regulations), under which 
benefits for medical care are secondary or incidental to other 
insurance benefits. Applicable employer-sponsored coverage does not 
include coverage only for a specified disease or illness or hospital 
indemnity or other fixed indemnity insurance if the cost of the 
coverage is not excludible from an employee's income or deductible by a 
self-employed individual.
    \49\Section 162(l) allows a deduction to a self-employed individual 
for the cost of health insurance.
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    For purposes of the excise tax, the cost of applicable 
employer-sponsored coverage is generally determined under rules 
similar to the rules for determining the applicable premium for 
purposes of COBRA continuation coverage,\50\ except that any 
portion of the cost of coverage attributable to the excise tax 
is not taken into account. Cost is determined separately for 
self-only coverage and other coverage. Special valuation rules 
apply to retiree coverage, certain health FSAs, and 
contributions to HSAs and Archer MSAs.
---------------------------------------------------------------------------
    \50\Sec. 4980B(f)(4).
---------------------------------------------------------------------------

Calculation of excess benefit and imposition of excise tax

    In determining the excess benefit with respect to an 
employee (i.e., the amount by which the cost of applicable 
employer-sponsored coverage for the employee exceeds the 
threshold amount), the aggregate cost of all applicable 
employer-sponsored coverage of the employee is taken into 
account. The threshold amount for self-only coverage generally 
applies to an employee. The threshold amount for other coverage 
applies to an employee only if the employee and at least one 
other beneficiary are enrolled in coverage other than self-only 
coverage under a group health plan that provides minimum 
essential coverage and under which the benefits provided do not 
vary based on whether the covered individual is the employee or 
other beneficiary. For purposes of the threshold amount, any 
coverage provided under a multiemployer plan is treated as 
coverage other than self-only coverage.\51\
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    \51\As defined in section 414(f), a multiemployer plan is generally 
a plan to which more than one employer is required to contribute and 
that is maintained pursuant to one or more collective bargaining 
agreements between one or more employee organizations and more than one 
employer.
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    The excise tax is imposed on the coverage provider.\52\ In 
the case of insured coverage (i.e., coverage under a policy, 
certificate, or contract issued by an insurance company), the 
health insurance issuer is liable for the excise tax. In the 
case of self-insured coverage, the person that administers the 
plan benefits (``plan administrator'') is generally liable for 
the excise tax. However, in the case of employer contributions 
to an HSA or an Archer MSA, the employer is liable for the 
excise tax.
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    \52\The excise tax is allocated pro rata among the coverage 
providers, with each responsible for the excise tax on an amount equal 
to the total excess benefit multiplied by a fraction, the numerator of 
which is the cost of the applicable employer-sponsored coverage of that 
coverage provider and the denominator of which is the aggregate cost of 
all applicable employer-sponsored coverage of the employee.
---------------------------------------------------------------------------
    The employer is generally responsible for calculating the 
amount of excess benefit allocable to each coverage provider 
and notifying each coverage provider (and the IRS) of the 
coverage provider's allocable share. In the case of applicable 
employer-sponsored coverage under a multiemployer plan, the 
plan sponsor is responsible for the calculation and 
notification.\53\
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    \53\The employer or multiemployer plan sponsor may be liable for a 
penalty if the total excise tax due exceeds the tax on the excess 
benefit calculated and allocated among coverage providers by the 
employer or plan sponsor.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    Like many in the country, employers--and employees--are 
concerned about increasing health care costs and the increasing 
portion of compensation needed to provide health coverage. 
Accordingly, employers are taking measures to contain costs and 
exploring options for additional measures. Although intended to 
contain health care costs by discouraging use of high cost 
employer-sponsored health coverage, the excise tax on such 
coverage punishes employers for complying with requirements to 
offer minimum essential coverage and with ACA regulations, 
thereby driving up the cost of such coverage. The Committee 
believes that postponing the punitive excise tax on employer-
provided coverage in the context of true health care reform 
will prevent job loss, will provide relief to employers and 
employees who are facing increased premium costs, and will lead 
to increased economic growth, while providing employers with 
time to identify and implement their own measures to contain 
costs.

                        EXPLANATION OF PROVISION

    Under the provision, the excise tax on high cost employer-
sponsored health coverage will not apply for any taxable period 
beginning after December 31, 2019, and before January 1, 2025. 
Thus, the tax will apply only for taxable periods beginning 
after December 31, 2024.

                             EFFECTIVE DATE

    The provision is effective upon enactment.

   F. Repeal of Tax on Over-the-Counter Medications (sec. _08 of the 
        committee print and secs. 106, 220 and 223 of the Code)


                              PRESENT LAW

Exclusion for employer-provided health benefits

    Employees may exclude from gross income the value of 
employer-provided health coverage under an accident or health 
plan.\54\ In addition, any reimbursements under an employer-
provided accident or health plan for medical care expenses for 
employees, their spouses, their dependents, and adult children 
under age 27 generally are excludible from gross income.\55\
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    \54\Sec. 106.
    \55\Sec. 105(b).
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    An employer may agree to reimburse expenses for medical 
care of its employees (and their spouses, dependents, and adult 
children under age 27), not covered by a health insurance plan, 
through a flexible spending arrangement (``FSA'') which allows 
reimbursement not in excess of a specified dollar amount, 
provided the amount is only available for reimbursement for 
medical care.\56\ The amount available for reimbursement is 
either elected by an employee under a cafeteria plan (``health 
FSA'') or otherwise specified by the employer under a health 
reimbursement arrangement (``HRA''). Reimbursements under these 
arrangements are also excludible from gross income as 
reimbursements for medical care under an employer-provided 
accident or health plan.
---------------------------------------------------------------------------
    \56\Sec. 106(c)(1).
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Health savings accounts

    An individual with a high deductible health plan (and no 
other health plan other than a plan that provides certain 
permitted insurance or permitted coverage) may establish a 
health savings account (``HSA'').\57\ Subject to limits, 
contributions made to an HSA by an employer, including 
contributions made through a cafeteria plan through salary 
reduction, are excludible from income (and from wages for 
payroll tax purposes). Contributions made by individuals are 
deductible for income tax purposes, regardless of whether the 
individuals itemize deductions. Distributions from an HSA that 
are used for qualified medical expenses are excludible from 
gross income. Distributions from an HSA that are not used for 
qualified medical expenses are includible in gross income and 
generally are subject to an additional tax of 20 percent. 
Similar rules apply for another type of medical savings 
arrangement called an Archer medical savings account (``Archer 
MSA'').\58\
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    \57\Sec. 223.
    \58\Sec. 220.
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Definition of medical care for excludible reimbursements

    For purposes of the exclusion for reimbursements under 
employer-provided accident and health plans (including under 
health FSAs and HRAs), and for distributions from HSAs and 
Archer MSAs used for qualified medical expenses, the definition 
of medical care is generally the same as the definition that 
applies for the itemized deduction for the cost of medical care 
and includes prescription medicine or drugs and insulin.\59\ 
However, the definition of medical care for purposes of the 
exclusion for reimbursements for medical care under employer-
provided accident and health plans and for distributions from 
HSAs and Archer MSAs used for qualified medical expenses 
includes an over-the-counter medicine but only if prescribed by 
a physician.\60\ Thus, under present law, excludible treatment 
under a health FSA or an HRA is available on reimbursements for 
the cost of over-the-counter medicine only if the medicine is 
prescribed by a physician, and distributions from an HSA or an 
Archer MSA used to purchase over-the-counter medicine are not a 
qualified medical expense unless the medicine is prescribed by 
a physician.
---------------------------------------------------------------------------
    \59\Sec. 213(d). There are certain limitations on the general 
definition including a rule that cosmetic surgery or similar procedures 
are generally not medical care.
    \60\The prescription requirement does not apply to insulin.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The requirement to obtain a prescription for an over-the-
counter medicine in order for the cost of the medicine to be 
paid on a tax-favored basis from a health FSA, HRA, HSA, or 
Archer MSA has left consumers with three undesirable options: 
(1) seek an unnecessary appointment with a doctor to obtain a 
prescription before purchasing the medicine; (2) purchase the 
medicine without reimbursement, thus increasing the after-tax 
cost to the consumer; or (3) forego the medicine and leave a 
condition untreated, which could then worsen and necessitate 
more expensive treatment. The Committee notes that all three 
options increase costs to the consumer and to the healthcare 
system. The Committee believes that an over-the-counter 
medicine should be a qualified medical expense under a health 
FSA, HRA, HSA, or Archer MSA, regardless of whether a 
prescription is obtained. The requirement to obtain a 
prescription should therefore be repealed.

                        EXPLANATION OF PROVISION

    The provision changes the definition of qualified medical 
care for purposes of the exclusions for reimbursements for 
medical care under employer-provided accident and health plans 
(including health FSAs and HRAs) and for distributions from 
HSAs or Archer MSAs used for qualified medical expenses to 
include over-the-counter medicine that is not prescribed by a 
physician. Thus, for example, amounts paid from a health FSA or 
HRA, or funds distributed from an HSA or an Archer MSA, to 
reimburse a taxpayer for over-the-counter medicine, such as 
nonprescription aspirin, allergy medicine, antacids, or pain 
relievers, will be excluded from income in accordance with the 
general rules associated with those health-related savings and 
reimbursement vehicles.

                             EFFECTIVE DATE

    The provision is effective (1) in the case of HSAs and 
MSAs, amounts paid with respect to taxable years beginning 
after December 31, 2017, and (2) in the case of health FSAs and 
HRAs, expenses incurred with respect to taxable years beginning 
after December 31, 2017.

 G. Repeal of Increase in Tax on Health Savings Accounts (sec. _09 of 
         the committee print and secs. 220 and 223 of the Code)


                              PRESENT LAW

    Subject to limits, an individual with a high deductible 
health plan generally may make deductible contributions to a 
health savings account (``HSA'') or an Archer MSA (or ``medical 
savings account''), which is a tax-exempt trust or custodial 
account. Employer contributions to Archer MSAs and HSAs on 
behalf of employees are excluded from income and wages, 
including Archer MSA and HSA contributions made with salary 
reduction contributions through a cafeteria plan.\61\ Thus, 
contributions to an HSA or Archer MSA are made on a pretax 
basis.
---------------------------------------------------------------------------
    \61\Sec. 106(b) and (d). Employer contributions are subject to the 
same limits as individual contributions and reduce the amount of 
contributions that the individual can make.
---------------------------------------------------------------------------
    Distributions from an HSA or Archer MSA that are used for 
qualified medical expenses are excludible from gross income. 
Distributions that are not used for qualified medical expenses 
are includible in income and are generally subject to an 
additional tax. Before 2011, the additional tax on HSA 
distributions not used for qualified medical expenses was 10 
percent of the distributed amount, and the additional tax on 
Archer MSA distributions not used for qualified medical 
expenses was 15 percent of the distributed amount. Effective 
for distributions made after December 31, 2010, the additional 
tax on distributions from an HSA or an Archer MSA that are not 
used for qualified medical expenses is 20 percent of the 
distributed amount.

                           REASONS FOR CHANGE

    HSAs and Archer MSAs enable individuals to save for and pay 
for medical expenses on a tax-favored basis. The additional 
taxes on distributions not used for medical expenses are 
designed to discourage the use of HSA and Archer MSA funds for 
other purposes. However, financial pressures may leave an 
individual with no choice but using such funds for other 
purposes. In that case, an additional tax of 20 percent unduly 
increases financial pressure and results in further depletion 
of HSA and Archer MSA assets. The Committee believes that the 
prior-law rates of the additional tax are more appropriate and 
should be restored.

                        EXPLANATION OF PROVISION

    Under the provision, the additional tax on HSA 
distributions not used for qualified medical expenses is 10 
percent of the distributed amount, and the additional tax on 
Archer MSA distributions not used for qualified medical 
expenses is 15 percent of the distributed amount.

                             EFFECTIVE DATE

    The provision is effective for distributions made after 
December 31, 2017.

H. Repeal of Limitations on Contributions to Flexible Spending Accounts 
       (sec. _10 of the committee print and sec. 125 of the Code)


                              PRESENT LAW

    A health flexible spending arrangement (``health FSA'') is 
an arrangement under which medical care expenses of an employee 
(and family members, if applicable) that are not covered by 
insurance may be paid or reimbursed.\62\ The funds available to 
an employee through a health FSA generally consist of the 
employee's salary reduction contributions under a cafeteria 
plan, meaning that employees are given the option to reduce 
their current cash compensation and instead have the amount 
made available for use in reimbursing the employee for his or 
her medical expenses.\63\ In order for a health FSA to be a 
qualified benefit under a cafeteria plan, an employee's salary 
reduction contributions cannot exceed a dollar limit ($2,600 
for 2017).\64\
---------------------------------------------------------------------------
    \62\Sec. 106(c)(2).
    \63\Health FSAs may also include funds provided by the employer 
(often called ``flex credits'').
    \64\Sec. 125(i). The dollar limit is indexed to CPI-U, with any 
increase that is not a multiple of $50 rounded to the next lowest 
multiple of $50.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    Health FSAs provide workers with pretax funds to pay for 
medical expenses not covered by insurance. Salary reduction 
contributions in turn give a worker the flexibility to 
coordinate the funds available through the health FSA with the 
actual level of his or her uncovered expenses. As a practical 
matter, therefore, the effect of the limit falls most heavily 
on workers with large uncovered expenses. The Committee 
believes the limit should be repealed in order to provide tax 
relief for these workers.

                        EXPLANATION OF PROVISION

    The provision repeals the limitation on health FSA salary 
reduction contributions.

                             EFFECTIVE DATE

    The provision applies to taxable years beginning after 
December 31, 2017.

I. Repeal of Medical Device Excise Tax (sec. _11 of the committee print 
                       and sec. 4191 of the Code)


                              PRESENT LAW

    Effective for sales after December 31, 2012, excluding 
sales during the period beginning on January 1, 2016 and ending 
on December 31, 2017, a tax equal to 2.3 percent of the sale 
price is imposed on the sale of any taxable medical device by 
the manufacturer, producer, or importer of such device.\65\ A 
taxable medical device is any device, as defined in section 
201(h) of the Federal Food, Drug, and Cosmetic Act,\66\ 
intended for humans. Regulations further define a medical 
device as one that is listed by the Food and Drug 
Administration (``FDA'') under section 510(j) of the Federal 
Food, Drug, and Cosmetic Act and 21 C.F.R. Part 807, pursuant 
to FDA requirements.\67\
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    \65\Section 4191(c) provides a moratorium under which the medical 
device excise tax does not apply to sales during the period beginning 
on January 1, 2016, and ending on December 31, 2017.
    \66\21 U.S.C. sec. 321. Section 201(h) defines device as ``an 
instrument, apparatus, implement, machine, contrivance, implant, in 
vitro reagent, or other similar or related article, including any 
component, part, or accessory, which is (1) recognized in the official 
National Formulary, or the United States Pharmacopeia, or any 
supplement to them, (2) intended for use in the diagnosis of disease or 
other conditions, or in the cure, mitigation, treatment, or prevention 
of disease, in man or other animals, or (3) intended to affect the 
structure or any function of the body of man or other animals, and 
which does not achieve its primary intended purposes through chemical 
action within or on the body of man or other animals and which is not 
dependent upon being metabolized for the achievement of its primary 
intended purposes.''
    \67\Treas. Reg. sec. 48.4191-2(a). The regulations also include as 
devices items that should have been listed as a device with the FDA as 
of the date the FDA notifies the manufacturer or importer that 
corrective action with respect to listing is required.
---------------------------------------------------------------------------
    The excise tax does not apply to eyeglasses, contact 
lenses, hearing aids, or any other medical device determined by 
the Secretary to be of a type that is generally purchased by 
the general public at retail for individual use (``retail 
exemption''). Regulations provide guidance on the types of 
devices that are exempt under the retail exemption. A device is 
exempt under these provisions if: (1) it is regularly available 
for purchase and use by individual consumers who are not 
medical professionals; and (2) the design of the device 
demonstrates that it is not primarily intended for use in a 
medical institution or office or by a medical professional.\68\ 
Additionally, the regulations provide certain safe harbors for 
devices eligible for the retail exemption.\69\
---------------------------------------------------------------------------
    \68\Treas. Reg. sec. 48.4191-2(b)(2).
    \69\Treas. Reg. sec. 48.4191-2(b)(2)(iii). The safe harbors include 
devices that are described as over-the-counter devices in relevant FDA 
classification headings as well as certain FDA device classifications 
listed in the regulations.
---------------------------------------------------------------------------
    The medical device excise tax is generally subject to the 
rules applicable to other manufacturers excise taxes. These 
rules include certain general manufacturers excise tax 
exemptions including the exemption for sales for use by the 
purchaser for further manufacture (or for resale to a second 
purchaser in further manufacture) or for export (or for resale 
to a second purchaser for export).\70\ If a medical device is 
sold free of tax for resale to a second purchaser for further 
manufacture or for export, the exemption does not apply unless, 
within the six-month period beginning on the date of sale by 
the manufacturer, the manufacturer receives proof that the 
medical device has been exported or resold for use in further 
manufacturing.\71\ In general, the exemption does not apply 
unless the manufacturer, the first purchaser, and the second 
purchaser are registered with the Secretary of the Treasury. 
Foreign purchasers of articles sold or resold for export are 
exempt from the registration requirement.
---------------------------------------------------------------------------
    \70\Sec. 4221(a). Other general manufacturers excise tax exemptions 
(i.e., the exemption for sales to purchasers for use as supplies for 
vessels or aircraft, to a State or local government, to a nonprofit 
educational organization, or to a qualified blood collector 
organization) do not apply to the medical device excise tax.
    \71\Sec. 4221(b).
---------------------------------------------------------------------------
    The lease of a medical device is generally considered to be 
a sale of such device.\72\ Special rules apply for the 
imposition of tax to each lease payment. The use of a medical 
device subject to tax by manufacturers, producers, or importers 
of such device, is treated as a sale for the purpose of 
imposition of excise taxes.\73\
---------------------------------------------------------------------------
    \72\Sec. 4217(a).
    \73\Sec. 4218.
---------------------------------------------------------------------------
    There are also rules for determining the price of a medical 
device on which the excise tax is imposed.\74\ These rules 
provide for (1) the inclusion of containers, packaging, and 
certain transportation charges in the price, (2) determining a 
constructive sales price if a medical device is sold for less 
than the fair market price, and (3) determining the tax due in 
the case of partial payments or installment sales.
---------------------------------------------------------------------------
    \74\Sec. 4216.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The U.S. medical device industry is a leader in medical 
technology innovation. The industry is an important contributor 
to the nation's economy, employing hundreds of thousands of 
people and manufacturing devices both for the U.S. and foreign 
markets. The United States is a net exporter of medical 
devices. The Committee believes that the excise tax on medical 
devices adversely affects the industry. The Committee believes 
that repealing the tax will decrease the cost of healthcare, 
encourage medical innovation, and lead to more jobs in the 
industry.

                        EXPLANATION OF PROVISION

    Under the provision, the medical device excise tax applies 
only to sales before January 1, 2016. Thus, the medical device 
excise tax will not resume for sales in calendar years 
beginning after December 31, 2017.

                             EFFECTIVE DATE

    The provision is effective upon enactment.

    J. Repeal of Elimination of Deduction for Expenses Allocable to 
Medicare Part D Subsidy (sec. _12 of the committee print and sec. 139A 
                              of the Code)


                              PRESENT LAW

    Sponsors of qualified retiree prescription drug plans are 
eligible for subsidy payments from the Secretary of HHS with 
respect to a portion of each qualified covered retiree's gross 
covered prescription drug costs (``qualified retiree 
prescription drug plan subsidy'').\75\ A qualified retiree 
prescription drug plan is employment-based retiree health 
coverage that has an actuarial value at least as great as the 
Medicare Part D standard plan for the risk pool and that meets 
certain other disclosure and recordkeeping requirements. These 
qualified retiree prescription drug plan subsidies are 
excludible from the plan sponsor's gross income.
---------------------------------------------------------------------------
    \75\Sec. 1860D-22 of the Social Security Act (SSA), 42 U.S.C. sec. 
1395w-132.
---------------------------------------------------------------------------
    In general, no deduction is allowed under any provision of 
the Code for any expense or amount that would otherwise be 
allowable as a deduction if the expense or amount is allocable 
to a class or classes of exempt income.\76\ Thus, expenses 
incurred with respect to the subsidies excluded from income 
would generally not be deductible. For years before 2013, the 
exclusion for the qualified retiree prescription drug plan 
subsidy included a provision under which the exclusion was not 
taken into account in determining deductions with respect to 
the retiree prescription drug costs for which subsidy payments 
were received, thus allowing a deduction for costs subsidized 
by HHS payments. The ACA eliminated that provision and, as a 
result, the amount otherwise allowable as a deduction for 
retiree prescription drug costs is reduced by the amount of 
excludable subsidy payments received.
---------------------------------------------------------------------------
    \76\Sec. 265(a) and Treas. Reg. sec. 1.265-1(a).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    Prescription drug coverage under employer-sponsored retiree 
health plans helps limit Medicare costs. The HHS subsidy for a 
qualified retiree prescription drug plan, accompanied by tax-
free treatment of the subsidy and a deduction for retiree drug 
expenses, provides employers with a strong incentive to 
continue providing these plans. The Committee wishes to restore 
that incentive by restoring the deduction.

                        EXPLANATION OF PROVISION

    Under the provision, the exclusion for qualified retiree 
prescription drug plan subsidy payments is not taken into 
account in determining whether a deduction is allowed with 
respect to retiree prescription drug costs taken into account 
in determining the subsidy payments from HHS. Therefore, a 
taxpayer may claim a deduction for covered retiree prescription 
drug expenses notwithstanding that the taxpayer excludes from 
income qualified retiree prescription drug plan subsidies 
received from HHS with respect to the expenses.

                             EFFECTIVE DATE

    The provision is effective for taxable years beginning 
after December 31, 2017.

K. Repeal of Increase in Income Threshold for Medical Expense Deduction 
       (sec. _13 of the committee print and sec. 213 of the Code)


                              PRESENT LAW

    An individual may claim an itemized deduction for 
unreimbursed medical expenses, but only to the extent that the 
expenses exceed 10 percent of adjusted gross income.\77\ For 
taxable years beginning before January 1, 2017, for purposes of 
the regular tax (but not for purposes of the AMT), the 10-
percent threshold is reduced to 7.5 percent in the case of an 
individual who has attained the age of 65 before the close of 
the taxable year.\78\
---------------------------------------------------------------------------
    \77\For taxable years beginning before January 1, 2013, the 
threshold was 7.5 percent for the regular tax and 10 percent for 
alternative minimum tax (``AMT'').
    \78\In the case of married taxpayers, the 7.5 percent threshold 
applies if either spouse has obtained the age of 65 before the close of 
the taxable year.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that the increase of the income 
threshold for the medical expense deduction from 7.5 percent to 
10 percent imposed a tax burden on individuals with high health 
care costs. The Committee believes that the increase of the 
threshold should be repealed, lowering the threshold back to 
the pre-2013 level for all taxpayers.

                        EXPLANATION OF PROVISION

    The provision extends for one year the present-law regular 
tax 7.5-percent threshold for taxpayers who have attained the 
age of 65 before the close of the taxable year.
    The provision permanently lowers the adjusted gross income 
threshold from 10 percent to 7.5 percent for all taxpayers 
(regardless of age) for purposes of both the regular tax and 
the AMT.

                             EFFECTIVE DATE

    The provision extending the regular tax 7.5-percent 
threshold for taxpayers who have attained the age of 65 before 
the close of the taxable year is effective for taxable years 
beginning after December 31, 2016.
    The provision lowering the adjusted gross income threshold 
from 10 percent to 7.5 percent for all taxpayers is effective 
for taxable years beginning after December 31, 2017.

L. Repeal of Medicare Tax Increase (sec. _14 of the committee print and 
                    secs. 1401 and 3101 of the Code)


                              PRESENT LAW

Social Security and Medicare taxes--in general

    The Federal Insurance Contributions Act (``FICA'') imposes 
tax on employers and employees based on the amount of wages (as 
defined for FICA purposes) paid to an employee during the 
year.\79\ The tax imposed on the employer and on the employee 
each consists of two parts: (1) the social security or old age, 
survivors, and disability insurance (``OASDI'') tax equal to 
6.2 percent of covered wages up to the taxable wage base 
($127,200 for 2017); and (2) the Medicare or hospital insurance 
(``HI'') tax equal to 1.45 percent of all covered wages 
(including wages above the taxable wage base).\80\ The combined 
employer and employee taxes result in a total OASDI tax rate of 
12.4 percent of covered wages up to the taxable wage base and a 
total Medicare tax rate of 2.9 percent of all covered wages. 
The employee portion of the FICA tax generally must be withheld 
and remitted to the Federal government by the employer. If the 
employer fails to withhold the employee portion, the employer 
is generally liable for the amount that should have been 
withheld.
---------------------------------------------------------------------------
    \79\Secs. 3101-3128.
    \80\Social security and Medicare taxes respectively fund the Social 
Security and Medicare trust funds.
---------------------------------------------------------------------------
    Instead of FICA taxes, railroad employers and employees are 
subject, under the Railroad Retirement Tax Act (``RRTA''), to 
taxes equivalent to the OASDI and Medicare taxes under FICA 
with respect to compensation as defined for RRTA purposes 
(``RRTA compensation'').\81\ The employee portion of RRTA taxes 
generally must be withheld from an employee's RRTA compensation 
and remitted to the Federal government by the employer.
---------------------------------------------------------------------------
    \81\Secs. 3201-3233.
---------------------------------------------------------------------------
    As a parallel to FICA and RRTA taxes, the Self-Employment 
Contributions Act (``SECA'') imposes tax on the self-employment 
income of self-employed individuals.\82\ The rate of the OASDI 
portion of SECA tax is equal to the combined employee and 
employer OASDI FICA tax rates (12.4 percent) and applies to 
self-employment income up to the FICA taxable wage base 
(reduced by FICA wages, if any). Similarly, the rate of the 
Medicare portion of SECA tax is the same as the combined 
employer and employee Medicare rates (2.9 percent) and applies 
to all self-employment income.
---------------------------------------------------------------------------
    \82\Secs. 1401-1403.
---------------------------------------------------------------------------

Additional Medicare tax

    An additional Medicare tax of 0.9 percent is imposed on 
employees and self-employed individuals with FICA wages, RRTA 
compensation or self-employment income exceeding a threshold 
amount.
    Under FICA and RRTA, the employee portion of the Medicare 
tax (not the employer portion) is increased by an additional 
tax of 0.9 percent on wages received in excess of the threshold 
amount. The threshold amount is $250,000 in the case of a joint 
return, $125,000 in the case of a married individual filing a 
separate return, and $200,000 in any other case. Thus, in the 
case of a joint return, the additional Medicare tax is based on 
the combined wages of an employee and the employee's spouse.
    An employer is required to withhold the additional Medicare 
tax from an employee's wages and RRTA compensation only to the 
extent wages or compensation paid to the employee by the 
employer exceeds $200,000. The employer's withholding 
obligation does not depend on the amount of the employee's 
ultimate liability for the additional Medicare tax, if any. 
That is, the amount required to be withheld may be more or less 
than the employee's ultimate liability. If the employee's 
liability is more than the amount withheld, the employee must 
pay the additional amount. If the employee's liability is less 
than the amount withheld, the employee may claim a refund.
    The additional Medicare tax applies also to self-employment 
income in excess of the threshold amount. As in the case of the 
additional Medicare tax for employees, the threshold amount for 
the additional SECA Medicare tax is $250,000 in the case of a 
joint return, $125,000 in the case of a married individual 
filing a separate return, and $200,000 in any other case. The 
threshold amount is reduced (but not below zero) by the amount 
of wages taken into account in determining the individual's 
additional FICA Medicare tax, if any. Thus, only a single 
threshold amount applies for an individual (or individual and 
spouse) with both FICA wages and self-employment income.

                           REASONS FOR CHANGE

    The Committee believes that taxes to fund Medicare should 
vary proportionately with wages, the result provided by the 
basic 2.9 percent combined Medicare tax rate under FICA and the 
basic Medicare tax rate under SECA. The additional 0.9 percent 
Medicare tax imposes a disproportionate tax burden on some 
taxpayers. Furthermore, the wage thresholds at which the 
additional tax applies are not indexed for inflation. Real wage 
growth will cause more and more taxpayers to become subject to 
the higher tax rates over time. Therefore, the Committee 
considers it appropriate to repeal the additional Medicare tax.

                        EXPLANATION OF PROVISION

    The provision repeals the additional 0.9 percent Medicare 
tax.

                             EFFECTIVE DATE

    The provision is effective with respect to remuneration 
received after, and taxable years beginning after, December 31, 
2017.

M. Refundable Tax Credit for Health Insurance Coverage (sec. _15 of the 
 committee print and new secs. 36C, 7529, 7530, and 6050X of the Code)


                              PRESENT LAW

Premium assistance credit

            In general
    A refundable tax credit (the ``premium assistance credit'') 
is provided for eligible individuals and families to subsidize 
the purchase of health insurance plans through an Exchange, 
referred to as ``qualified health plans.''\83\ The premium 
assistance credit is generally 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. An individual who is eligible for minimum 
essential coverage from a source other than the individual 
insurance market, such as employer-provided coverage, generally 
is not eligible for the premium assistance credit.\84\ In 
general, advance payments with respect to the premium 
assistance credit are made during the year directly to the 
insurer, as discussed below. However, eligible individuals may 
choose to pay their total health insurance premiums without 
advance payments and claim the credit at the end of the taxable 
year.
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    \83\Sec. 36B. Under the Public Health Service Act (``PHSA'') as 
amended by the ACA, health insurance must meet certain requirements. 
Section 1251 of PPACA excepts certain health plans sold at the time of 
enactment of PPACA from some of the PHSA requirements (referred to as 
``grandfathered'' plans). In addition, under guidance provided by the 
Center for Consumer Information & Insurance Oversight (``CCIIO,'' part 
of the Department of Health and Human Services), including a letter 
dated November 14, 2013, to the State Insurance Commissioners and 
subsequent extensions, certain health plans that were sold in the 
individual insurance market as of January 1, 2013, are permitted to be 
sold after January 1, 2014, despite not complying with ACA requirements 
(referred to as ``grandmothered plans''). The premium assistance credit 
is not available with respect to a grandfathered plan or a 
grandmothered plan. Another provision in the bill repeals the premium 
assistance credit.
    \84\Minimum essential coverage is defined in section 5000A(f). An 
individual covered by a qualified small employer health reimbursement 
arrangement (``QSEHRA'') as defined in section 9831(d) may be eligible 
for the premium assistance credit. In that case, the amount of the 
credit is reduced by the benefit amount available to an individual 
under the QSEHRA. Under section 162(l), a self-employed individual may 
take a deduction in determining adjusted gross income (``AGI''), that 
is, an ``above-the line'' deduction, for the cost of health insurance 
for the individual and the individual's spouse, dependents and, under 
the ACA, children up to age 26. Under section 213, an individual may 
take an itemized deduction for medical expenses, including health 
insurance premiums, that exceed 10 percent of AGI. If an individual 
receives a premium assistance credit, the amount of premiums taken into 
account in determining a deduction under section 162(l) or 213 is 
reduced by the amount of the credit.
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    As part of the process of enrollment in a qualified health 
plan through an Exchange, an individual may apply and be 
approved advance payments with respect to a premium assistance 
credit (``advance payments'').\85\ The individual must provide 
information on income, family size, changes in marital or 
family status or income, and citizenship or lawful presence 
status.\86\ Eligibility for advance payments is generally based 
on the individual's income for the tax year ending two years 
prior to the enrollment period. The Exchange process includes a 
system through which information provided by the individual is 
verified using information from the IRS and certain other 
sources.\87\ If an individual is approved for advance premium 
assistance payments, the Treasury pays the advance amount 
directly to the issuer of the health plan in which the 
individual is enrolled. The individual then pays to the issuer 
of the plan the difference between the advance payment amount 
and the total premium charged for the plan.
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    \85\Secs. 1411-1412 of PPACA. Under section 1402 of PPACA, certain 
individuals eligible for advance premium assistance payments are 
eligible also for a reduction in their share of medical costs, such as 
deductibles and copays, under the plan, referred to as reduced cost-
sharing. Eligibility for reduced cost-sharing is also determined as 
part of the Exchange enrollment process. The Department of Health and 
Human Services (``HHS'') is responsible for rules relating to Exchanges 
and the eligibility determination process.
    \86\Under section 1312(f)(3) of PPACA, an individual may not enroll 
in a qualified health plan through an Exchange if the individual is not 
a citizen or national of the United States or an alien lawfully present 
in the United States. Thus, such an individual is not eligible for the 
premium assistance credit.
    \87\Under section 6103, returns and return information are 
confidential and may not be disclosed, except as authorized by the 
Code, by the IRS, other Federal employees, State employees, and certain 
others having access to such information. Under section 6103(l)(21), 
upon written request of the Secretary of HHS, the IRS is permitted to 
disclose certain return information for use in determining an 
individual's eligibility for advance premium assistance payments, 
reduced cost-sharing, or certain other State health subsidy programs, 
including a State Medicaid program under title XIX of the Social 
Security Act, a State's Children's Health Insurance Program under title 
XXI of the Social Security Act and a Basic Health Program under section 
1331 of PPACA.
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            Amount of credit and reconciliation of advance payment on 
                    return
    The premium assistance credit amount is generally the lower 
of (1) the premium for the qualified health plan in which the 
individual or family enrolls and (2) the premium for the second 
lowest cost silver plan in the rating area where the individual 
resides, reduced by the individual's or family's share of 
premiums, determined as a specified percentage of household 
income.\88\ Household income is defined as the sum of: (1) the 
individual's modified adjusted gross income, plus (2) the 
aggregate modified adjusted gross incomes of all other 
individuals taken into account in determining the individual's 
family size (but only if the other 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 from gross income for citizens or 
residents living abroad,\89\ (2) any tax-exempt interest 
received or accrued during the tax year, and (3) the portion of 
the individual's social security benefits not included in gross 
income.\90\
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    \88\The premium assistance amount is determined on a monthly basis 
and the credit for a year is the sum of the monthly amounts.
    \89\Sec. 911.
    \90\Under section 86, only a portion of an individual's social 
security benefits are included in gross income.
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    An individual on whose behalf advance payments of the 
premium assistance credit for a taxable year are made is 
required to file an income tax return to reconcile the advance 
payments with the credit to which the individual is entitled 
for the taxable year. If the advance payments of the premium 
assistance credit exceed the amount of credit to which the 
individual is entitled, the excess (``excess advance 
payments'') is treated as an additional tax liability on the 
individual's income tax return for the taxable year (referred 
to as ``recapture''), subject to a limit on the amount of 
additional liability in some cases. For an individual with 
household income below 400 percent of FPL, liability for the 
excess advance payments for a taxable year is limited to a 
specific dollar amount (the ``applicable dollar amount'') as 
shown in Table 4 below. One-half of the applicable dollar 
amount shown in Table 4 applies to an unmarried individual who 
is not a surviving spouse or filing as a head of household.

       TABLE 4.--RECONCILIATION LIMIT ON ADDITIONAL TAX LIABILITY
                             (For 2017)\91\
------------------------------------------------------------------------
 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%..............                   $2,550
------------------------------------------------------------------------

    If the advance payments of the premium assistance credit 
for a taxable year are less than the amount of the credit to 
which the individual is entitled, the additional credit amount 
is also reflected on the individual's income tax return for the 
year.
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    \91\Rev. Proc. 2016-55, 2015-45 I.R.B. 707. The applicable dollar 
amounts are indexed to reflect cost-of-living increases, with the 
amount of any increase rounded down to the next lowest multiple of $50.
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Health coverage tax credit

    Another refundable tax credit (the ``health coverage tax 
credit'' or ``HCTC'') is available to certain individuals for 
months beginning before January 1, 2020, generally based on 
eligibility relating to the Trade Adjustment Assistance 
(``TAA'') program or the receipt of pension benefits from the 
Pension Benefit Guaranty Corporation.\92\ The credit amount is 
72.5 percent of the individual's premiums for qualified health 
insurance of the individual and qualifying family members for 
each eligible coverage month beginning in the taxable year. The 
credit is available on an advance payment basis through a 
program established by the IRS.\93\ In the case of an 
individual on whose behalf advance HCTC payments are made, the 
individual's income tax liability is increased by the amount of 
the advance payment, but then offset by the amount of the HCTC 
allowed to the individual.\94\
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    \92\Sec. 35.
    \93\Sec. 7527.
    \94\ Rules to coordinate eligibility for the HCTC and the premium 
assistance credit apply in the case of an individual who is eligible 
for both.
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Health Savings Accounts

    An individual with a high deductible health plan and no 
other health plan (other than a plan that provides certain 
permitted insurance or permitted coverage) may establish a 
health savings account (``HSA'').\95\ Subject to limits, 
contributions to an HSA made by or on behalf of an eligible 
individual are deductible in determining adjusted gross income 
of the individual (that is, an ``above-the-line'' deduction). 
Contributions to an HSA by an employer for an employee 
(including salary reduction contributions made through a 
cafeteria plan) are excludible from income and from wages for 
employment tax purposes.\96\ Distributions from an HSA for 
qualified medical expenses are not includible in gross income. 
An individual may roll funds over from one HSA to another on a 
nontaxable basis. In that case, the amount of the rollover is 
not taken into account in applying the HSA contribution limits.
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    \95\ Sec. 223.
    \96\ Secs. 106(d), 125, 3121(a)(2), 3231(e)(1), 3306(b)(2), 
3401(a)(22).
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Reporting relating to health insurance and employer-provided health 
        coverage

    A health insurance issuer is required to report to the IRS 
and to an individual the months during a year for which the 
individual was covered by minimum essential coverage issued by 
the insurer in the individual market.\97\ In addition, an 
Exchange is required to report to the IRS and to an individual 
the months during a year for which the individual was covered 
by a qualified health plan purchased through the Exchange, the 
premiums paid by the individual, and, if applicable, advance 
premium assistance payments made on behalf of the 
individual.\98\ An employer generally is required to report the 
cost of health coverage provided to an employee on Form W-
2.\99\
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    \97\ Sec. 6055.
    \98\ Sec. 36B(f)(3).
    \99\ Sec. 6051(a)(14).
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Penalty for claim of excess credit

    Present law imposes a penalty of 20 percent on the amount 
by which a claim for refund or credit exceeds the amount 
allowable unless it is shown that the claim has reasonable 
cause.\100\
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    \100\ Sec. 6676. This penalty does not apply to the portion of any 
claim to which accuracy-related and fraud penalties apply.
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                           REASONS FOR CHANGE

    The Committee recognizes that an advanceable tax credit 
will facilitate the purchase of health insurance by lower- and 
middle-income individuals. The Committee therefore wishes to 
provide such a credit. At the same time, the Committee wishes 
to avoid the flaws in the design of the present-law premium 
assistance credit, such as the limits on recapture of excess 
advance payments. In addition, because premiums are higher for 
older individuals, the Committee believes that credit amounts 
should increase with age. The Committee wishes also to provide 
an additional incentive for the purchase of high deductible 
health plans, which further the goal of containing health costs 
by encouraging consumers to be cost conscious in their use of 
health care, as reflected in lower premiums for such plans. The 
Committee believes an additional incentive can be provided by 
allowing an individual who purchases a high deductible health 
plan with premiums lower than the maximum credit to designate 
an HSA into which the difference will be deposited. Finally, 
the Committee wishes to limit the cost of the credit to the 
Federal budget by including a maximum credit amount, which 
varies by family size, and by phasing out the credit for 
higher-income individuals.

                        EXPLANATION OF PROVISION

In general

    The provision establishes a refundable tax credit with 
respect to eligible health insurance for individuals and their 
qualifying family members for eligible coverage months. 
Qualifying family members are the individual's spouse in the 
case of a joint return, a dependent, and a child who has not 
attained age 27 as of the end of the taxable year and is 
covered for the month by the same health insurance plan as the 
individual or the individual's spouse.\101\
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    \101\In order to claim the credit, married individuals must file a 
joint return. A dependent, or a child described above, may not claim 
the credit with respect to the same period for which a credit is 
claimed by the individual. If a health insurance plan covers a person 
other than the individual and qualifying family members, rules similar 
to the rules of section 213(d)(6) apply in allocating the amount paid 
for the coverage.
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    The total credit for a taxable year is the lesser of (1) 
the sum of the monthly credit amounts described below for the 
year, subject to reduction based on modified adjusted gross 
income, as described below, and (2) the amount paid for 
eligible health insurance for the individual and qualifying 
family members for eligible coverage months beginning during 
the year.\102\ Advance payments with respect to the credit may 
be made during the year directly to the insurer, as discussed 
below. Alternatively, individuals may choose to pay their total 
health insurance premiums without advance payments and claim 
the credit at the end of the taxable year.
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    \102\Amounts paid for eligible health insurance may not be taken 
into account in determining a deduction under section 162(l) or 213 
except to the extent they exceed the amount of the credit (plus the 
amount deposited into an HSA as described below, if applicable). In the 
case of an individual covered by a QSEHRA, the amount of the credit is 
reduced by the benefit amount available to an individual under the 
QSEHRA. The provision includes rules to coordinate eligibility for the 
HCTC and the new credit in the case of an individual who is eligible 
for both.
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Definitions

            Eligible coverage month
    For purposes of the credit, a month is an eligible coverage 
month with respect to an individual if, as of the first day of 
the month, the individual--
           is covered by eligible health insurance,
           is not eligible for other specified 
        coverage,
           is a citizen or national of the United 
        States or a qualified alien,\103\ and
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    \103\Qualified alien is defined in section 431 of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 (8 
U.S.C. 1641).
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           is not incarcerated, other than 
        incarceration pending the disposition of charges.
            Eligible health insurance
    Eligible health insurance is health insurance coverage--
\104\
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    \104\Health insurance coverage is defined in section 9832(b) and 
means benefits consisting of medical care (provided directly, through 
insurance or reimbursement, or otherwise) under any hospital or medical 
service policy or certificate, hospital or medical service plan 
contract, or health maintenance organization contract offered by a 
health insurance issuer. Health insurance issuer means an insurance 
company, insurance service, or insurance organization (including a 
health maintenance organization) that is licensed to engage in the 
business of insurance in a State and which is subject to State law 
regulating. A group health plan, defined below, is not a health 
insurance issuer.
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           that is offered in the individual market 
        within a State or is unsubsidized COBRA continuation 
        coverage,\105\
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    \105\Individual health insurance market means the market for health 
insurance coverage offered to individuals other than in connection with 
a group health plan, defined below. COBRA continuation coverage 
generally means continuation coverage provided under section 4980B, 
sections 601-608 of the Employee Retirement Income Security Act of 
1974, or Title XXII of the PHSA, temporary continuation coverage under 
the Federal Employees Health Benefit Program, or coverage under a State 
program that provides comparable continuation coverage. It does not 
include coverage under a health flexible spending arrangement. 
Unsubsidized COBRA continuation coverage' means COBRA continuation 
coverage no portion of the premiums for which are subsidized by the 
employer.
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           substantially all of which is not of 
        excepted benefits,\106\
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    \106\Excepted benefits is defined in section 9832(b). Excepted 
benefits are various types of arrangements providing only limited 
coverage, such as dental, vision or long-term care.
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           that does not include coverage relating to 
        abortions, other than an abortion necessary to save the 
        life of the mother or an abortion with respect to a 
        pregnancy that is the result of an act of rape or 
        incest,\107\
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    \107\For purposes of this restriction, the treatment of any 
infection, injury, disease, or disorder that has been caused by or 
exacerbated by the performance of an abortion is not considered an 
abortion. In addition, nothing in the provision is to be construed as 
prohibiting any individual from purchasing separate coverage for 
abortions, or a health plan that includes those abortions, so long as 
no credit under the provision is allowed with respect to the premiums 
for the coverage or plan. In addition, nothing in the provision 
restricts any health insurance issuer offering a health plan from 
offering separate coverage for abortions, or a plan that includes those 
abortions, so long as premiums for the separate coverage or plan are 
not paid for with any amount attributable to the credit under the 
provision.
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           that does not consist of short-term limited 
        duration insurance (as defined by the Secretary),\108\ 
        and
---------------------------------------------------------------------------
    \108\It is expected that the definition will be consistent with the 
definition used for purposes of the group health plan rules under 
Chapter 100 of the Code, currently in Treas. Reg. sec. 54.9801-2.
---------------------------------------------------------------------------
           with respect to which, the State in which 
        the insurance is offered (or, in the case of 
        unsubsidized COBRA continuation coverage under a group 
        health plan, the plan administrator) certifies that the 
        coverage meets the preceding requirements.\109\
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    \109\A State certification will not be taken into account for this 
purpose unless the certification is made available to the public and 
meets such other requirements as the Secretary may provide. A 
certification relating to COBRA coverage must meet requirements 
provided by the Secretary.
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            Other specified coverage
    Other specified coverage is (1) coverage under a group 
health plan,\110\ other than COBRA continuation coverage or 
coverage under a plan substantially all of the coverage of 
which is of excepted benefits, (2) Part A Medicare coverage, 
(3) Medicaid coverage, (4) coverage under the Children's Health 
Insurance Plan (``CHIP''), (5) military-related medical 
coverage, including coverage under the TRICARE program, (6) 
coverage under a veterans health care program, as determined by 
the Secretary of Veterans Affairs, in coordination with the 
Secretary of Health and Human Services and the Secretary of the 
Treasury,\111\ (7) coverage under a health plan for Peace Corps 
volunteers, or (8) coverage under the Nonappropriated Fund 
Health Benefits Program of the Department of Defense.
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    \110\Group health plan is defined in section 5000(b)(1) and means a 
plan (including a self-insured plan) of, or contributed to by, an 
employer (including a self-employed person) or employee organization to 
provide health care (directly or otherwise) to the employees, former 
employees, the employer, others associated or formerly associated with 
the employer in a business relationship, or their families. Group 
health plan includes a health plan maintained by a governmental 
employer, such as the Federal Employees Health Benefit Program.
    \111\An individual is not treated as eligible for this coverage 
unless enrolled in the coverage.
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Credit amount

    The monthly credit amount applicable with respect to an 
individual is 1/12 of an annual amount that varies with the age 
of the individual as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                           Has attained
                                                                                        Has attained     Has attained     Has attained    age 60 (and is
                        Age of individual\1\                           Under age 30      age 30 but       age 40 but       age 50 but      not eligible
                                                                                        under age 40     under age 50     under age 60    for Medicare)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual credit amount...............................................          $2,000           $2,500           $3,000           $3,500          $4,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Age for this purpose is determined as of the beginning of the taxable year.

    In general, the monthly credit amount for a family is the 
sum of the monthly credit amounts applicable with respect to 
the five oldest family members with respect to whom monthly 
credit amounts are available. The maximum credit amount with 
respect to a family for a taxable year is $14,000.\112\ In 
addition, the credit amount otherwise determined for a taxable 
year under this rule is reduced (but not below zero) by 10 
percent of the excess (if any) of (1) the individual's modified 
adjusted gross income for the taxable year, over (2) $75,000 
(twice this amount in the case of a joint return).\113\ For 
this purpose, modified adjusted gross income means adjusted 
gross income increased by: (1) any amount excluded from gross 
income for citizens or residents living abroad, (2) any tax-
exempt interest received or accrued during the tax year, and 
(3) the portion of the individual's social security benefits 
not included in gross income.
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    \112\For years after 2020, the monthly and maximum credit amounts 
are increased to reflect increases in cost-of-living based on the 
consumer price index (``CPI'') plus one percentage point, with the 
result rounded to the nearest multiple of $50.
    \113\For years after 2020, the modified adjusted gross income 
amount is increased to reflect increases in cost-of-living based on the 
consumer price index (``CPI'') plus one percentage point, with the 
result rounded to the nearest multiple of $50.
---------------------------------------------------------------------------
    The total credit for a taxable year cannot exceed the 
amount paid for eligible health insurance for the individual 
and qualifying family members eligible for coverage months 
beginning during the year. If the amount paid for the insurance 
is less than the maximum credit amount described above and the 
individual or a qualifying family member is eligible to 
contribute to a health savings account (``HSA'') for the year, 
at the request of the individual, the Secretary may deposit the 
excess into the HSA (or among one or more HSAs) of the 
individual or a qualifying family member as designated by the 
individual.\114\ The deposit is generally treated as a 
rollover, and the amount deposited is not taken into account 
for purposes of the limits on HSA contributions.
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    \114\If the individual (or, in the case of a joint return, either 
spouse) has a seriously delinquent tax debt, as defined in section 
7345(b), that has not been fully satisfied, the Secretary will not make 
any HSA deposit, and if the beneficiary of the designated HSA has a 
seriously delinquent tax debt, the Secretary will not make a deposit to 
that HSA.
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Advance payments and reconciliation

    The provision directs the Secretary, in consultation with 
the Secretary of HHS, the Secretary of Homeland Security, and 
the Commissioner of Social Security, to establish a program not 
later than January 1, 2020, for making payments to providers of 
eligible health insurance on behalf of individuals eligible for 
the credit (an ``advance payment'' program). The aggregate 
advance payments made with respect to any individual, 
determined as of any time during any calendar year, must not 
exceed the monthly credit amounts determined with respect to 
the individual under the provision for completed months during 
the year.
    The program established for making advance payments is, to 
the greatest extent practicable, to use the methods and 
procedures used to administer the programs created under the 
rules relating to advance payments of the present-law premium 
assistance credit (as in effect before repeal by another 
provision), and each entity required to take any actions under 
those programs is, at the request of the Secretary, to take 
those actions to the extent necessary to carry out the advance 
payment program under the provision, including HHS. Except as 
otherwise provided by the Secretary, in making advance payments 
with respect to eligible health insurance that is not enrolled 
in through an Exchange, the rules relating to advance payments 
of the present-law premium assistance credit are to be applied 
by treating references to an Exchange as references to the 
provider of the eligible health insurance (or, as the Secretary 
determines appropriate, to the licensed agent or broker with 
respect to the insurance).\115\
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    \115\As under present law, the provision includes authority for the 
IRS to disclose a limited amount of return information for purposes of 
determining eligibility for the new credit and certain State health 
subsidy programs. In addition, for insurance not purchased from an 
Exchange, the provision permits the disclosure to the provider of the 
insurance, the amount of any advance payment for which the taxpayer may 
be eligible.
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    The advance payment program is to provide that any 
individual applying to have payments made on their behalf under 
the program must, if the individual (or any qualifying family 
member taken into account in determining the amount of the 
credit) is employed, submit a written statement from each 
employer of the individual or qualifying family member stating 
whether the individual or qualifying family member (as the case 
may be) is eligible for other specified coverage in connection 
with the employment. An employer must, at the request of any 
employee, provide such a statement at the time, and in the form 
and manner, as the Secretary may provide.\116\
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    \116\An employer may be subject to a reporting penalty if failing 
to provide the statement as required.
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    If an individual receives advance payments under the 
provision for a taxable year, the credit amount for which the 
individual would otherwise be eligible is reduced (but not 
below zero) by the aggregate amount of the advance payments for 
months beginning in the taxable year. If the aggregate amount 
of the individual's advance payments for months beginning in 
the taxable year exceed the credit amount for which the 
individual is eligible (before the previously described 
reduction), the individual's tax liability for the year is 
increased by the excess.

Reporting

            Provider of eligible health insurance
    Under the provision, any person who provides eligible 
health insurance for any month of any calendar year with 
respect to any individual is required to report certain 
information to the IRS, generally at the time prescribed by the 
Secretary. However, in the case of an individual with respect 
to whom payments are made under the advance payment program, 
the reports to the IRS must be made on a monthly basis. The 
required reporting is to be in the form prescribed by the 
Secretary and must include the following information with 
respect to each policy of eligible health insurance:
           the name, address, and tax identification 
        number of each individual covered under the policy,
           the premiums paid with respect to the 
        policy,
           the amount of advance payments made on 
        behalf of the individual,
           the months during which the health insurance 
        is provided to the individual,
           whether the policy constitutes a high 
        deductible health plan, and
           any other information prescribed by the 
        Secretary.
    The same information must be provided to the individual, on 
or before January 31 of the year following the calendar year to 
which it relates, and must also include the name and address of 
the person required to report and the phone number of the 
information contact for that person.
            Employer
    Under the provision, an employer is required to report on 
the Form W-2 of an employee each month with respect to which 
the employee is eligible for other specified coverage in 
connection with employment by the employer.

Penalty for claim of excess credit

    The provision increases the penalty imposed on claims for 
refund or credit in excess of the amount allowable to 25 
percent in the case of a claim relating to the refundable tax 
credit for health insurance coverage.

                             EFFECTIVE DATE

    The provision is effective for months beginning after 
December 31, 2019, in taxable years ending after that date.

 N. Maximum Contribution Limit to Health Savings Account Increased to 
  Amount of Deductible and Out-of-Pocket Limitation (sec. __16 of the 
               committee print and sec. 223 of the Code)


                              PRESENT LAW

    An individual with a high deductible health plan and no 
other health plan (other than a plan that provides certain 
permitted insurance or permitted coverage) may establish a 
health savings account (``HSA''). Subject to limits, 
contributions to an HSA made by or on behalf of an eligible 
individual are deductible in determining adjusted gross income 
of the individual (that is, an ``above-the-line'' deduction). 
Contributions to an HSA by an employer for an employee 
(including salary reduction contributions made through a 
cafeteria plan) are excludible from income and from wages for 
employment tax purposes.\117\ Distributions from an HSA for 
qualified medical expenses are not includible in gross income.
---------------------------------------------------------------------------
    \117\Secs. 106(d), 125, 3121(a)(2), 3231(e)(1), 3306(b)(2), 
3401(a)(22).
---------------------------------------------------------------------------
    HSA contributions for a year are subject to basic dollar 
limits that are adjusted annually as needed to reflect annual 
cost-of-living increases. For 2017, the basic limit on 
contributions that can be made to an HSA for a year is $3,400 
in the case of self-only coverage and $6,750 in the case of 
family coverage.\118\ The basic contribution limits are 
increased by $1,000 for an eligible individual who has attained 
age 55 by the end of the taxable year (referred to as ``catch-
up contributions'').\119\ All HSA contributions are aggregated 
for purposes of the contribution limits.\120\ The annual HSA 
contribution limit for an individual is generally the sum of 
the limits determined separately for each month (that is, 1/12 
of the limit for the year, including the catch-up limit, if 
applicable), based on the individual's status and health plan 
coverage as of the first day of the month.\121\
---------------------------------------------------------------------------
    \118\Under section 4973, an excise tax applies to contributions in 
excess of the maximum contribution amount for the HSA. The excise tax 
generally is equal to six percent of the cumulative amount of excess 
contributions that are not distributed from the HSA.
    \119\Contributions, including catch-up contributions, cannot be 
made once an individual is enrolled in Medicare.
    \120\In addition, contributions to Archer MSAs under section 220 
reduce the annual HSA contribution limit.
    \121\Under a special rule, an individual who is an eligible 
individual during the last month of a taxable year is treated as having 
been an eligible individual for every month in the taxable year for 
purposes of computing the annual limit. Thus, the individual may 
contribute the maximum annual amount. However, if the individual ceases 
to be an eligible individual within a certain period, contributions 
that could not otherwise have been made are generally includible in 
income and are subject to a 10-percent additional tax.
---------------------------------------------------------------------------
    A minimum annual deductible amount and a maximum on the sum 
of the annual deductible and out-of-pocket expenses (such as 
co-pays) apply to high deductible health plans, which are 
adjusted annually as needed to reflect cost-of-living 
increases. For 2017, the minimum deductible is $1,300 in the 
case of self-only coverage and $2,600 in the case of family 
coverage. In addition, for 2017, the sum of the deductible and 
out-of-pocket expenses must be no more than $6,550 in the case 
of self-only coverage and no more than $13,100 in the case of 
family coverage.

                           REASONS FOR CHANGE

    The Committee continues to believe that the combination of 
high deductible health plans and HSA will help reduce health 
care costs. In furtherance of that goal, increasing the limits 
on HSA contributions will encourage more people to enroll in 
high deductible health plans and contribute to HSAs.

                        EXPLANATION OF PROVISION

    The provision increases the basic limit on aggregate HSA 
contributions for a year to equal the maximum on the sum of the 
annual deductible and out-of-pocket expenses permitted under a 
high deductible health plan, which are, for 2017, $6,550 in the 
case of self-only coverage and $13,100 in the case of family 
coverage. As under present law, basic contribution limits are 
increased by $1,000 for an eligible individual who has attained 
age 55 by the end of the taxable year. In addition, as under 
present law, the annual HSA contribution limit for an 
individual is generally the sum of the limits determined 
separately for each month (that is, 1/12 of the limit for the 
year, including the catch-up limit, if applicable), based on 
the individual's status and health plan coverage as of the 
first day of the month.

                             EFFECTIVE DATE

    The provision applies for taxable years beginning after 
December 31, 2017.

O. Allow Both Spouses To Make Catch-Up Contributions to the Same Health 
 Savings Account (sec. __17 of the committee print and sec. 223 of the 
                                 Code)


                              PRESENT LAW

    An individual with a high deductible health plan and no 
other health plan (other than a plan that provides certain 
permitted insurance or permitted coverage) may establish an 
HSA. HSA contributions for a year are subject to basic dollar 
limits that are adjusted annually as needed to reflect annual 
cost-of-living increases. The basic contribution limits are 
increased by $1,000 for an eligible individual who has attained 
age 55 by the end of the taxable year (referred to as ``catch-
up contributions''). If eligible individuals are married to 
each other and either spouse has family coverage, both spouses 
are treated as having only family coverage, so that the 
contribution limit for family coverage applies. The 
contribution limit (without regard to any catch-up contribution 
amounts) is divided equally between the spouses unless they 
agree on a different division.
    If both spouses of a married couple are eligible 
individuals, each may contribute to an HSA, but they cannot 
have a joint HSA.\122\ Under the rule described above, however, 
the spouses may divide their basic contribution limit for the 
year by allocating the entire amount to one spouse to be 
contributed to that spouse's HSA.\123\ This rule does not apply 
to catch-up contribution amounts. Thus, if both spouses are at 
least age 55 and eligible to make catch-up contributions, each 
must make the catch-up contribution to his or her own HSA.\124\
---------------------------------------------------------------------------
    \122\Notice 2004-50, 2004-2 C.B. 196, Q&A-63.
    \123\Notice 2004-50, Q&A-32. Funds from that HSA can be used to pay 
qualified medical expenses for either spouse on a tax-free basis. 
Notice 2004-50, Q&A-36.
    \124\Notice 2008-59, 2008-2 C.B. 123, Q&A-22.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee continues to believe that the combination of 
high deductible health plans and HSAs will help reduce health 
care costs. The Committee has identified certain cases where it 
believes that the operation of HSAs can be improved. One such 
case involves the present-law obstacle that prevents both 
otherwise eligible spouses from making catch-up contributions 
if they have only one HSA account. The Committee wishes to make 
the operation of HSAs more efficient by allowing both eligible 
spouses to make catch-up contributions to a single HSA, rather 
than the present law requirement that they each must have their 
own HSA in order to make catch-up contributions.

                        EXPLANATION OF PROVISION

    Under the provision, if both spouses of a married couple 
are eligible for catch-up contributions and either has family 
coverage, the annual contribution limit that can be divided 
between them includes catch-up contribution amounts of both 
spouses. Thus, for example, the spouses can agree that their 
combined basic and catch-up contribution amounts are allocated 
to one spouse to be contributed to that spouse's HSA. In other 
cases, as under present law, a spouse's catch-up contribution 
amount is not eligible for division between the spouses; the 
catch-up contribution must be made to the HSA of that spouse.

                             EFFECTIVE DATE

    The provision applies for taxable years beginning after 
December 31, 2017.

     P. Special Rule for Certain Medical Expenses Incurred Before 
  Establishment of Health Savings Account (sec. _18 of the committee 
                    print and sec. 223 of the Code)


                              PRESENT LAW

    Distributions from an HSA for qualified medical expenses 
are not includible in gross income. Distributions from an HSA 
that are not used for qualified medical expenses are includible 
in gross income and are subject to an additional tax of 20 
percent. The 20-percent additional tax does not apply if the 
distribution is made after death, disability, or the individual 
attains the age of Medicare eligibility (that is, age 65).
    In order for a distribution from an HSA to be excludible as 
a payment for a qualified medical expense, the medical expense 
must be incurred on or after the date that the HSA is 
established.\125\ Thus, a distribution from an HSA is not 
excludible as a payment for a qualified medical expense if the 
medical expense is incurred after a taxpayer enrolls in a high 
deductible health plan but before the taxpayer establishes an 
HSA.
---------------------------------------------------------------------------
    \125\Notice 2004-2, 2004-1 C.B. 269, Q&A-26.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee has identified certain cases where it 
believes that the operation of HSAs can be improved. One such 
case involves the typical lag between obtaining coverage under 
a high deductible health plan and the establishment of an HSA. 
Recognizing this lag, the Committee believes it is appropriate 
to allow medical expenses incurred after coverage is obtained 
under a high deductible health plan but prior to the 
establishment of the HSA to be paid for from the HSA and to be 
excludible from income, provided the HSA is established within 
60 days of obtaining coverage under a high deductible health 
plan.

                        EXPLANATION OF PROVISION

    Under the provision, if an HSA is established during the 
60-day period beginning on the date that an individual's 
coverage under a high deductible health plan begins, then the 
HSA is treated as having been established on the date coverage 
under the high deductible health plan begins for purposes of 
determining if an expense incurred is a qualified medical 
expense. Thus, if a taxpayer establishes an HSA within 60 days 
of the date that the taxpayer's coverage under a high 
deductible health plan begins, any distribution from an HSA 
used as a payment for a medical expense incurred during that 
60-day period after the high deductible health plan coverage 
began is excludible from gross income as a payment for a 
qualified medical expense even though the expense was incurred 
before the date that the HSA was established.

                             EFFECTIVE DATE

    The provision applies with respect to coverage beginning 
after December 31, 2017.
                      III. 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 the Reconciliation Legislative Recommendations 
Relating to Repeal and Replace of Health-Related Tax Policy on 
March 8, 2017.
    The vote on the amendment by Mr. Neal to the amendment in 
the nature of a substitute to Subtitle __: Budget 
Reconciliation Legislative Recommendations Relating to Repeal 
and Replace of Health-Related Tax Policy, which would strike 
the repeal of the 0.9 percent Medicare tax increase, was not 
agreed to by a roll call vote of 23 nays to 16 yeas (with a 
quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Johnson....................  ........  ........  .........  Mr. Levin........        X   ........  .........
Mr. Nunes......................  ........        X   .........  Mr. Lewis........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Reichert...................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Roskam.....................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. Smith (NE).................  ........        X   .........  Mr. Kind.........        X   ........  .........
Ms. Jenkins....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Mr. Paulsen....................  ........        X   .........  Mr. Crowley......        X   ........  .........
Mr. Marchant...................  ........        X   .........  Mr. Davis........        X   ........  .........
Ms. Black......................  ........        X   .........  Ms. Sanchez......        X   ........  .........
Mr. Reed.......................  ........        X   .........  Mr. Higgins......        X   ........  .........
Mr. Kelly......................  ........        X   .........  Ms. Sewell.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Ms. DelBene......        X   ........  .........
Mr. Meehan.....................  ........        X   .........  Ms. Chu..........        X   ........  .........
Ms. Noem.......................  ........        X   .........
Mr. Holding....................  ........        X   .........
Mr. Smith (MO).................  ........        X   .........
Mr. Rice.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Ms. Walorski...................  ........        X   .........
Mr. Curbelo....................  ........        X   .........
Mr. Bishop.....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    Mr. Tiberi's motion to table Mr. Pascrell's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 23 
yeas and 16 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................  ........  ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................        X   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........  .................
Mr. Holding....................        X   ........  .........  .................
Mr. Smith (MO).................        X   ........  .........  .................
Mr. Rice.......................        X   ........  .........  .................
Mr. Schweikert.................        X   ........  .........  .................
Ms. Walorski...................        X   ........  .........  .................
Mr. Curbelo....................        X   ........  .........  .................
Mr. Bishop.....................        X   ........  .........  .................
----------------------------------------------------------------------------------------------------------------

    The vote on the amendment by Mr. Blumenauer to the 
amendment in the nature of a substitute to Subtitle __: Budget 
Reconciliation Legislative Recommendations Relating to Repeal 
and Replace of Health-Related Tax Policy, which would allow 
individual consumers the choice between the ACA's tax credits, 
or the American Health Care Act's tax credits, was not agreed 
to by a roll call vote of 23 nays to 16 yeas (with a quorum 
being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Johnson....................  ........  ........  .........  Mr. Levin........        X   ........  .........
Mr. Nunes......................  ........        X   .........  Mr. Lewis........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Reichert...................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Roskam.....................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. Smith (NE).................  ........        X   .........  Mr. Kind.........        X   ........  .........
Ms. Jenkins....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Mr. Paulsen....................  ........        X   .........  Mr. Crowley......        X   ........  .........
Mr. Marchant...................  ........        X   .........  Mr. Davis........        X   ........  .........
Ms. Black......................  ........        X   .........  Ms. Sanchez......        X   ........  .........
Mr. Reed.......................  ........        X   .........  Mr. Higgins......        X   ........  .........
Mr. Kelly......................  ........        X   .........  Ms. Sewell.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Ms. DelBene......        X   ........  .........
Mr. Meehan.....................  ........        X   .........  Ms. Chu..........        X   ........  .........
Ms. Noem.......................  ........        X   .........
Mr. Holding....................  ........        X   .........
Mr. Smith (MO).................  ........        X   .........
Mr. Rice.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Ms. Walorski...................  ........        X   .........
Mr. Curbelo....................  ........        X   .........
Mr. Bishop.....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    The vote on the amendment by Ms. DelBene to the amendment 
in the nature of a substitute to Subtitle __: Budget 
Reconciliation Legislative Recommendations Relating to Repeal 
and Replace of Health-Related Tax Policy, which would fully 
repeal the excise tax on high-cost employee health plans 
(``Cadillac tax''), was not agreed to by a roll call vote of 23 
nays to 16 yeas (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Johnson....................  ........  ........  .........  Mr. Levin........        X   ........  .........
Mr. Nunes......................  ........        X   .........  Mr. Lewis........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Reichert...................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Roskam.....................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. Smith (NE).................  ........        X   .........  Mr. Kind.........        X   ........  .........
Ms. Jenkins....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Mr. Paulsen....................  ........        X   .........  Mr. Crowley......        X   ........  .........
Mr. Marchant...................  ........        X   .........  Mr. Davis........        X   ........  .........
Ms. Black......................  ........        X   .........  Ms. Sanchez......        X   ........  .........
Mr. Reed.......................  ........        X   .........  Mr. Higgins......        X   ........  .........
Mr. Kelly......................  ........        X   .........  Ms. Sewell.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Ms. DelBene......        X   ........  .........
Mr. Meehan.....................  ........        X   .........  Ms. Chu..........        X   ........  .........
Ms. Noem.......................  ........        X   .........
Mr. Holding....................  ........        X   .........
Mr. Smith (MO).................  ........        X   .........
Mr. Rice.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Ms. Walorski...................  ........        X   .........
Mr. Curbelo....................  ........        X   .........
Mr. Bishop.....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    The vote on the amendment by Ms. Sewell to the amendment in 
the nature of a substitute to Subtitle __: Budget 
Reconciliation Legislative Recommendations Relating to Repeal 
and Replace of Health-Related Tax Policy, which would ensure 
that the American Health Care Act does not result in an 
increase in medical costs or taxes for certain farmers, was not 
agreed to by a roll call vote of 23 nays to 15 yeas (with a 
quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Johnson....................  ........  ........  .........  Mr. Levin........        X   ........  .........
Mr. Nunes......................  ........        X   .........  Mr. Lewis........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Reichert...................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Roskam.....................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Blumenauer...  ........  ........  .........
Mr. Smith (NE).................  ........        X   .........  Mr. Kind.........        X   ........  .........
Ms. Jenkins....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Mr. Paulsen....................  ........        X   .........  Mr. Crowley......        X   ........  .........
Mr. Marchant...................  ........        X   .........  Mr. Davis........        X   ........  .........
Ms. Black......................  ........        X   .........  Ms. Sanchez......        X   ........  .........
Mr. Reed.......................  ........        X   .........  Mr. Higgins......        X   ........  .........
Mr. Kelly......................  ........        X   .........  Ms. Sewell.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Ms. DelBene......        X   ........  .........
Mr. Meehan.....................  ........        X   .........  Ms. Chu..........        X   ........  .........
Ms. Noem.......................  ........        X   .........
Mr. Holding....................  ........        X   .........
Mr. Smith (MO).................  ........        X   .........
Mr. Rice.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Ms. Walorski...................  ........        X   .........
Mr. Curbelo....................  ........        X   .........
Mr. Bishop.....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    The vote on the amendment by Mr. Davis to the amendment in 
the nature of a substitute to Subtitle __: Budget 
Reconciliation Legislative Recommendations Relating to Repeal 
and Replace of Health-Related Tax Policy, which would require 
that the credit apply only to health plans that include 
services from community providers, including rural providers, 
community health centers, and child hospitals, was not agreed 
to by a roll call vote of 23 nays to 16 yeas (with a quorum 
being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Johnson....................  ........  ........  .........  Mr. Levin........        X   ........  .........
Mr. Nunes......................  ........        X   .........  Mr. Lewis........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Reichert...................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Roskam.....................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. Smith (NE).................  ........        X   .........  Mr. Kind.........        X   ........  .........
Ms. Jenkins....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Mr. Paulsen....................  ........        X   .........  Mr. Crowley......        X   ........  .........
Mr. Marchant...................  ........        X   .........  Mr. Davis........        X   ........  .........
Ms. Black......................  ........        X   .........  Ms. Sanchez......        X   ........  .........
Mr. Reed.......................  ........        X   .........  Mr. Higgins......        X   ........  .........
Mr. Kelly......................  ........        X   .........  Ms. Sewell.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Ms. DelBene......        X   ........  .........
Mr. Meehan.....................  ........        X   .........  Ms. Chu..........        X   ........  .........
Ms. Noem.......................  ........        X   .........
Mr. Holding....................  ........        X   .........
Mr. Smith (MO).................  ........        X   .........
Mr. Rice.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Ms. Walorski...................  ........        X   .........
Mr. Curbelo....................  ........        X   .........
Mr. Bishop.....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    The vote on the amendment by Ms. DelBene to the amendment 
in the nature of a substitute to Subtitle __: Budget 
Reconciliation Legislative Recommendations Relating to Repeal 
and Replace of Health-Related Tax Policy, which would strike 
and replace the underlying bill's repeal of the Small Business 
Tax, was not agreed to by a roll call vote of 23 nays to 16 
yeas (with a quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Johnson....................  ........  ........  .........  Mr. Levin........        X   ........  .........
Mr. Nunes......................  ........        X   .........  Mr. Lewis........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Reichert...................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Roskam.....................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. Smith (NE).................  ........        X   .........  Mr. Kind.........        X   ........  .........
Ms. Jenkins....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Mr. Paulsen....................  ........        X   .........  Mr. Crowley......        X   ........  .........
Mr. Marchant...................  ........        X   .........  Mr. Davis........        X   ........  .........
Ms. Black......................  ........        X   .........  Ms. Sanchez......        X   ........  .........
Mr. Reed.......................  ........        X   .........  Mr. Higgins......        X   ........  .........
Mr. Kelly......................  ........        X   .........  Ms. Sewell.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Ms. DelBene......        X   ........  .........
Mr. Meehan.....................  ........        X   .........  Ms. Chu..........        X   ........  .........
Ms. Noem.......................  ........        X   .........
Mr. Holding....................  ........        X   .........
Mr. Smith (MO).................  ........        X   .........
Mr. Rice.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Ms. Walorski...................  ........        X   .........
Mr. Curbelo....................  ........        X   .........
Mr. Bishop.....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    The vote on the amendment by Ms. Sanchez to the amendment 
in the nature of a substitute to Subtitle __: Budget 
Reconciliation Legislative Recommendations Relating to Repeal 
and Replace of Health-Related Tax Policy, which would specify 
that health plans cannot vary charges on the basis of gender, 
was not agreed to by a roll call vote of 23 nays to 16 yeas 
(with a quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Johnson....................  ........  ........  .........  Mr. Levin........        X   ........  .........
Mr. Nunes......................  ........        X   .........  Mr. Lewis........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Reichert...................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Roskam.....................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. Smith (NE).................  ........        X   .........  Mr. Kind.........        X   ........  .........
Ms. Jenkins....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Mr. Paulsen....................  ........        X   .........  Mr. Crowley......        X   ........  .........
Mr. Marchant...................  ........        X   .........  Mr. Davis........        X   ........  .........
Ms. Black......................  ........        X   .........  Ms. Sanchez......        X   ........  .........
Mr. Reed.......................  ........        X   .........  Mr. Higgins......        X   ........  .........
Mr. Kelly......................  ........        X   .........  Ms. Sewell.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Ms. DelBene......        X   ........  .........
Mr. Meehan.....................  ........        X   .........  Ms. Chu..........        X   ........  .........
Ms. Noem.......................  ........        X   .........
Mr. Holding....................  ........        X   .........
Mr. Smith (MO).................  ........        X   .........
Mr. Rice.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Ms. Walorski...................  ........        X   .........
Mr. Curbelo....................  ........        X   .........
Mr. Bishop.....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    Mr. Paulsen's motion to table Ms. Chu's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 23 
yeas and 16 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................  ........  ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................        X   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    Amendment by Mr. Lewis to the amendment in the nature of a 
substitute to Subtitle __: Budget Reconciliation Legislative 
Recommendations Relating to Repeal and Replace of Health-
Related Tax Policy, which would strike the entire section and 
replace it with a set of principles for health reform 
legislation, was not agreed to by a roll call vote of 23 nays 
to 16 yeas (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Johnson....................  ........  ........  .........  Mr. Levin........        X   ........  .........
Mr. Nunes......................  ........        X   .........  Mr. Lewis........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Reichert...................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Roskam.....................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. Smith (NE).................  ........        X   .........  Mr. Kind.........        X   ........  .........
Ms. Jenkins....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Mr. Paulsen....................  ........        X   .........  Mr. Crowley......        X   ........  .........
Mr. Marchant...................  ........        X   .........  Mr. Davis........        X   ........  .........
Ms. Black......................  ........        X   .........  Ms. Sanchez......        X   ........  .........
Mr. Reed.......................  ........        X   .........  Mr. Higgins......        X   ........  .........
Mr. Kelly......................  ........        X   .........  Ms. Sewell.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Ms. DelBene......        X   ........  .........
Mr. Meehan.....................  ........        X   .........  Ms. Chu..........        X   ........  .........
Ms. Noem.......................  ........        X   .........
Mr. Holding....................  ........        X   .........
Mr. Smith (MO).................  ........        X   .........
Mr. Rice.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Ms. Walorski...................  ........        X   .........
Mr. Curbelo....................  ........        X   .........
Mr. Bishop.....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    The legislation was ordered favorably transmitted to the 
House Committee on the Budget as amended by a roll call vote of 
23 yeas and 16 nays (with a quorum being present). The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................  ........  ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................        X   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                  IV. BUDGET EFFECTS OF THE PROVISIONS


               A. 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 Repeal 
and Replace of Health-Related Tax Policy.''
    The budget reconciliation legislative recommendations, as 
transmitted, are estimated to have the following effects on 
budget receipts for fiscal years 2017-2026:

 ESTIMATED REVENUE EFFECTS OF BUDGET RECONCILIATION LEGISLATIVE RECOMMENDATIONS RELATING TO REPEAL AND REPLACEMENT OF CERTAIN HEALTH-RELATED TAX POLICY PROVISIONS CONTAINED IN THE ``AFFORDABLE
                                                               CARE ACT (`ACA'),'' AS REPORTED BY THE COMMITTEE ON WAYS AND MEANS
                                                                          [Fiscal years 2017-2026, billions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                    Provision                        Effective       2017     2018     2019     2020     2021     2022     2023      2024       2025       2026     2017-21    2017-26
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Revenue Provisions:
  1. Modifications and repeal of premium tax               (\1\)
   credit:......................................
                                                                                                    [Estimate included in CBO Estimate of Coverage Provisions]
  2. Small business tax credit..................           (\2\)
                                                                                                    [Estimate included in CBO Estimate of Coverage Provisions]
  3. Repeal of individual mandate penalty.......    mba 12/31/15
                                                                                                    [Estimate included in CBO Estimate of Coverage Provisions]
  4. Repeal of employer mandate penalty.........    mba 12/31/15
                                                                                                    [Estimate included in CBO Estimate of Coverage Provisions]
  5. Repeal of tax on employee health insurance    tyba 12/31/19   .......  .......  .......     -3.4     -6.9     -8.7    -10.7      -13.6       -5.5  .........      -10.3      -48.7
   premiums and health plan benefits: repeal 40%
   excise tax on health coverage in excess of
   $10,200/$27,500 (subject to adjustment for
   unexpected increase in medical costs prior to
   effective date) and increased thresholds of
   $1,650/$3,450 for over age 55 retirees or
   certain high-risk professions, both indexed
   for inflation by CPI-U (CPI-U plus 1% for
   2019); adjustment based on age and gender
   profile of employees; vision and dental
   excluded from excise tax; levied at insurer
   level; employer aggregates and issues
   information return for insurers indicating
   amount subject to the excise tax (repeal
   sunsets 12/31/24)\3,4\.......................
  6. Repeal exclusion of nonprescribed over-the-   apaeiwrt tyba   .......     -0.4     -0.5     -0.6     -0.6     -0.6     -0.6       -0.7       -0.7       -0.7       -2.1       -5.5
   counter medicines from the definition of             12/31/17
   medical expenses for health savings accounts
   (``HSAs''), Archer MSAs, health flexible
   spending arrangements, and health
   reimbursement arrangements\4,5\..............
  7. Repeal increase in additional tax on           dma 12/31/17   .......    (\6\)    (\6\)    (\6\)    (\6\)    (\6\)    (\6\)      (\6\)      (\6\)      (\6\)      (\6\)       -0.1
   distributions from HSAs and Archer MSAs not
   used for qualified medical expenses\5\.......
  8. Repeal limitations on contributions to        tyba 12/31/17   .......     -0.3     -1.2     -1.6     -1.7     -1.8     -2.2       -2.6       -3.3       -4.1       -4.7      -18.6
   health flexible spending arrangements in
   cafeteria plans\4,5\.........................
  9. Repeal 2.3% excise tax on manufacturers and     sa 12/31/17   .......     -1.4     -1.9     -2.0     -2.1     -2.2     -2.3       -2.4       -2.6       -2.7       -7.4      -19.6
   importers of certain medical devices.........
  10. Reinstate deduction for expenses allocable   tyba 12/31/17   .......     -0.1     -0.2     -0.2     -0.2     -0.2     -0.2       -0.2       -0.2       -0.2       -0.6       -1.7
   to Medicare Part D subsidy...................
  11. Extend the 7.5% AGI floor in 2017 for       tyba 12/31/16 &     -0.2     -2.0     -3.2     -3.4     -3.6     -3.9     -4.2       -4.5       -4.8       -5.1      -12.4      -34.9
   elderly taxpayers and repeal increase in AGI    tyba 12/31/17
   floor on medical expenses deduction from 7.5%
   to 10%; apply 7.5% floor for alternative
   minimum tax purposes.........................
  12. Repeal additional HI tax of 0.9% on earned  rra & tyba 12/      -0.4     -6.5    -10.1    -11.4    -12.3    -13.2    -14.1      -15.2      -16.5      -17.6      -40.8     -117.3
   income in excess of $200,000/$250,000                   31/17
   (unindexed)..................................
  13. Refundable health credit for health         mba 12/31/19 in
   insurance coverage...........................         tyea sd
                                                                                                                [Estimate included in CBO Estimate
  14. Maximum contribution limit to HSA            tyba 12/31/17   .......     -1.0     -1.6     -1.7     -1.9     -2.1     -2.3       -2.5       -2.7       -2.9       -6.2      -18.6
   increased to amount of deductible and out-of-
   pocket limitation\4\.........................
  15. Allow both spouses to make catch-up          tyba 12/31/17   .......    (\6\)    (\6\)    (\6\)    (\6\)    (\6\)    (\6\)      (\6\)       -0.1       -0.1       -0.1       -0.4
   contributions to the same HSA\4\.............
  16. Special rule for certain medical expenses     cba 12/31/17   .......    (\6\)    (\6\)    (\6\)    (\6\)    (\6\)    (\6\)      (\6\)      (\6\)      (\6\)       -0.1       -0.2
   incurred before establishment of HSA\4\......
                                                                  ------------------------------------------------------------------------------------------------------------------------------
    Net total...................................  ...............     -0.6    -11.7    -18.7    -24.3    -29.3    -32.7    -36.6      -41.7      -36.4      -33.4      -84.7     -265.6
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Details may not add to totals due to rounding. The date of enactment is assumed to be before April 1, 2017.
 
Legend for ``Effective'' column: apaeiwrt = amounts paid and expenses incurred with respect to; mba = months beginning after; sd = such date; cba = coverage beginning after; rra = remuneration
  received after; tyba = taxable years beginning after; dma = distributions made after; sa = sales after; tyea = taxable years ending after.
 
\1\This provision is effective for months beginning after December 31, 2019, in taxable years ending after such date and subsection (b) shall take effect on January 1, 2020.
\2\This provision is effective for taxable years beginning after December 31, 2017, and taxable years beginning after December 31, 2019.
\3\This estimate does not include effects of interactions with other subsidies; those effects are included in estimates of other relevant provisions.
\4\Estimate includes the following off-budget effects:


 
                                                      2017    2018    2019    2020    2021    2022    2023    2024    2025    2026    2017-21   2017-26
 
 
  Repeal 40% excise tax on health coverage......... -......--......--......-----0.8-----1.4-----1.9-----2.4-----3.0-----1.0--......-------2.3-------10.5
  Repeal exclusion of nonprescribed over-the-        ......    -0.1    -0.1    -0.1    -0.1    -0.2    -0.2    -0.2    -0.2    -0.2      -0.5       -1.3
   counter medicines from the definition of medical
   expenses........................................
  Repeal limitation on health flexible spending      ......    -0.3    -0.5    -0.5    -0.5    -0.6    -0.7    -0.9    -1.2    -1.1      -1.8       -6.4
   arrangements to cafeteria plans.................
  Maximum contribution limit to HSA increased to     ......    -0.2    -0.4    -0.4    -0.4    -0.5    -0.5    -0.6    -0.6    -0.7      -1.4       -4.3
   amount of deductible and out-of-pocket
   limitation......................................
  Allow both spouses to make catch-up contributions  ......   (\6\)   (\6\)   (\6\)   (\6\)   (\6\)   (\6\)   (\6\)   (\6\)   (\6\)     (\6\)       -0.1
   to the same HSA.................................
  Special rule for certain medical expenses          ......   (\6\)   (\6\)   (\6\)   (\6\)   (\6\)   (\6\)   (\6\)   (\6\)   (\6\)     (\6\)       -0.1
   incurred before establishment of HSA............
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
\5\This estimate includes the effects of interactions with the proposal to increase the maximum contribution limit to HSAs.
\6\Loss of less than $50 million.

    Pursuant to clause 8 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 recommendations amending 
the Internal Revenue Code of 1986: While the bill meets the 
standard of major legislation, it is not practicable to 
incorporate the macroeconomic effects of the bill in the 
official cost estimate, given current time constraints.

B. 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 recommendations relating to a 
refundable tax credit for the purchase of health insurance and 
deposit of an amount into an individual's HSA involve new or 
increased budget authority. The Committee states further that 
the budget reconciliation legislative recommendations relating 
to the premium tax credit and the small business tax credit 
involve reduced tax expenditures. The Committee also states 
that the budget reconciliation legislative recommendations 
relating to repeal of limits on certain exclusions and 
deductions, repeal of various taxes, provision of a new 
refundable tax credit for the purchase of health insurance, and 
changes to the rules for health savings accounts involve new or 
increased tax expenditures.

      C. 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, refer to Subtitle E.

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


          A. Committee Oversight Findings and Recommendations

    Pursuant to 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 into 
the description portions of this report.

        B. 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 recommendations contain no 
measure that authorizes funding, so no statement of general 
performance goals and objectives for which any measure 
authorizing funding is required.

              C. 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 recommendations relating to recapture of excess 
advance payments of premium tax credits and the small business 
tax credit impose private sector mandates. The Committee has 
determined that the budget reconciliation legislative 
recommendations do not impose any Federal intergovernmental 
mandates on State, local, or tribal governments.

                D. 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 recommendations and states that the provisions of 
the legislative recommendations do not involve any Federal 
income tax rate increases within the meaning of the rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 (``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. For each such provision 
identified by the staff of the Joint Committee on Taxation, a 
summary description of the provision is provided below along 
with an estimate of the number and type of affected taxpayers, 
and a discussion regarding the relevant complexity and 
administrative issues. Following the analysis of the staff of 
the Joint Committee on Taxation are the comments of the IRS and 
Treasury regarding each provision included in the complexity 
analysis.

1. Repeal of Tax on Over-The-Counter Medications

            Summary description of the provisions
    The provision allows payment or reimbursement on a pretax 
basis from a health flexible spending arrangement, health 
reimbursement arrangement, health savings account or Archer 
MSA, of the cost of an over-the-counter medicine without 
requiring a prescription for the medicine.
            Number of affected taxpayers
    It is estimated that the provision will affect over ten 
percent of individual tax returns.
            Discussion
    Taxpayers voluntarily claiming reimbursement for over-the-
counter medicines may have an increased burden in record-
keeping and claim submissions. It is expected that revisions to 
IRS published guidance and tax publications will be required.


  F. 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 
recommendations and states that the provisions of the 
legislative recommendations do not contain any congressional 
earmarks, limited tax benefits, or limited tariff benefits 
within the meaning of the rule.

                   G. Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
budget reconciliation legislative recommendation does not 
establish or reauthorize: (1) a program of the Federal 
Government known to be duplicative of another Federal program, 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139, or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to section 6104 of title 31, 
United States Code.

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), 
the following statement is made concerning directed rule 
makings: The Committee advises that the budget reconciliation 
legislative recommendations require no directed rule makings 
within the meaning of such section.

     VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONILIATION 
               LEGISLATIVE RECOMMENDATION, AS TRANSMITTED

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes to existing law made by 
the recommendations, as transmitted, are shown in Subtitle E of 
title II.

                         VII. DISSENTING VIEWS

DISSENTING VIEWS ON RECOMMENDATION TO REPEAL AND REPLACE THE AFFORDABLE 
                      CARE ACT, COMMITTEE PRINT 5

    1. Donald Trump promised that ``we're going to have 
insurance for everybody . . . [but it will be] much less 
expensive and much better.'' This bill reveals those promises 
for what they always were: empty campaign rhetoric.''--Families 
USA\1\
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    \1\http://familiesusa.org/blog/2017/03/healthy-and-wealthy-benefit-
under-house-republican-affordable-care-act repeal plan
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    2. ``We cannot support the AHCA as drafted because of the 
expected decline in health insurance coverage and the potential 
harm it would cause to vulnerable patient populations.''--
American Medical Association \2\
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    \2\https://www.ama-assn.org/sites/default/files/media-browser/
public/washington/ama-letter-on-ahca.pdf
---------------------------------------------------------------------------
    3. ``Repeal-and-replace is a gigantic transfer of wealth 
from the lowest-income Americans to the highest-income 
Americans.''--Edward D. Kleinbard, former chief of staff for 
the Joint Committee on Taxation and professor, University of 
Southern California School of Law.\3\
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    \3\https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-
care-act-repeal.html?_r=1
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    The five reconciliation legislative recommendations 
considered by the Committee on Ways and Means (the 
``Committee'') and referred to the Committee on Budget 
(collectively, the Ways and Means reconciliation package or the 
``reconciliation package'') was a far-reaching attempt to 
undermine our health systems from Medicare to employer 
sponsored health insurance in order to give tax cuts to the 
wealthiest and corporations. After almost 18 hours of debate, 
the Committee mark-up ended with a party-line vote on the 
reconciliation package, which is likely to take health 
insurance away from millions of Americans. This reconciliation 
package, coupled with what was passed out of the Energy and 
Commerce Committee, would harm access to health care for 
middle-class Americans and undermine Medicare's long-term 
viability while cutting taxes for corporations and the 
wealthiest Americans.
    The Committee moved forward irresponsibly, without any 
official accounting about the estimated effect of the 
reconciliation package on health insurance coverage, out-of-
pocket costs, or premium increases. While the Joint Committee 
on Taxation (JCT) estimated that the reconciliation package 
includes nearly $600 billion worth of tax breaks, as of the 
mark-up, the Congressional Budget Office (CBO) was unable to 
provide estimates about the package's effect on American 
families. Additionally the JCT score was incomplete as of the 
mark-up and did not provide an official accounting of all of 
the provisions considered by the Committee. Both the Ways and 
Means and Energy and Commerce Committees moved forward to pass 
recommendations out of each Committee without any sense from 
CBO of coverage losses due to the severe cuts to Medicaid, the 
repeal of the individual and employer-shared responsibility 
provisions of current law, or the changes in the tax credits 
available to help purchase health insurance on the individual 
market.
    CBO provided the Committee an estimate of the effects after 
the reconciliation package was reported to the Committee on 
Budget from the Ways and Means and Energy and Commerce 
Committees. This estimate showed that 24 million Americans 
would lose coverage, with 14 million Americans losing coverage 
in the first year alone.
    The Committee's reconciliation package provided generous 
tax cuts to the wealthiest, while reducing health insurance 
assistance for middle-class Americans. The tax breaks 
considered by the Committee are focused on the wealthy 
individuals and corporations, instead on middle-class 
Americans. About $275 billion in tax breaks would benefit high-
income earners; about 62% of the tax breaks would go to 
millionaires in 2020. Businesses and corporations are receive 
nearly $192 billion in tax cuts. These and other tax breaks add 
up to nearly $600 billion in lost revenue.
    Democrats objected strenuously to the Republican approach 
and instead believe the Committee should focus on policies that 
matter to middle-class Americans under the jurisdiction of this 
Committee, including financing long-term infrastructure, 
reforming the tax system to address income inequality, and 
further building on President Obama's record of job creation. 
Democrats believe that the reconciliation package will 
destabilize the health insurance market, which represents 18 
percent of our gross domestic product.
    The reconciliation package continues Republican efforts to 
undermine and destabilize the health insurance market. It 
undermines current law and the stability of both the individual 
and group health insurance markets by gutting individual and 
employer-shared responsibility provisions. The reconciliation 
package would reduce the uptake of the premium tax credits and 
the Medicaid expansion established in the Affordable Care Act 
(ACA), which have made health care affordable for millions of 
individuals. Reduced uptake of the Medicaid expansion and the 
tax credits disproportionately impacts low- and middle-income 
Americans and places them at risk for health insecurity and 
unexpected medical expenses. Based on independent estimates, 
roughly 24 million Americans would lose their insurance 
coverage because of this reconciliation package when taken 
together with the reconciliation recommendations passed by the 
Energy and Commerce Committee.\4\ Further, this reconciliation 
package reduces the life of the Medicare Trust Fund by three 
years by reducing $170 billion from the Medicare Trust Fund, 
which puts Medicare at risk for 57 million seniors and 
individuals with disabilities.
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    \4\https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-
cbo-to-estimate-large-coverage-losses-from-the-gop-health-care-plan/
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    Individual and employer-shared responsibility provisions 
are key to maintaining the robust and healthy risk pools that 
allow the ACA health insurance reforms to improve consumer 
protections while controlling health care costs. This is 
because well-functioning insurance markets rely on 
participation of both healthy and sick individuals to spread 
risk across the pool.
    The reconciliation package effectively would repeal the 
individual and employer-shared responsibility penalty, leading 
to premium increases of an estimated 20 percent in the 
individual market alone. In spite of President Trump and 
Congressional Republicans' efforts to sabotage the ACA, 
millions of Americans have enrolled in the health insurance 
Marketplaces, many using the available financial assistance, 
and millions more have enrolled in expanded Medicaid programs.
    Despite promises made by President Trump, the 
reconciliation package would not cover more people or offer 
more affordable coverage with comparable benefits. Instead, 
this package leads to an estimated coverage loss of 24 million 
people while gutting benefits and consumer protections as a 
mechanism for affordability. When coupled with the legislation 
passed out of the Energy and Commerce Committee, the 
reconciliation package would return to a time when the market 
once again discriminates against those with pre-existing 
conditions and leaves those that might need medical care in the 
future without meaningful coverage. The reconciliation package 
provides for tax credits less generous than current law with no 
assistance with out-of-pocket expenses. Instead, the 
reconciliation package enshrines high deductible health plans 
that would increase out-of-pocket expenses. However, these 
plans do not address the underlying issues of access to quality 
services and the cost of care.
    Since January of 2009, the Republicans voted to repeal or 
undermine the ACA more than 65 times. Democrats offered a 
number of amendments in Committee to point out serious flaws 
with the reconciliation package. For example, at the beginning 
of the mark up, Democrats asked Republicans to postpone mark up 
until CBO could provide a comprehensive report on costs, 
coverage losses, and premium effects of the reconciliation 
package.
    In that regard, Congressman Lloyd Doggett (D-TX) offered a 
motion to postpone the markup for one week to allow time for 
review of the bill and the CBO estimate that was not available 
prior to or during the mark up. For over four decades, CBO has 
been recognized as the official referee of costs and effects of 
legislation passed in the House and Senate. Congress relies on 
CBO's non-partisan estimates to evaluate legislative proposals. 
Democrats were concerned that Republicans deliberately moved 
forward with the reconciliation package without a CBO score in 
an effort to conceal the harmful effects of the reconciliation 
package on nearly all Americans.
    The contrast of this rushed process versus the lengthy and 
transparent process of enacting the ACA is striking. In 2009, 
House Committees posted a draft of the ACA legislation for 
review and comment a month before the mark-up process began, 
holding multiple hearings and providing the public with two 
preliminary CBO estimates on July 8th and July 14th. Democrats 
maintain that there is no reason to rush to mark-up this 
reconciliation package without a CBO score, or without a 
hearing to consider the implications of the package. 
Congressman Doggett 's amendment was tabled on a party line 
vote.
    Since taking office President Trump has initiated a number 
of actions that continue a pattern of trying to sabotage the 
ACA. In January, President Trump issued an Executive Order to 
direct agencies to take action to ``eliminate burden.'' The 
Trump Administration cancelled ACA outreach in the last two 
weeks of the 2017 individual market open enrollment period. 
Prior to that, 2017 Marketplace enrollment was outpacing 2016 
enrollment. Final enrollment came in slightly lower. On 
February 15, 2017, CMS issued a proposed Marketplace rule that 
makes it more expensive and more difficult to get coverage, 
including cutting the open enrollment period in half. Per 
President Trump's Executive Order, the Internal Revenue Service 
(IRS) issued a February 14, 2017 statement on non-enforcement 
of the individual mandate in processing tax returns. This 
change in enforcement would undermine stability in the 
marketplace by preventing the IRS from using new tools to 
enforce the individual responsibility provision of the ACA--a 
crucial part of keeping a healthier pool and keeping premiums 
affordable.\5\
---------------------------------------------------------------------------
    \5\http://www.cbpp.erg/sabotage-watch-tracking-efforts-to-
undermine-the-aca
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    Nevertheless, the current marketplace is benefitting 
consumers. Of the approximately 10.4 million consumers who had 
effectuated Marketplace enrollments: 84 percent, or about 8.8 
million consumers, were receiving advance premium tax credits 
and 56 percent or nearly 5.9 million consumers were benefiting 
from cost sharing reductions (CSRs) to make their coverage and 
covered services more affordable.
    In addition to new coverage options Americans gained under 
the ACA, the pace of health spending has been moderated under 
the ACA. Overall, health care spending growth slowed from 5.8% 
in 2015 to 4.8% in 2016 due to slowdowns in Medicaid and 
prescription drug spending. Private health insurance spending 
slowed from 7.2% in 2015 to 5.9% in 2016. Health spending is 
projected to grow an average of 5.6 percent between 2016 and 
2025; well below the average over the previous two decades 
before 2008, which was nearly 8 percent.\6\
---------------------------------------------------------------------------
    \6\https://www.cms.gov/Research-Statistics-Data-and-Systems/
Statistics-Trends-andReports/NationalHealthExpendData/Downloads/
proj2016.pdf
---------------------------------------------------------------------------
    While some areas of the country experienced atypical 
premium increases, many analysts believed they were a one-time 
correction: ``One factor contributing to faster growth is a 
significant acceleration in premium growth for Marketplace 
plans because of previous underpricing of premiums and 
elimination of risk corridor payments.''\7\
---------------------------------------------------------------------------
    \7\Keehan et al. ``National Health Expenditure Projections, 2016-
25: Price Increases, Aging Push Sector To 20 Percent Of Economy.'' 
Health Aff March 2017 vol. 36 no. 3 553-563.
---------------------------------------------------------------------------
    Concern is growing, however, that under the Republican plan 
premiums will grow substantially. J. Mario Molina, chief 
executive of Molina Healthcare Inc., believes that the recent 
Republican actions to undo the mandate could help push 
individual-plan premiums up by 30% or more next year and they 
could rise considerably more in the future, when the reduced 
federal assistance for low-income enrollees kicks in. He noted, 
``You 're going to see big rate increases, and you're going to 
see insurers exit markets . . . this is going to destabilize 
the marketplace,'' he said.\8\
---------------------------------------------------------------------------
    \8\https://www.wsj.com/articles/what-insurers-like-and-dread-about-
gops-plan-to-replace-obamacare-1488906247
---------------------------------------------------------------------------
    Other analysts concur that the Republican plan would result 
in coverage losses. ``We conclude that CBO's analysis will 
likely estimate that at least 15 million people will lose 
coverage under the American Health Care Act (AHCA) by the end 
of the ten-year scoring window. Estimates could be higher, but 
it's is unlikely they will be significantly lower,'' wrote 
Brookings Institute researchers who modeled the Republican 
bill.\9\
---------------------------------------------------------------------------
    \9\https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-
cbo-to-estimate-large-coverage-losses-from-the-gop-health-care-plan/
#fn1
---------------------------------------------------------------------------
    Given the far-reaching impact on the Republican 
reconciliation package to harm Medicare, Medicaid, employer-
sponsored insurance and the individual insurance market, 
Democrats offered a series of amendments to address and 
highlight the serious shortcomings of the Republican plan. All 
amendments were defeated in partisan votes.
    I offered an amendment to strike the repeal of the high-
earner tax that goes into the Medicare Trust Fund. The 
independent Office of the Actuary at the Centers for Medicare & 
Medicaid Services (CMS) found that repealing this tax would 
take $170 billion from the Medicare Trust Fund, shortening the 
program's solvency by three years. This tax cut for the highest 
income earners hurts Medicare's long-term financial footing 
just as America's baby boomers are becoming Medicare eligible. 
The ACA, on the other hand, extended Medicare solvency by 11 
years. Since Medicare was enacted, the poverty rate for seniors 
dropped by 70 percent. In 1966, the first year of Medicare, 
28.5 percent of seniors were in poverty; in 2015, that figure 
dropped to 8.8 percent.\10\ Before Medicare was enacted, about 
half of all seniors did not have health insurance.\11\ Since 
the advent of Medicare and Medicaid, nearly all have Medicare 
and/or Medicaid. Over three-quarters of Americans support 
Medicare and believe it is very important. With low 
administrative costs, broad choice of care, and affordable 
cost-sharing, there is good reason for Medicare's popularity. 
The Republicans are attacking Medicare, slashing Medicare 
funding without providing anything to improve Medicare, or 
access to care for seniors and individuals with disabilities. 
Instead, this legislation provides tax cuts for the wealthy and 
corporations, while cutting Medicare funding and taking three 
years off of the life of the Medicare trust fund. This is 
another provision that would increase costs for seniors and 
older Americans. The Democratic amendment to restore the 
funding to Medicare was defeated on a party line vote of 23-16.
---------------------------------------------------------------------------
    \10\http://www.census.gov/data/tables/time-series/demo/income-
poverty/historica1-poverty-peopIe.html
    \11\https://www.cms.gov/Outreach-and-Education/Look-Up-Topics/50th-
Anniversary/50-Facts-in-50-Days-Pt1.pdf
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    Congressman Pascrell (D-NJ) offered an amendment to provide 
a Sense of Congress that Congress should not cap Medicaid 
funding and shift costs, and that Congress should protect the 
Medicaid expansion. Medicaid, while not in the jurisdiction of 
the Committee on Ways and Means, is an important part of 
coverage for 16 million Medicare-eligible Americans. For 
seniors and people with disabilities, Medicaid is the primary 
source of long-term care coverage, and 70 percent of all 
nursing home residents rely on Medicaid.\12\ The Republican 
reconciliation recommendation to cap the Medicaid program 
threatens this important safety-net for people needing long-
term services and support.
---------------------------------------------------------------------------
    \12\ Families USA, Medicaid (http://familiesusa.org/issues/
medicaid).
---------------------------------------------------------------------------
    Medicaid expansion serves a critical role in providing 
health insurance to those who otherwise cannot afford it and 
would remain uninsured. Medicaid provides high quality coverage 
that improves the lives of its beneficiaries. For individuals 
gaining coverage because of the Medicaid expansion, access to 
primary care and treatment for chronic conditions have 
increased, and rates of skipping medications to save money have 
decreased.\13\ This new coverage, combined with coverage 
expansions through the Marketplaces and other coverage 
improvements the ACA made, has helped drive the uninsured rate 
to the lowest level in our nation's history.
---------------------------------------------------------------------------
    \13\Benjamin D. Sommers, et al., Changes in utilization and health 
among low-income adults after Medicaid expansion or expanded private 
insurance, JAMA Internal Medicine (Oct. 2016 https://
www.ncbi.nlm.nih.gov/pubmed/27532694).
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    Republicans refused to support a simple resolution calling 
for the protection of coverage for more than 70 million 
Americans. The nearly $600 billion in tax breaks for the 
wealthiest individuals and corporations in the reconciliation 
package are paid for by starving health coverage for 70 million 
Americans and slashing funding by $370 billion. Nevertheless, 
Chairman Brady ruled the amendment was not in order.
    Congressman Blumenauer (D-OR) offered an amendment that 
would provide Americans with the choice of keeping tax credits 
provided under the ACA or receiving tax credits provided under 
this Republican health care bill. Independent analyses show 
that low-income people, older Americans, Americans with health 
conditions and those who live in high-cost areas stand to lose 
financial protection, benefits and choice under the Republican 
plan.\14\ Moreover, the Republican tax credits are insufficient 
and simply shift more costs onto middle-class Americans. Flat 
tax credits diminish in value over time, decreasing the amount 
of coverage that families can buy. This problem is particularly 
acute in high-cost areas like rural communities where the value 
of the tax credit would not keep up with the cost of care. The 
Department of Health and Human Services conducted an analysis 
on just this issue and informed me of the findings. This 
analysis shows that under the ACA, nearly three-quarters of 
Americans in 2017 can find health insurance coverage for $75 or 
less a month in the ACA Marketplace. If we replace the analysis 
with the Republican tax credits, the share drops from nearly 75 
percent to 46 percent--a roughly sixty percent drop in the 
number of Americans who are able to find affordable insurance 
coverage. More Americans will have to pay more to get less 
comprehensive coverage under the Republican plan. Americans 
should not be forced into this one-size-fits-all approach. This 
amendment would allow Americans to keep their coverage tax 
credits and coverage if they prefer the tax credits they 
currently have. This amendment was similarly defeated.
---------------------------------------------------------------------------
    \14\https://www.nytimes.com/interactive/2017/03/08/upshot/who-wins-
and-who-loses-under-republicans-health-care-plan.html_? r=0
    http://www.aarp.org/ppi/info-2017/affordable-care-act-protects-
millions-of-older-adults-with-pre-existing-conditions.html
    http://www.vox.com/the-big-idea/2017/2/24/14722152/obamacare-aca-
health-care-costs-premiums-costs-increase
---------------------------------------------------------------------------
    Congresswoman DelBene (D-CA) offered an amendment to repeal 
the high-cost plan excise tax (often called the ``Cadillac 
tax''). As noted other dissenting views, Congresswoman Sanchez 
(D-CA) offered an amendment to repeal the Cadillac Tax that was 
ruled non-germane during the mark-up of Committee Print 1. The 
amendment was germane when offered in Committee Print 5, as the 
Republican bill delays implementation of the tax until 2025. 
While Republicans have put forward a package with nearly $600 
billion in tax cuts for corporations and wealthy Americans, 
they have left in place the tax on employee benefits.
    The tax unfairly reduces health benefits for employees who 
have these plans, particularly those with expensive chronic 
illnesses. The AFL-CIO noted, ``Far from providing an 
improvement on the coverage provided by the ACA, this 
Republican alternative will result in millions of Americans 
losing their coverage. . . . Estimates from the Mercer Firm 
find that by the time the AHCA imposes the tax in 2025, the 
coverage provided by more than 40% of employers with 50+ 
workers would be impacted by the tax. CBO predicts that the 
vast majority of 14 employers confronted with this tax are 
expected to shift costs to their workers by increasing 
deductibles, copays, co-insurance, and maximum out of pocket 
limits to avoid paying the tax.''\15\ While in the 114th 
Congress, 300 members of the House of Representatives, nearly 
70 percent, have signed on to legislation to fully repeal the 
Cadillac tax, the amendment was defeated 16-23.
---------------------------------------------------------------------------
    \15\AFL-CIO letter from William Samuels to Congresswoman Sanchez, 
March 8, 2017.
---------------------------------------------------------------------------
    Congresswoman Sewell (D-AL) offered an amendment to protect 
farmers in rural areas from coverage loss under the Republican 
legislation. More than 50 million Americans live in rural areas 
and have significantly benefitted from the ACA through greater 
insurance coverage. Rural individuals saw greater gains in 
insurance coverage compared with urban individuals (7.2 
percentage point increase versus 6.3 percentage point increase 
for urban areas)\16\ and some rural communities experienced 
even larger decreases.\17\ This drop in uninsured occurred even 
though uninsured rural individuals disproportionately live in 
states that have not expanded Medicaid.\18\ Due to the 
physically taxing and hazardous nature of their work, small 
family farmers had a particularly tough time before the ACA 
getting health insurance for themselves and their families. The 
majority of them are self-employed and do not make enough to 
cover the costs. The ACA provided family farmers with cost-
sharing subsidies, premium tax credits, and access to coverage 
that they were not guaranteed before. Rural communities would 
be among the hardest hit if Republicans repeal the ACA. This 
amendment was defeated.
---------------------------------------------------------------------------
    \16\http://hrms.urban.org/quicktakes/Substantial-Gains-in-Health-
lnsurance-Coverage-Occurring-for-Adults-in-Both- Rural-and-Urban-
Areas.html
    \17\http://www.npr.org/sections/health-shots/2016/11/19/502580120/
in-depressed-rural-kentucky-worries-mount-over-medicaid-cutbacks
    \18\https://aspe.hhs.gov/sites/default/files/pdf/204986/
ACARuralbrief.pdf
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    Congresswoman Sanchez (D-CA) offered an amendment that 
would disallow health savings accounts (HSA) expenditures by 
sex-offenders to purchase pharmaceuticals treating erectile 
dysfunction. The Republican reconciliation package greatly 
expands the amount of funds that can be contributed to tax-
preferred HSAs and the types of health related expenditures 
that can be reimbursed through a health-related tax-preferred 
account such as an HSA. The amendment was withdrawn.
    Congresswoman Judy Chu (D-CA) offered an amendment that 
would require the GOP health care bill to protect coverage for 
abortion. This bill would create sweeping new restrictions on 
abortion coverage for women who purchase health insurance using 
their own money. The restrictions in this bill have no 
meaningful exceptions to protect women's safety, and only 
create exceptions for the life of the mother, or for rape and 
incest, ignoring situations when the health of the mother is at 
risk or serious complications would result from the pregnancy. 
The amendment was defeated.
    Democrats expressed concern that the Republican legislation 
could jeopardize access to community providers and interfere 
with patients getting access to the providers that they prefer 
to see. Congressman Davis offered an amendment to require that 
for an insurance plan to be tax credit eligible it must include 
as participating providers essential community providers. The 
Republicans' health plan does not guarantee access to local 
community health centers and essential local providers. 
Republicans want to let insurance companies go back to the days 
when they could cut out local community health centers and 
local doctors, and force Americans to drive for hours to find 
care. Not only will this make it hard for Americans to get the 
check-ups, vaccines, and prescriptions for antibiotics, 
insulin, and heart medications that they need, but it will make 
it hard for local providers who need paying customers to keep 
their doors open. The amendment would require that any tax 
credit only go to insurance plans that cover local community 
health centers and family physicians, rural providers, and 
other essential community providers.
    Democrats expressed concern that the Republican 
reconciliation package would make it more difficult for small 
businesses to offer health coverage to their employees. The 
reconciliation package repeals the tax credit small businesses 
can receive under current law that is making health insurance 
coverage more affordable. Congresswoman DelBene offered an 
amendment that would reinstate the small business health tax 
credit program and make improvements that make it easier for 
small businesses to participate. More than half (55 percent) of 
all jobs are through small businesses. Since the 1970s, about 
two-thirds of net new jobs have been from small businesses. 
Helping support small businesses that choose to offer health 
coverage can help those businesses offer better paying jobs, 
and provide benefits to their employees.
    Congresswoman Sanchez (D-CA) offered an amendment that 
would prohibit insurance companies from discriminating against 
women in pricing. The ACA has dramatically increased coverage 
for women, while also improving the accessibility, 
affordability, and quality of care. Prior to the passage of the 
ACA, women were charged significantly higher premiums if they 
were able to obtain coverage, and often lacked access to 
critical preventive care and maternity care services.\19\ The 
ACA ended these discriminatory practices, and as a result, 
millions of women now have access to affordable health coverage 
for the first time. Since the implementation of the ACA, 9.5 
million women that were previously uninsured have gained 
affordable, comprehensive health coverage.\20\ The uninsured 
rate among women ages 18 to 64 has decreased from 19.3 percent 
in 2010 to 10.8 percent in 2015.\21\
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    \19\http://go.nationalpartnership.org/site/DocServer/SUMMARY.pdf/
?docID=1000
    \20\https://aspe.hhs.gov/system/files/pdf/187551/ACA2010-2016.pdf
    \21\https://aspe.hhs.gov/system/files/pdf/205066/
ACAWomenHealthIssueBrief.pdf
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    This amendment was based on the bipartisan Gender Equity in 
Health Premiums Act introduced by Congresswoman Sanchez and 
former Republican from Florida, Ginny Brown-Waite, which 
prohibited health insurance companies from engaging in ``gender 
rating.'' Gender rating is the practice of charging women more 
for health insurance premiums than men. This practice was 
prohibited as a result of the ACA. Under the Republican 
legislation, women have the most to lose. Congresswoman Ginny 
Brown-Waite said in 2009, ``It is ludicrous that in this day 
and age, insurance companies can charge women more simply for 
being women. That is the definition of discrimination and it 
must end.'' The motion to table the amendment was approved 23-
16.
    Congresswoman Chu (D-CA) offered an amendment that would 
ensure that the Republican legislation did not disadvantage 
minority health care. Specifically, the amendment would ensure 
that if the National Academies of Science determine that 
uninsured rates of minority communities would increase under 
this bill, then the bill will not take effect. There were 
significant decreases in the percentage of uninsured adults 
between 2013, before the ACA was implemented, and 2016 for 
Hispanic, non-Hispanic black, non-Hispanic white, and non 
Hispanic Asian adults.\22\ Hispanic adults had the greatest 
percentage point decrease (15.9 percentage points) in the 
uninsured rate between 2013 and 2016.\23\ The coverage gained 
by low income individuals because of the ACA halted the 
decades-long widening of the coverage gap between the rich and 
poor at a time when other disparities between rich and poor are 
growing.\24\
---------------------------------------------------------------------------
    \22\https://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201702.pdf
    \23\https://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201702.pdf
    \24\https://www.nytimes.com/2016/04/18/health/immigrants-the-poor-
and-minorities-gain-sharply-under-health-act.html?_r=0
---------------------------------------------------------------------------
    Despite coverage gains from the ACA, data show that Asians, 
Hispanics, Blacks, and American Indians and Alaska Natives 
continue to face significant disparities in access to and 
utilization of care, health status and health outcomes, and 
health coverage.\25\ However, the scope and types of 
disparities vary across racial and ethnic groups. The 
Republican legislation would likely harm the coverage gains 
made as a result of the ACA and increase barriers to care. The 
motion to table the amendment was approved 23-16.
---------------------------------------------------------------------------
    \25\http://kff.org/disparities-policy/report/key-facts-on-health-
and-health-care-by-race-and-ethnicity/
---------------------------------------------------------------------------
    After 18 hours of debate, at almost 4:00 a.m., Congressman 
Lewis offered an amendment to strike the Republican repeal and 
replace reconciliation package and establish a set of 
principles to develop legislation that would not harm the 
American people. Congressman Lewis stated that under the 
Republican legislation, ``Tax cuts for the rich, wealthy, and 
corporations are the priority. The sick, the elderly, the 
middle class, and working Americans are left out and left 
behind. The American people cannot--must not--bear the burden. 
This is not right; this is not just. You can do better; you 
must do better.'' This final amendment highlighted that 
Committee Republicans had rejected every single Democratic 
attempt to protect and assist America's seniors and people with 
disabilities and middle-class Americans who rely on employer-
sponsored insurance, Medicare and Medicaid. The amendment set 
forth a set of principles where people take priority over the 
rich and corporations.

    In conclusion, Democrats strongly oppose the Republicans' 
package of reconciliation bills. These bills decimate health 
coverage for middle and lower income Americans to pay for 
nearly $600 billion in tax giveaways to millionaires and 
corporations.

                                           Richard E. Neal,
                                                    Ranking Member.

                            COMMITTEE PRINT

Budget Reconciliation Legislative Recommendations Relating to Repeal and 
                  Replace of Health-Related Tax Policy

      Subtitle __--Repeal and Replace of Health-Related Tax Policy

SEC. _01. RECAPTURE EXCESS ADVANCE PAYMENTS OF PREMIUM TAX CREDITS.

  Subparagraph (B) of section 36B(f)(2) of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new 
clause:
                          ``(iii) Nonapplicability of 
                        limitation.--This subparagraph shall 
                        not apply to taxable years beginning 
                        after December 31, 2017, and before 
                        January 1, 2020.''.

SEC. _02. ADDITIONAL MODIFICATIONS TO PREMIUM TAX CREDIT.

  (a) Modification of Definition of Qualified Health Plan.--
          (1) In general.--Section 36B(c)(3)(A) of the Internal 
        Revenue Code of 1986 is amended--
                  (A) by inserting ``(determined without regard 
                to subparagraphs (A), (C)(ii), and (C)(iv) of 
                paragraph (1) thereof and without regard to 
                whether the plan is offered on an Exchange)'' 
                after ``1301(a) of the Patient Protection and 
                Affordable Care Act'', and
                  (B) by striking ``shall not include'' and all 
                that follows and inserting ``shall not include 
                any health plan that--
                          ``(i) is a grandfathered health plan 
                        or a grandmothered health plan, or
                          ``(ii) includes coverage for 
                        abortions (other than any abortion 
                        necessary to save the life of the 
                        mother or any abortion with respect to 
                        a pregnancy that is the result of an 
                        act of rape or incest).''.
          (2) Definition of grandmothered health plan.--Section 
        36B(c)(3) of such Code is amended by adding at the end 
        the following new subparagraph:
                  ``(C) Grandmothered health plan.--
                          ``(i) In general.--The term 
                        `grandmothered health plan' means 
                        health insurance coverage which is 
                        offered in the individual health 
                        insurance market as of October 1, 2013, 
                        and is permitted to be offered in such 
                        market after January 1, 2014, as a 
                        result of CCIIO guidance.
                          ``(ii) CCIIO guidance defined.--The 
                        term `CCIIO guidance' means the letter 
                        issued by the Centers for Medicare & 
                        Medicaid Services on November 14, 2013, 
                        to the State Insurance Commissioners 
                        outlining a transitional policy for 
                        non-grandfathered coverage in the 
                        individual health insurance market, as 
                        subsequently extended and modified 
                        (including by a communication entitled 
                        `Insurance Standards Bulletin Series--
                        INFORMATION--Extension of Transitional 
                        Policy through Calendar Year 2017' 
                        issued on February 29, 2016, by the 
                        Director of the Center for Consumer 
                        Information & Insurance Oversight of 
                        such Centers).
                          ``(iii) Individual health insurance 
                        market.--The term `individual health 
                        insurance market' means the market for 
                        health insurance coverage (as defined 
                        in section 9832(b)) offered to 
                        individuals other than in connection 
                        with a group health plan (within the 
                        meaning of section 5000(b)(1)).''.
          (3) Conforming amendment related to abortion 
        coverage.--Section 36B(c)(3) of such Code, as amended 
        by paragraph (2), is amended by adding at the end the 
        following new subparagraph:
                  ``(D) Certain rules related to abortion.--
                          ``(i) Option to purchase separate 
                        coverage or plan.--Nothing in 
                        subparagraph (A) shall be construed as 
                        prohibiting any individual from 
                        purchasing separate coverage for 
                        abortions described in such 
                        subparagraph, or a health plan that 
                        includes such abortions, so long as no 
                        credit is allowed under this section 
                        with respect to the premiums for such 
                        coverage or plan.
                          ``(ii) Option to offer coverage or 
                        plan.--Nothing in subparagraph (A) 
                        shall restrict any health insurance 
                        issuer offering a health plan from 
                        offering separate coverage for 
                        abortions described in such 
                        subparagraph, or a plan that includes 
                        such abortions, so long as premiums for 
                        such separate coverage or plan are not 
                        paid for with any amount attributable 
                        to the credit allowed under this 
                        section (or the amount of any advance 
                        payment of the credit under section 
                        1412 of the Patient Protection and 
                        Affordable Care Act).
                          ``(iii) Other treatments.--The 
                        treatment of any infection, injury, 
                        disease, or disorder that has been 
                        caused by or exacerbated by the 
                        performance of an abortion shall not be 
                        treated as an abortion for purposes of 
                        subparagraph (A).''.
          (4) Conforming amendments related to off-exchange 
        coverage.--
                  (A) Advance payment not applicable.--Section 
                1412 of the Patient Protection and Affordable 
                Care Act is amended by adding at the end the 
                following new subsection:
  ``(f) Exclusion of Off-Exchange Coverage.--Advance payments 
under this section, and advance determinations under section 
1411, with respect to any credit allowed under section 36B 
shall not be made with respect to any health plan which is not 
enrolled in through an Exchange.''.
                  (B) Reporting.--Section 6055(b) of the 
                Internal Revenue Code of 1986 is amended by 
                adding at the end the following new paragraph:
          ``(3) Information relating to off-exchange premium 
        credit eligible coverage.--If minimum essential 
        coverage provided to an individual under subsection (a) 
        consists of a qualified health plan (as defined in 
        section 36B(c)(3)) which is not enrolled in through an 
        Exchange established under title I of the Patient 
        Protection and Affordable Care Act, a return described 
        in this subsection shall include--
                  ``(A) a statement that such plan is a 
                qualified health plan (as defined in section 
                36B(c)(3)),
                  ``(B) the premiums paid with respect to such 
                coverage,
                  ``(C) the months during which such coverage 
                is provided to the individual,
                  ``(D) the adjusted monthly premium for the 
                applicable second lowest cost silver plan (as 
                defined in section 36B(b)(3)) for each such 
                month with respect to such individual, and
                  ``(E) such other information as the Secretary 
                may prescribe.
        This paragraph shall not apply with respect to coverage 
        provided for any month beginning after December 31, 
        2019.''.
                  (C) Other conforming amendments.--
                          (i) Section 36B(b)(2)(A) is amended 
                        by striking ``and which were enrolled'' 
                        and all that follows and inserting ``, 
                        or''.
                          (ii) Section 36B(b)(3)(B)(i) is 
                        amended by striking ``the same 
                        Exchange'' and all that follows and 
                        inserting ``the Exchange through which 
                        such taxpayer is permitted to obtain 
                        coverage, and''.
  (b) Modification of Applicable Percentage.--Section 
36B(b)(3)(A) of such Code is amended to read as follows:
                  ``(A) Applicable percentage.--
                          ``(i) In general.--The applicable 
                        percentage for any taxable year shall 
                        be the percentage such that the 
                        applicable percentage for any taxpayer 
                        whose household income is within an 
                        income tier specified in the following 
                        table shall increase, on a sliding 
                        scale in a linear manner, from the 
                        initial percentage to the final 
                        percentage specified in such table for 
                        such income tier with respect to a 
                        taxpayer of the age involved:

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
  ``In the case of              Up to Age 29                         Age 30-39                          Age 40-49                         Age 50-59                        Over Age 59
  household income  ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
  (expressed as a
   percent of the
   poverty line)
     within the          Initial %          Final %          Initial %         Final %         Initial %         Final %         Initial %         Final %         Initial %         Final %
  following income
       tier:
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Up to 133%           2...............  2...............  2...............  2..............  2..............  2..............  2..............  2..............  2..............  2
133%-150%            3...............  4...............  3...............  4..............  3..............  4..............  3..............  4..............  3..............  4
150%-200%            4...............  4.3.............  4...............  5.3............  4..............  6.3............  4..............  7.3............  4..............  8.3
200%-250%            4.3.............  4.3.............  5.3.............  5.9............  6.3............  8.05...........  7.3............  9..............  8.3............  10
250%-300%            4.3.............  4.3.............  5.9.............  5.9............  8.05...........  8.35...........  9..............  10.5...........  10.............  11.5
300%-400%            4.3.............  4.3.............  5.9.............  5.9............  8.35...........  8.35...........  10.5...........  10.5...........  11.5...........  11.5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                          ``(ii) Age determinations.--
                                  ``(I) In general.--For 
                                purposes of clause (i), the age 
                                of the taxpayer taken into 
                                account under clause (i) with 
                                respect to any taxable year is 
                                the age attained by such 
                                taxpayer before the close of 
                                such taxable year.
                                  ``(II) Joint returns.--In the 
                                case of a joint return, the age 
                                of the older spouse shall be 
                                taken into account under clause 
                                (i).
                          ``(iii) Indexing.--In the case of any 
                        taxable year beginning in calendar year 
                        2019, the initial and final percentages 
                        contained in clause (i) shall be 
                        adjusted to reflect--
                                  ``(I) the excess (if any) of 
                                the rate of premium growth for 
                                the period beginning with 
                                calendar year 2013 and ending 
                                with calendar year 2018, over 
                                the rate of income growth for 
                                such period, and
                                  ``(II) in addition to any 
                                adjustment under subclause (I), 
                                the excess (if any) of the rate 
                                of premium growth for calendar 
                                year 2018, over the rate of 
                                growth in the consumer price 
                                index for calendar year 2018.
                          ``(iv) Failsafe.--Clause (iii)(II) 
                        shall apply only if the aggregate 
                        amount of premium tax credits under 
                        this section and cost-sharing 
                        reductions under section 1402 of the 
                        Patient Protection and Affordable Care 
                        Act for calendar year 2018 exceeds an 
                        amount equal to 0.504 percent of the 
                        gross domestic product for such 
                        calendar year.''.
  (b) Effective Date.--
          (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall 
        apply to taxable years beginning after December 31, 
        2017.
          (2) Advance payment not applicable to off-exchange 
        coverage.--The amendment made by subsection (a)(4)(A) 
        shall take effect on January 1, 2018.
          (3) Reporting.--The amendment made by subsection 
        (a)(4)(B) shall apply to coverage provided for months 
        beginning after December 31, 2017.
          (4) Modification of applicable percentage.--The 
        amendment made by subsection (b) shall apply to taxable 
        years beginning after December 31, 2018.

SEC. _03. PREMIUM TAX CREDIT.

  (a) Repeal of Premium Tax Credit.--Section 36B of the 
Internal Revenue Code of 1986 is amended by adding at the end 
the following new subsection:
  ``(h) Termination.--No credit shall be allowed under this 
section with respect to any coverage month which begins after 
December 31, 2019.''.
  (b) Repeal of Advance Payment of, and Eligibility 
Determination for, Premium Tax Credit.--Section 1412 of the 
Patient Protection and Affordable Care Act, as amended by the 
preceding provisions of this subtitle, is amended by adding at 
the end the following new subsection:
  ``(g) Termination With Respect to Premium Tax Credit.--
Effective January 1, 2020, no provision of this section or 
section 1411 shall apply to the credit allowed under section 
36B of the Internal Revenue Code of 1986 (or to the advance 
payment of, or determination of eligibility for, such credit or 
payment).''.
  (c) Effective Dates.--
          (1) Premium tax credit.--The amendment made by 
        subsection (a) shall apply to months beginning after 
        December 31, 2019, in taxable years ending after such 
        date.
          (2) Eligibility determinations.--The amendment made 
        by subsection (b) shall take effect on January 1, 2020.

SEC. _04. SMALL BUSINESS TAX CREDIT.

  (a) In General.--Section 45R of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
subsection:
  ``(j) Shall Not Apply.--This section shall not apply with 
respect to amounts paid or incurred in taxable years beginning 
after December 31, 2019.''.
  (b) Disallowance of Small Employer Health Insurance Expense 
Credit for Plan Which Includes Coverage for Abortion.--
Subsection (h) of section 45R of the Internal Revenue Code of 
1986 is amended--
          (1) by striking ``Any term'' and inserting the 
        following:
          ``(1) In general.--Any term''; and
          (2) by adding at the end the following new paragraph:
          ``(2) Exclusion of health plans including coverage 
        for abortion.--
                  ``(A) In general.--The term `qualified health 
                plan' does not include any health plan that 
                includes coverage for abortions (other than any 
                abortion necessary to save the life of the 
                mother or any abortion with respect to a 
                pregnancy that is the result of an act of rape 
                or incest).
                  ``(B) Certain rules related to abortion.--
                          ``(i) Option to purchase separate 
                        coverage or plan.--Nothing in 
                        subparagraph (A) shall be construed as 
                        prohibiting any employer from 
                        purchasing for its employees separate 
                        coverage for abortions described in 
                        such subparagraph, or a health plan 
                        that includes such abortions, so long 
                        as no credit is allowed under this 
                        section with respect to the employer 
                        contributions for such coverage or 
                        plan.
                          ``(ii) Option to offer coverage or 
                        plan.--Nothing in subparagraph (A) 
                        shall restrict any health insurance 
                        issuer offering a health plan from 
                        offering separate coverage for 
                        abortions described in such 
                        subparagraph, or a plan that includes 
                        such abortions, so long as such 
                        separate coverage or plan is not paid 
                        for with any employer contribution 
                        eligible for the credit allowed under 
                        this section.
                          ``(iii) Other treatments.--The 
                        treatment of any infection, injury, 
                        disease, or disorder that has been 
                        caused by or exacerbated by the 
                        performance of an abortion shall not be 
                        treated as an abortion for purposes of 
                        subparagraph (A).''.
  (c) Effective Dates.--
          (1) In general.--The amendment made by subsection (a) 
        shall apply to taxable years beginning after December 
        31, 2019.
          (2) Disallowance of small employer health insurance 
        expense credit for plan which includes coverage for 
        abortion.--The amendments made by subsection (b) shall 
        apply to taxable years beginning after December 31, 
        2017.

SEC. _05. INDIVIDUAL MANDATE.

  (a) In General.--Section 5000A(c) of the Internal Revenue 
Code of 1986 is amended--
          (1) in paragraph (2)(B)(iii), by striking ``2.5 
        percent'' and inserting ``Zero percent'', and
          (2) in paragraph (3)--
                  (A) by striking ``$695'' in subparagraph (A) 
                and inserting ``$0'', and
                  (B) by striking subparagraph (D).
  (b) Effective Date.--The amendments made by this section 
shall apply to months beginning after December 31, 2015.

SEC. _06. EMPLOYER MANDATE.

  (a) In General.--
          (1) Paragraph (1) of section 4980H(c) of the Internal 
        Revenue Code of 1986 is amended by inserting ``($0 in 
        the case of months beginning after December 31, 2015)'' 
        after ``$2,000''.
          (2) Paragraph (1) of section 4980H(b) of the Internal 
        Revenue Code of 1986 is amended by inserting ``($0 in 
        the case of months beginning after December 31, 2015)'' 
        after ``$3,000''.
  (b) Effective Date.--The amendments made by this section 
shall apply to months beginning after December 31, 2015.

SEC. _07. REPEAL OF THE TAX ON EMPLOYEE HEALTH INSURANCE PREMIUMS AND 
                    HEALTH PLAN BENEFITS.

  Section 4980I of the Internal Revenue Code of 1986 is amended 
by adding at the end the following new subsection:
  ``(h) Shall Not Apply.--No tax shall be imposed under this 
section with respect to any taxable period beginning after 
December 31, 2019, and before January 1, 2025.''.

SEC. _08. REPEAL OF TAX ON OVER-THE-COUNTER MEDICATIONS.

  (a) HSAs.--Subparagraph (A) of section 223(d)(2) of the 
Internal Revenue Code of 1986 is amended by striking ``Such 
term'' and all that follows through the period.
  (b) Archer MSAs.--Subparagraph (A) of section 220(d)(2) of 
the Internal Revenue Code of 1986 is amended by striking ``Such 
term'' and all that follows through the period.
  (c) Health Flexible Spending Arrangements and Health 
Reimbursement Arrangements.--Section 106 of the Internal 
Revenue Code of 1986 is amended by striking subsection (f) and 
by redesignating subsection (g) as subsection (f).
  (d) Effective Dates.--
          (1) Distributions from savings accounts.--The 
        amendments made by subsections (a) and (b) shall apply 
        to amounts paid with respect to taxable years beginning 
        after December 31, 2017.
          (2) Reimbursements.--The amendment made by subsection 
        (c) shall apply to expenses incurred with respect to 
        taxable years beginning after December 31, 2017.

SEC. _09. REPEAL OF INCREASE OF TAX ON HEALTH SAVINGS ACCOUNTS.

  (a) HSAs.--Section 223(f)(4)(A) of the Internal Revenue Code 
of 1986 is amended by striking ``20 percent'' and inserting 
``10 percent''.
  (b) Archer MSAs.--Section 220(f)(4)(A) of the Internal 
Revenue Code of 1986 is amended by striking ``20 percent'' and 
inserting ``15 percent''.
  (c) Effective Date.--The amendments made by this section 
shall apply to distributions made after December 31, 2017.

SEC. _10. REPEAL OF LIMITATIONS ON CONTRIBUTIONS TO FLEXIBLE SPENDING 
                    ACCOUNTS.

  (a) In General.--Section 125 of the Internal Revenue Code of 
1986 is amended by striking subsection (i).
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. _11. REPEAL OF MEDICAL DEVICE EXCISE TAX.

  Section 4191 of the Internal Revenue Code of 1986 is amended 
by adding at the end the following new subsection:
  ``(d) Applicability.--The tax imposed under subsection (a) 
shall not apply to sales after December 31, 2017.''.

SEC. _12. REPEAL OF ELIMINATION OF DEDUCTION FOR EXPENSES ALLOCABLE TO 
                    MEDICARE PART D SUBSIDY.

  (a) In General.--Section 139A of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
sentence: ``This section shall not be taken into account for 
purposes of determining whether any deduction is allowable with 
respect to any cost taken into account in determining such 
payment.''.
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. _13. REPEAL OF INCREASE IN INCOME THRESHOLD FOR DETERMINING 
                    MEDICAL CARE DEDUCTION.

  (a) In General.--Subsection (a) of section 213 of the 
Internal Revenue Code of 1986 is amended by striking ``10 
percent'' and inserting ``7.5 percent''.
  (b) Extension of Special Rule.--Subsection (f) of section 213 
of such Code is amended--
          (1) by striking ``2017'' and inserting ``2018'', and
          (2) by striking ``and 2016'' and inserting ``2016, 
        and 2017''.
  (c) Effective Date.--
          (1) In general.--The amendment made by subsection (a) 
        shall apply to taxable years beginning after December 
        31, 2017.
          (2) Extension of special rule.--The amendments made 
        by subsection (b) shall apply to taxable years 
        beginning after December 31, 2016.

SEC. _14. REPEAL OF MEDICARE TAX INCREASE.

  (a) In General.--Subsection (b) of section 3101 of the 
Internal Revenue Code of 1986 is amended to read as follows:
  ``(b) Hospital Insurance.--In addition to the tax imposed by 
the preceding subsection, there is hereby imposed on the income 
of every individual a tax equal to 1.45 percent of the wages 
(as defined in section 3121(a)) received by such individual 
with respect to employment (as defined in section 3121(b)).''.
  (b) SECA.--Subsection (b) of section 1401 of the Internal 
Revenue Code of 1986 is amended to read as follows:
  ``(b) Hospital Insurance.--In addition to the tax imposed by 
the preceding subsection, there shall be imposed for each 
taxable year, on the self-employment income of every 
individual, a tax equal to 2.9 percent of the amount of the 
self-employment income for such taxable year.''.
  (c) Effective Date.--The amendments made by this section 
shall apply with respect to remuneration received after, and 
taxable years beginning after, December 31, 2017.

SEC. _15. REFUNDABLE TAX CREDIT FOR HEALTH INSURANCE COVERAGE.

  (a) In General.--Subpart C of part IV of subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 is amended by 
inserting after section 36B the following new section:

``SEC. 36C. HEALTH INSURANCE COVERAGE.

  ``(a) In General.--In the case of an individual, there shall 
be allowed as a credit against the tax imposed by this subtitle 
for the taxable year the sum of the monthly credit amounts with 
respect to such taxpayer for calendar months during such 
taxable year.
  ``(b) Monthly Credit Amounts.--
          ``(1) In general.--The monthly credit amount with 
        respect to any taxpayer for any calendar month is the 
        lesser of--
                  ``(A) the sum of the monthly limitation 
                amounts determined under subsection (c) with 
                respect to the taxpayer and the taxpayer's 
                qualifying family members for such month, or
                  ``(B) the amount paid for eligible health 
                insurance for the taxpayer and the taxpayer's 
                qualifying family members for such month.
          ``(2) Eligible coverage month requirement.--No amount 
        shall be taken into account under subparagraph (A) or 
        (B) of paragraph (1) with respect to any individual for 
        any month unless such month is an eligible coverage 
        month with respect to such individual.
  ``(c) Monthly Limitation Amounts.--
          ``(1) In general.--The monthly limitation amount with 
        respect to any individual for any eligible coverage 
        month during any taxable year is \1/12\ of--
                  ``(A) $2,000 in the case of an individual who 
                has not attained age 30 as of the beginning of 
                such taxable year,
                  ``(B) $2,500 in the case of an individual who 
                has attained age 30 but who has not attained 
                age 40 as of such time,
                  ``(C) $3,000 in the case of an individual who 
                has attained age 40 but who has not attained 
                age 50 as of such time,
                  ``(D) $3,500 in the case of an individual who 
                has attained age 50 but who has not attained 
                age 60 as of such time, and
                  ``(E) $4,000 in the case of an individual who 
                has attained age 60 as of such time.
          ``(2) Limitation based on modified adjusted gross 
        income.--
                  ``(A) In general.--The amount otherwise 
                determined under subsection (b)(1)(A) (without 
                regard to this subparagraph but after any other 
                adjustment of such amount under this section) 
                for the taxable year shall be reduced (but not 
                below zero) by 10 percent of the excess (if 
                any) of--
                          ``(i) the taxpayer's modified 
                        adjusted gross income for such taxable 
                        year, over
                          ``(ii) $75,000 (twice such amount in 
                        the case of a joint return).
                  ``(B) Modified adjusted gross income.--For 
                purposes of this paragraph, the term `modified 
                adjusted gross income' means adjusted gross 
                income increased by--
                          ``(i) any amount excluded from gross 
                        income under section 911,
                          ``(ii) any amount of interest 
                        received or accrued by the taxpayer 
                        during the taxable year which is exempt 
                        from tax, and
                          ``(iii) an amount equal to the 
                        portion of the taxpayer's social 
                        security benefits (as defined in 
                        section 86(d)) which is not included in 
                        gross income under section 86 for the 
                        taxable year.
          ``(3) Other limitations.--
                  ``(A) Aggregate dollar limitation.--The sum 
                of the monthly limitation amounts taken into 
                account under this section with respect to any 
                taxpayer for any taxable year shall not exceed 
                $14,000.
                  ``(B) Maximum number of individuals taken 
                into account.--With respect to any taxpayer for 
                any month, monthly limitation amounts shall be 
                taken into account under this section only with 
                respect to the 5 oldest individuals with 
                respect to whom monthly limitation amounts 
                could (without regard to this subparagraph) 
                otherwise be so taken into account.
  ``(d) Eligible Coverage Month.--For purposes of this section, 
the term `eligible coverage month' means, with respect to any 
individual, any month if, as of the first day of such month, 
the individual--
          ``(1) is covered by eligible health insurance,
          ``(2) is not eligible for other specified coverage,
          ``(3) is either--
                  ``(A) a citizen or national of the United 
                States, or
                  ``(B) a qualified alien (within the meaning 
                of section 431 of the Personal Responsibility 
                and Work Opportunity Reconciliation Act of 1996 
                (8 U.S.C. 1641)), and
          ``(4) is not incarcerated, other than incarceration 
        pending the disposition of charges.
  ``(e) Qualifying Family Member.--For purposes of this 
section, the term `qualifying family member' means--
          ``(1) in the case of a joint return, the taxpayer's 
        spouse,
          ``(2) any dependent of the taxpayer, and
          ``(3) with respect to any eligible coverage month, 
        any child (as defined in section 152(f)(1)) of the 
        taxpayer who as of the end of the taxable year has not 
        attained age 27 if such child is covered for such month 
        under eligible health insurance which also covers the 
        taxpayer (in the case of a joint return, either 
        spouse).
  ``(f) Eligible Health Insurance.--For purposes of this 
section--
          ``(1) In general.--The term `eligible health 
        insurance' means any health insurance coverage (as 
        defined in section 9832(b)) if--
                  ``(A) such coverage is either--
                          ``(i) offered in the individual 
                        health insurance market within a State, 
                        or
                          ``(ii) is unsubsidized COBRA 
                        continuation coverage,
                  ``(B) such coverage is not a grandfathered 
                health plan (as defined in section 1251 of the 
                Patient Protection and Affordable Care Act) or 
                a grandmothered health plan,
                  ``(C) substantially all of such coverage is 
                not of excepted benefits described in section 
                9832(c),
                  ``(D) such coverage does not include coverage 
                for abortions (other than any abortion 
                necessary to save the life of the mother or any 
                abortion with respect to a pregnancy that is 
                the result of an act of rape or incest),
                  ``(E) such coverage does not consist of 
                short-term limited duration insurance (as 
                defined by the Secretary), and
                  ``(F) the State in which such insurance is 
                offered certifies that such coverage meets the 
                requirements of this paragraph.
          ``(2) Rules related to state certification.--
                  ``(A) Certification made available to 
                public.--A certification shall not be taken 
                into account under paragraph (1)(E) unless such 
                certification is made available to the public 
                and meets such other requirements as the 
                Secretary may provide.
                  ``(B) Special rule for unsubsidized cobra 
                continuation coverage.--In the case of 
                unsubsidized COBRA continuation coverage--
                          ``(i) paragraph (1)(E) shall be 
                        applied by substituting `the plan 
                        administrator (as defined in section 
                        414(g)) of the health plan' for `the 
                        State in which such insurance is 
                        offered', and
                          ``(ii) the requirements of 
                        subparagraph (A) shall be treated as 
                        satisfied if the certification meets 
                        such requirements as the Secretary may 
                        provide.
          ``(3) Grandmothered health plan.--
                  ``(A) In general.--The term `grandmothered 
                health plan' means health insurance coverage 
                which is offered in the individual health 
                insurance market as of January 1, 2013, and is 
                permitted to be offered in such market after 
                January 1, 2014, as a result of CCIIO guidance.
                  ``(B) CCIIO guidance defined.--The term 
                `CCIIO guidance' means the letter issued by the 
                Centers for Medicare & Medicaid Services on 
                November 14, 2013, to the State Insurance 
                Commissioners outlining a transitional policy 
                for non-grandfathered coverage in the 
                individual health insurance market, as 
                subsequently extended and modified (including 
                by a communication entitled `Insurance 
                Standards Bulletin Series--INFORMATION--
                Extension of Transitional Policy through 
                Calendar Year 2017' issued on February 29, 
                2016, by the Director of the Center for 
                Consumer Information & Insurance Oversight of 
                such Centers).
          ``(4) Individual health insurance market.--The term 
        `individual health insurance market' means the market 
        for health insurance coverage (as defined in section 
        9832(b)) offered to individuals other than in 
        connection with a group health plan (within the meaning 
        of section 5000(b)(1)).
  ``(g) Other Specified Coverage.--For purposes of this 
section--
          ``(1) In general.--The term `other specified 
        coverage' means any of the following:
                  ``(A) Coverage under a group health plan 
                (within the meaning of section 5000(b)(1)) 
                other than--
                          ``(i) coverage under a plan 
                        substantially all of the coverage of 
                        which is of excepted benefits described 
                        in section 9832(c), and
                          ``(ii) COBRA continuation coverage.
                  ``(B) Coverage under the Medicare program 
                under part A of title XVIII of the Social 
                Security Act.
                  ``(C) Coverage under the Medicaid program 
                under title XIX of the Social Security Act.
                  ``(D) Coverage under the CHIP program under 
                title XXI of the Social Security Act.
                  ``(E) Medical coverage under chapter 55 of 
                title 10, United States Code, including 
                coverage under the TRICARE program.
                  ``(F) Coverage under a health care program 
                under chapter 17 or 18 of title 38, United 
                States Code, as determined by the Secretary of 
                Veterans Affairs, in coordination with the 
                Secretary of Health and Human Services and the 
                Secretary of the Treasury.
                  ``(G) Coverage under a health plan under 
                section 2504(e) of title 22, United States Code 
                (relating to Peace Corps volunteers).
                  ``(H) Coverage under the Nonappropriated Fund 
                Health Benefits Program of the Department of 
                Defense, established under section 349 of the 
                National Defense Authorization Act for Fiscal 
                Year 1995 (Public Law 103-337; 10 U.S.C. 1587 
                note).
          ``(2) Special rule with respect to veterans health 
        programs.--In the case of other specified coverage 
        described in paragraph (1)(F), an individual shall not 
        be treated as eligible for such coverage unless such 
        individual is enrolled in such coverage.
  ``(h) Unsubsidized COBRA Continuation Coverage.--For purposes 
of this section--
          ``(1) In general.--The term `unsubsidized COBRA 
        continuation coverage' means COBRA continuation 
        coverage no portion of the premiums for which are 
        subsidized by the employer.
          ``(2) COBRA continuation coverage.--The term `COBRA 
        continuation coverage' means continuation coverage 
        provided pursuant to part 6 of subtitle B of title I of 
        the Employee Retirement Income Security Act of 1974 
        (other than under section 609), title XXII of the 
        Public Health Service Act, section 4980B of the 
        Internal Revenue Code of 1986 (other than subsection 
        (f)(1) of such section insofar as it relates to 
        pediatric vaccines), or section 8905a of title 5, 
        United States Code, or under a State program that 
        provides comparable continuation coverage. Such term 
        shall not include coverage under a health flexible 
        spending arrangement.
  ``(i) Special Rules.--
          ``(1) Married couples must file joint return.--If the 
        taxpayer is married (within the meaning of section 
        7703) at the close of the taxable year, no credit shall 
        be allowed under this section to such taxpayer unless 
        such taxpayer and the taxpayer's spouse file a joint 
        return for such taxable year.
          ``(2) Denial of credit to dependents.--
                  ``(A) In general.--No credit shall be allowed 
                under this section to any individual who is a 
                dependent with respect to another taxpayer for 
                a taxable year beginning in the calendar year 
                in which such individual's taxable year begins.
                  ``(B) Coordination with rule for older 
                children.--In the case of any individual who is 
                a qualifying family member described in 
                subsection (e)(3) with respect to another 
                taxpayer for any month, in determining the 
                amount of any credit allowable to such 
                individual under this section for any taxable 
                year of such individual which includes such 
                month, the monthly limitation amount with 
                respect to such individual for such month shall 
                be zero and no amount paid for eligible health 
                insurance with respect to such individual for 
                such month shall be taken into account.
          ``(3) Coordination with medical expense deduction.--
        Amounts described in subsection (b)(1)(B) with respect 
        to any month shall not be taken into account in 
        determining the deduction allowed under section 213 
        except to the extent that such amounts exceed the 
        amount described in subsection (b)(1)(A) with respect 
        to such month.
          ``(4) Insurance which covers other individuals.--For 
        purposes of this section, rules similar to the rules of 
        section 213(d)(6) shall apply with respect to any 
        contract for eligible health insurance under which 
        amounts are payable for coverage of an individual other 
        than the taxpayer and the taxpayer's qualifying family 
        members.
          ``(5) Coordination with advance payments of credit.--
        With respect to any taxable year--
                  ``(A) the amount which would (but for this 
                subsection) be allowed as a credit to the 
                taxpayer under subsection (a) shall be reduced 
                (but not below zero) by the aggregate amount 
                paid on behalf of such taxpayer under section 
                7529 for months beginning in such taxable year, 
                and
                  ``(B) the tax imposed by section 1 for such 
                taxable year shall be increased by the excess 
                (if any) of--
                          ``(i) the aggregate amount paid on 
                        behalf of such taxpayer under section 
                        7529 for months beginning in such 
                        taxable year, over
                          ``(ii) the amount which would (but 
                        for this subsection) be allowed as a 
                        credit to the taxpayer under subsection 
                        (a).
          ``(6) Special rules for qualified small employer 
        health reimbursement arrangements.--
                  ``(A) In general.--If the taxpayer or any 
                qualifying family member of the taxpayer is 
                provided a qualified small employer health 
                reimbursement arrangement for any eligible 
                coverage month, the sum determined under 
                subsection (b)(1)(A) with respect to the 
                taxpayer for such month shall be reduced (but 
                not below zero) by \1/12\ of the permitted 
                benefit (as defined in section 9831(d)(3)(C)) 
                under such arrangement.
                  ``(B) Qualified small employer health 
                reimbursement arrangement.--For purposes of 
                this paragraph, the term `qualified small 
                employer health reimbursement arrangement' has 
                the meaning given such term by section 
                9831(d)(2).
                  ``(C) Coverage for less than entire year.--In 
                the case of an employee who is provided a 
                qualified small employer health reimbursement 
                arrangement for less than an entire year, 
                subparagraph (A) shall be applied by 
                substituting `the number of months during the 
                year for which such arrangement was provided' 
                for `12'.
          ``(7) Certain rules related to abortion.--
                  ``(A) Option to purchase separate coverage or 
                plan.--Nothing in subsection (f)(1)(D) shall be 
                construed as prohibiting any individual from 
                purchasing separate coverage for abortions 
                described in such subparagraph, or a health 
                plan that includes such abortions, so long as 
                no credit is allowed under this section with 
                respect to the premiums for such coverage or 
                plan.
                  ``(B) Option to offer coverage or plan.--
                Nothing in subsection (f)(1)(D) shall restrict 
                any health insurance issuer offering a health 
                plan from offering separate coverage for 
                abortions described in such clause, or a plan 
                that includes such abortions, so long as 
                premiums for such separate coverage or plan are 
                not paid for with any amount attributable to 
                the credit allowed under this section.
                  ``(C) Other treatments.--The treatment of any 
                infection, injury, disease, or disorder that 
                has been caused by or exacerbated by the 
                performance of an abortion shall not be treated 
                as an abortion for purposes of subsection 
                (f)(1)(D).
          ``(8) Inflation adjustment.--
                  ``(A) In general.--In the case of any taxable 
                year beginning in a calendar year after 2020, 
                each dollar amount in subsection (c)(1), the 
                $75,000 amount in subsection (c)(2)(A)(ii), and 
                the dollar amount in subsection (c)(3)(A), 
                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 in which the taxable 
                        year begins, determined--
                                  ``(I) by substituting 
                                `calendar year 2019' for 
                                `calendar year 1992' in 
                                subparagraph (B) thereof, and
                                  ``(II) by substituting for 
                                the CPI referred to section 
                                1(f)(3)(A) the amount that such 
                                CPI would have been if the 
                                annual percentage increase in 
                                CPI with respect to each year 
                                after 2019 had been one 
                                percentage point greater.
                  ``(B) Terms related to cpi.--
                          ``(i) Annual percentage increase.--
                        For purposes of subparagraph 
                        (A)(ii)(II), the term `annual 
                        percentage increase' means the 
                        percentage (if any) by which CPI for 
                        any year exceeds CPI for the prior 
                        year.
                          ``(ii) Other terms.--Terms used in 
                        this paragraph which are also used in 
                        section 1(f)(3) shall have the same 
                        meanings as when used in such section.
                  ``(C) Rounding.--Any increase determined 
                under subparagraph (A) shall be rounded to the 
                nearest multiple of $50.
          ``(9) Regulations.--The Secretary may prescribe such 
        regulations and other guidance as may be necessary or 
        appropriate to carry out this section, section 6050X, 
        and section 7529.''.
  (b) Advance Payment of Credit; Excess Health Insurance 
Coverage Credit Payable to Health Savings Account.--Chapter 77 
of such Code is amended by adding at the end the following:

``SEC. 7529. ADVANCE PAYMENT OF HEALTH INSURANCE COVERAGE CREDIT.

  ``(a) General Rule.--Not later than January 1, 2020, the 
Secretary, in consultation with the Secretary of Health and 
Human Services, the Secretary of Homeland Security, and the 
Commissioner of Social Security, shall establish a program 
(hereafter in this section referred to as the `advance payment 
program') for making payments to providers of eligible health 
insurance on behalf of taxpayers eligible for the credit under 
section 36C.
  ``(b) Limitation.--The aggregate payments made under this 
section with respect to any taxpayer, determined as of any time 
during any calendar year, shall not exceed the monthly credit 
amounts determined with respect to such taxpayer under section 
36C for months during such calendar year which have ended as of 
such time.
  ``(c) Administration.--
          ``(1) In general.--The advance payment program shall, 
        to the greatest extent practicable, use the methods and 
        procedures used to administer the programs created 
        under sections 1411 and 1412 of the Patient Protection 
        and Affordable Care Act (determined without regard to 
        section 1412(f) of such Act) and each entity that is 
        authorized to take any actions under the programs 
        created under such sections (as so determined) shall, 
        at the request of the Secretary, take such actions to 
        the extent necessary to carry out this section.
          ``(2) Application to off-exchange coverage.--Except 
        as otherwise provided by the Secretary, for purposes of 
        applying this subsection in the case of eligible health 
        insurance which is not enrolled in through an Exchange 
        established under title I of the Patient Protection and 
        Affordable Care Act, the sections referred to in 
        paragraph (1) shall be applied by treating references 
        in such sections to an Exchange as references to the 
        provider of such eligible health insurance (or, as the 
        Secretary determines appropriate, to the licensed agent 
        or broker with respect to such insurance), except that 
        the Secretary of Health and Human Services shall carry 
        out the responsibilities of the Exchange under section 
        1411(e)(4) of the Patient Protection and Affordable 
        Care Act (determined without regard to section 1412(f) 
        of such Act) in the case of such insurance.
          ``(3) Documentation regarding other specified 
        coverage.--
                  ``(A) In general.--The advance payment 
                program shall provide that any individual 
                applying to have payments made on their behalf 
                under such program shall, if such individual 
                (or any qualifying family member of such 
                individual taken into account in determining 
                the amount of the credit allowable under 
                section 36C) is employed, submit a written 
                statement from each employer of such individual 
                or such qualifying family member stating 
                whether such individual or qualifying family 
                member (as the case may be) is eligible for 
                other specified coverage in connection with 
                such employment.
                  ``(B) Issuance of statements.--An employer 
                shall, at the request of any employee, provide 
                the statement under subparagraph (A) at such 
                time, and in such form and manner, as the 
                Secretary may provide.
  ``(d) Definitions.--For purposes of this section, terms used 
in this section which are also used in section 36C shall have 
the same meaning as when used in section 36C.

``SEC. 7530. EXCESS HEALTH INSURANCE COVERAGE CREDIT PAYABLE TO HEALTH 
                    SAVINGS ACCOUNT.

  ``(a) In General.--At the request of an eligible taxpayer, 
the Secretary shall make a payment to the trustee of the 
designated health savings account with respect to such taxpayer 
in an amount equal to the sum of the excesses (if any) 
described in subsection (c)(2) with respect to months in the 
taxable year.
  ``(b) Designated Health Savings Account.--The term 
`designated health savings account' means a health savings 
account of an individual described in subsection (c)(3) which 
is identified by the eligible taxpayer for purposes of this 
section.
  ``(c) Eligible Taxpayer.--The term `eligible taxpayer' means, 
with respect to any taxable year, any taxpayer if--
          ``(1) such taxpayer is allowed a credit under section 
        36C for such taxable year,
          ``(2) the amount described in subparagraph (A) of 
        section 36C(b)(1) exceeds the amount described in 
        subparagraph (B) of such section with respect to such 
        taxpayer applied with respect to any month during such 
        taxable year, and
          ``(3) the taxpayer or one or more of the taxpayer's 
        qualifying family members (as defined in section 
        36C(e)) were eligible individuals (as defined in 
        section 223(c)(1)) for one or more months during such 
        taxable year.
  ``(d) Contributions Treated as Rollovers, etc.--
          ``(1) In general.--Any amount paid the Secretary to a 
        health savings account under this section shall be 
        treated for purposes of this title in the same manner 
        as a rollover contribution described in section 
        223(f)(5).
          ``(2) Coordination with limitation on rollovers.--Any 
        amount described in paragraph (1) shall not be taken 
        into account in applying section 223(f)(5)(B) with 
        respect to any other amount and the limitation of 
        section 223(f)(5)(B) shall not apply with respect to 
        the application of paragraph (1).
  ``(e) Form and Manner of Request.--The request referred to in 
subsection (a) shall be made at such time and in such form and 
manner as the Secretary may provide. To the extent that the 
Secretary determines feasible, such request may identify more 
than one designated health savings account (and the amount to 
be paid to each such account) provided that the aggregate of 
such payments with respect to any taxpayer for any taxable year 
do not exceed the excess described in subsection (c)(2).
  ``(f) Taxpayers With Seriously Delinquent Tax Debt.--In the 
case of an individual who has a seriously delinquent tax debt 
(as defined in section 7345(b)) which has not been fully 
satisfied--
          ``(1) if such individual is the eligible taxpayer 
        (or, in the case of a joint return, either spouse), the 
        Secretary shall not make any payment under this section 
        with respect to such taxpayer, and
          ``(2) if such individual is the account beneficiary 
        (as defined in section 223(d)(3)) of any health savings 
        account, the Secretary shall not make any payment under 
        this section to such health savings account.
  ``(g) Advance Payment.--To the extent that the Secretary 
determines feasible, payment under this section may be made in 
advance on a monthly basis under rules similar to the rules of 
sections 7529 and 36C(i)(5)(B).''.
  (c) Information Reporting.--
          (1) Reporting by health insurance providers.--Subpart 
        B of part III of subchapter A of chapter 61 of such 
        Code is amended by adding at the end the following new 
        section:

``SEC. 6050X. RETURNS BY HEALTH INSURANCE PROVIDERS RELATING TO HEALTH 
                    INSURANCE COVERAGE CREDIT.

  ``(a) Requirement of Reporting.--Every person who provides 
eligible health insurance for any month of any calendar year 
with respect to any individual shall, at such time as the 
Secretary may prescribe, make the return described in 
subsection (b) with respect to each such individual. With 
respect to any individual with respect to whom payments under 
section 7529 are made by the Secretary, the reporting under 
subsection (b) shall be made on a monthly basis.
  ``(b) Form and Manner of Returns.--A return is described in 
this subsection if such return--
          ``(1) is in such form as the Secretary may prescribe, 
        and
          ``(2) contains, with respect to each policy of 
        eligible health insurance--
                  ``(A) the name, address, and TIN of each 
                individual covered under such policy,
                  ``(B) the premiums paid with respect to such 
                policy,
                  ``(C) the amount of advance payments made on 
                behalf of the individual under section 7529,
                  ``(D) the months during which such health 
                insurance is provided to the individual,
                  ``(E) whether such policy constitutes a high 
                deductible health plan (as defined in section 
                223(c)(2)), and
                  ``(F) such other information as the Secretary 
                may prescribe.
  ``(c) Statements to Be Furnished to Individuals With Respect 
to Whom Information Is Required.--Every person required to make 
a return under subsection (a) shall furnish to each individual 
whose name is required to be set forth in such return a written 
statement showing--
          ``(1) the name and address of the person required to 
        make such return and the phone number of the 
        information contact for such person, and
          ``(2) the information required to be shown on the 
        return with respect to such individual.
The written statement required under the preceding sentence 
shall be furnished on or before January 31 of the year 
following the calendar year to which such statement relates.
  ``(d) Definitions.--For purposes of this section, terms used 
in this section which are also used in section 36C shall have 
the same meaning as when used in section 36C.''.
          (2) Reporting by employers.--Section 6051(a) of such 
        Code is amended by striking ``and'' at the end of 
        paragraph (14), by striking the period at the end of 
        paragraph (15) and inserting ``, and'', and by 
        inserting after paragraph (15) the following new 
        paragraph:
          ``(16) each month with respect to which the employee 
        is eligible for other specified coverage (as defined in 
        section 36C(g)) in connection with employment with the 
        employer.''.
          (3) Assessable penalties.--
                  (A) Section 6724(d)(1)(B) of such Code is 
                amended by striking ``or'' at the end of clause 
                (xxiv), by inserting ``or'' at the end of 
                clause (xxv), and by inserting after clause 
                (xxv) the following new clause:
                          ``(xxvi) section 6050X (relating to 
                        returns relating to health insurance 
                        coverage credit),''.
                  (B) Section 6724(d)(2) of such Code is 
                amended by striking ``or'' at the end of 
                subparagraph (HH), by striking the period at 
                the end of subparagraph (II) and inserting a 
                comma, and by adding after subparagraph (II) 
                the following new subparagraphs:
                  ``(JJ) section 6050X (relating to returns 
                relating to health insurance coverage credit), 
                or
                  ``(KK) section 7529(c)(3) (relating to 
                documentation regarding other specified 
                coverage).''.
  (d) Disclosures.--Paragraph (21) of section 6103(l) of the 
Internal Revenue Code of 1986 is amended--
          (1) in subparagraph (A)--
                  (A) by striking ``any premium tax credit 
                under section 36B or any cost-sharing reduction 
                under section 1402 of the Patient Protection 
                and Affordable Care Act or'' and inserting 
                ``any credit under section 36C'',
                  (B) by striking ``, a State's children's 
                health insurance program under title XXI of the 
                Social Security Act, or a basic health program 
                under section 1331 of Patient Protection and 
                Affordable Care Act'' and inserting ``or a 
                State's children's health insurance program 
                under title XXI of the Social Security Act'',
                  (C) by striking ``(as defined in section 
                36B)'' in clause (iv) and inserting ``(as 
                defined in section 36C(c)(2)(B))'', and
                  (D) by striking ``or reduction'' in clause 
                (v),
          (2) in subparagraph (B)--
                  (A) by striking ``may disclose to an 
                Exchange'' and inserting ``may disclose--
                          ``(i) to an Exchange'', and
                  (B) by striking the period at the end and 
                inserting ``, and'', and
                  (C) by adding at the end the following new 
                clause:
                          ``(ii) in the case of any credit 
                        under section 36C with respect to any 
                        health insurance, the amount of such 
                        credit (or the amount of any advance 
                        payment of such credit) to the provider 
                        of such insurance (or, as the Secretary 
                        determines appropriate, the licensed 
                        agent or broker with respect to such 
                        insurance).'', and
          (3) in subparagraph (C)(i), by striking ``amount of, 
        any credit or reduction'' and inserting ``amount of any 
        credit''.
  (e) Increased Penalty on Erroneous Claims of Credit.--Section 
6676(a) of such Code is amended by inserting ``(25 percent in 
the case of a claim for refund or credit relating to the health 
insurance coverage credit under section 36C)'' after ``20 
percent''.
  (f) Conforming Amendments.--
          (1) Section 35(g) of such Code is amended by adding 
        at the end the following new paragraph:
          ``(14) Coordination with health insurance coverage 
        credit.--
                  ``(A) In general.--An eligible coverage month 
                to which the election under paragraph (11) 
                applies shall not be treated as an eligible 
                coverage month (as defined in section 36C(d)) 
                for purposes of section 36C with respect to the 
                taxpayer or any of the taxpayer's qualifying 
                family members (as defined in section 36C(e)).
                  ``(B) Coordination with advance payments of 
                health insurance coverage credit.--In the case 
                of a taxpayer who makes the election under 
                paragraph (11) with respect to any eligible 
                coverage month in a taxable year or on behalf 
                of whom any advance payment is made under 
                section 7527 with respect to any month in such 
                taxable year--
                          ``(i) the tax imposed by this chapter 
                        for the taxable year shall be increased 
                        by the excess, if any, of--
                                  ``(I) the sum of any advance 
                                payments made on behalf of the 
                                taxpayer under sections 7527 
                                and 7529 for months during such 
                                taxable year, over
                                  ``(II) the sum of the credits 
                                allowed under this section 
                                (determined without regard to 
                                paragraph (1)) and section 36C 
                                (determined without regard to 
                                subsection (i)(5)(A) thereof) 
                                for such taxable year, and
                          ``(ii) section 36C(i)(5)(B) shall not 
                        apply with respect to such taxpayer for 
                        such taxable year.''.
          (2) Section 162(l) of such Code is amended by adding 
        at the end the following new paragraph:
          ``(6) Coordination with health insurance coverage 
        credit.--The deduction otherwise allowable to a 
        taxpayer under paragraph (1) for any taxable year shall 
        be reduced (but not below zero) by the sum of--
                  ``(A) the amount of the credit allowable to 
                such taxpayer under section 36C (determined 
                without regard to subsection (i)(5)(A) thereof) 
                for such taxable year, plus
                  ``(B) the aggregate payments made with 
                respect to the taxpayer under section 7530 for 
                months during such taxable year.''.
          (3) Section 1324(b)(2) of title 31, United States 
        Code is amended--
                  (A) by inserting ``36C,'' after ``36B,'', and
                  (B) by striking ``or 6431'' and inserting 
                ``6431, or 7530''.
          (4) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code 
        of 1986 is amended by inserting after the item relating 
        to section 36B the following new item:
``Sec. 36C. Health insurance coverage.''.
          (5) The table of sections for subpart B of part III 
        of subchapter A of chapter 61 of such Code is amended 
        by adding at the end the following new item:
``Sec. 6050X. Returns by health insurance providers relating to health 
                            insurance coverage credit.''.
          (6) The table of sections for chapter 77 of such Code 
        is amended by adding at the end the following new 
        items:
``Sec. 7529. Advance payment of health insurance coverage credit.
``Sec. 7530. Excess health insurance coverage credit payable to health 
                            savings account.''.
  (g) Effective Date.--The amendments made by this section 
shall apply to months beginning after December 31, 2019, in 
taxable years ending after such date.

SEC. _16. MAXIMUM CONTRIBUTION LIMIT TO HEALTH SAVINGS ACCOUNT 
                    INCREASED TO AMOUNT OF DEDUCTIBLE AND OUT-OF-POCKET 
                    LIMITATION.

  (a) Self-Only Coverage.--Section 223(b)(2)(A) of the Internal 
Revenue Code of 1986 is amended by striking ``$2,250'' and 
inserting ``the amount in effect under subsection 
(c)(2)(A)(ii)(I)''.
  (b) Family Coverage.--Section 223(b)(2)(B) of such Code is 
amended by striking ``$4,500'' and inserting ``the amount in 
effect under subsection (c)(2)(A)(ii)(II)''.
  (c) Conforming Amendments.--Section 223(g)(1) of such Code is 
amended--
          (1) by striking ``subsections (b)(2) and'' both 
        places it appears and inserting ``subsection'', and
          (2) in subparagraph (B), by striking ``determined 
        by'' and all that follows through ```calendar year 
        2003'.'' and inserting ``determined by substituting 
        `calendar year 2003' for `calendar year 1992' in 
        subparagraph (B) thereof .''.
  (d) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017.

SEC. _17. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CONTRIBUTIONS TO THE SAME 
                    HEALTH SAVINGS ACCOUNT.

  (a) In General.--Section 223(b)(5) of the Internal Revenue 
Code of 1986 is amended to read as follows:
          ``(5) Special rule for married individuals with 
        family coverage.--
                  ``(A) In general.--In the case of individuals 
                who are married to each other, if both spouses 
                are eligible individuals and either spouse has 
                family coverage under a high deductible health 
                plan as of the first day of any month--
                          ``(i) the limitation under paragraph 
                        (1) shall be applied by not taking into 
                        account any other high deductible 
                        health plan coverage of either spouse 
                        (and if such spouses both have family 
                        coverage under separate high deductible 
                        health plans, only one such coverage 
                        shall be taken into account),
                          ``(ii) such limitation (after 
                        application of clause (i)) shall be 
                        reduced by the aggregate amount paid to 
                        Archer MSAs of such spouses for the 
                        taxable year, and
                          ``(iii) such limitation (after 
                        application of clauses (i) and (ii)) 
                        shall be divided equally between such 
                        spouses unless they agree on a 
                        different division.
                  ``(B) Treatment of additional contribution 
                amounts.--If both spouses referred to in 
                subparagraph (A) have attained age 55 before 
                the close of the taxable year, the limitation 
                referred to in subparagraph (A)(iii) which is 
                subject to division between the spouses shall 
                include the additional contribution amounts 
                determined under paragraph (3) for both 
                spouses. In any other case, any additional 
                contribution amount determined under paragraph 
                (3) shall not be taken into account under 
                subparagraph (A)(iii) and shall not be subject 
                to division between the spouses.''.
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. _18. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BEFORE 
                    ESTABLISHMENT OF HEALTH SAVINGS ACCOUNT.

  (a) In General.--Section 223(d)(2) of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new 
subparagraph:
                  ``(D) Treatment of certain medical expenses 
                incurred before establishment of account.--If a 
                health savings account is established during 
                the 60-day period beginning on the date that 
                coverage of the account beneficiary under a 
                high deductible health plan begins, then, 
                solely for purposes of determining whether an 
                amount paid is used for a qualified medical 
                expense, such account shall be treated as 
                having been established on the date that such 
                coverage begins.''.
  (b) Effective Date.--The amendment made by this section shall 
apply with respect to coverage beginning after December 31, 
2017.

  

                                CONTENTS

                                                                   Page
SUBTITLE [B]--REPEAL OF CERTAIN CONSUMER TAXES...................   454
  I. SUMMARY AND BACKGROUND.........................................454
 II. EXPLANATION OF PROVISIONS......................................455
III. VOTES OF THE COMMITTEE.........................................458
 IV. BUDGET EFFECTS OF THE PROVISIONS...............................459
  V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.....461
 VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION 
     LEGISLATIVE RECOMMENDATIONS, AS TRANSMITTED....................463
VII. DISSENTING VIEWS...............................................464
             SUBTITLE [B]--REPEAL OF CERTAIN CONSUMER TAXES


                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    In fulfillment of the reconciliation instructions included 
in section 2002 of the Concurrent Resolution on the Budget for 
Fiscal Year 2017 (S. Con. Res. 3), the Committee on Ways and 
Means ordered favorably transmitted (with a quorum being 
present) the Budget Reconciliation Legislative Recommendations 
Relating to Repeal of Certain Consumer Taxes. The Committee 
recommends repeal of the tax on branded prescription 
pharmaceutical manufacturers and importers and the health 
insurance provider tax imposed by the Patient Protection and 
Affordable Care Act of 2010 (``PPACA''), Pub. L. No. 111-148 
(March 23, 2010), as amended by the Health Care and Education 
Reconciliation Act of 2010 (``HCERA''), Pub. L. No. 111-152 
(March 30, 2010).\1\
---------------------------------------------------------------------------
    \1\PPACA and HCERA are collectively referred to as the Affordable 
Care Act (``ACA'').
---------------------------------------------------------------------------

                 B. Background and Need for Legislation

    In the Committee's pursuit of comprehensive health care 
reform to relieve unnecessary burdens on insurance markets, the 
broader economy, and taxpayers in need of access to quality 
health care, the Committee wishes to provide relief from taxes 
imposing excessive constraints on choice and innovation. The 
Committee believes that repeal of the tax on branded 
prescription pharmaceutical manufacturers and importers and the 
health insurance provider tax will further these goals.

                         C. Legislative History


Budget resolution

    On January 13, 2017, the House of Representatives approved 
S. Con. Res. 3, the budget resolution for fiscal year 2017. 
Pursuant to section 2002(a)(3) of S. Con. Res. 3, 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 $1,000,000,000 for the period of fiscal 
years 2017 through 2026.

Committee action

    Beginning on March 8, 2017, in response to its instructions 
under the budget resolution, the Committee on Ways and Means 
marked up the budget reconciliation legislative recommendations 
relating to repeal of the tax on branded prescription 
pharmaceutical manufacturers and importers and the health 
insurance provider tax and ordered the legislative 
recommendations, as amended, favorably transmitted (with a 
quorum being present) on March 9, 2017.

Committee hearings

    The Committee on Ways and Means held hearings regarding the 
President's Fiscal Year 2017 budget submission on February 11, 
2016, and February 10, 2016 with Secretary of the Treasury 
Jacob J. Lew and Secretary of Health and Human Services Sylvia 
Burwell, respectively, in which the harmful effects of ACA 
taxes were discussed. Moreover, the Oversight Subcommittee held 
a hearing on March 5, 2013, discussing the tax-related 
provisions of the ACA.

                     II. EXPLANATION OF PROVISIONS


    A. Repeal of Annual Fee on Branded Prescription Pharmaceutical 
 Manufacturers and Importers (sec. _01 of the committee print and sec. 
                             9008 of PPACA)


                              PRESENT LAW

    An annual fee is imposed on covered entities engaged in the 
business of manufacturing or importing branded prescription 
drugs for sale to any specified government program or pursuant 
to coverage under any such program.\2\ Fees collected are 
credited to the Medicare Part B trust fund.
---------------------------------------------------------------------------
    \2\Sec. 9008 of PPACA, as amended.
---------------------------------------------------------------------------
    The aggregate annual fee imposed on all covered entities is 
$4 billion for calendar year 2017, $4.1 billion for calendar 
year 2018, and $2.8 billion for calendar year 2019 and 
thereafter. The aggregate fee is apportioned among the covered 
entities each year based on their relative share of branded 
prescription drug sales taken into account during the previous 
calendar year.
    A covered entity's relative market share for a calendar 
year is the entity's branded prescription drug sales taken into 
account during the preceding calendar year as a percentage of 
the aggregate branded prescription drug sales of all covered 
entities taken into account during the preceding calendar year. 
Sales taken into account during any calendar year with respect 
to a covered entity are: (1) zero percent of sales not more 
than $5 million; (2) 10 percent of sales over $5 million but 
not more than $125 million; (3) 40 percent of sales over $125 
million but not more than $225 million; (4) 75 percent of sales 
over $225 million but not more than $400 million; and (5) 100 
percent of sales over $400 million.
    A covered entity is any manufacturer or importer with gross 
receipts from branded prescription drug sales. All persons 
treated as a single employer under section 52(a) or (b) or 
under section 414(m) or (o) are treated as a single covered 
entity. In applying the single employer rules under 52(a) and 
(b), foreign corporations are not excluded. If more than one 
person is liable for payment of the fee, all such persons are 
jointly and severally liable for payment of such fee.
    Branded prescription drug sales are sales of branded 
prescription drugs made to any specified government program, or 
pursuant to coverage under any such program. The term branded 
prescription drugs includes any drug which is subject to 
section 503(b) of the Federal Food, Drug, and Cosmetic Act and 
for which an application was submitted under section 351(a) of 
such Act. Branded prescription drug sales do not include sales 
of any drug or biological product with respect to which an 
orphan drug tax credit was allowed for any taxable year under 
section 45C. The exclusion for orphan drug sales does not apply 
to any drug or biological product after such drug or biological 
product is approved by the Food and Drug Administration for 
marketing for any indication other than the rare disease or 
condition with respect to which the section 45C credit was 
allowed.
    Specified government programs include: (1) the Medicare 
Part D program under part D of title XVIII of the Social 
Security Act; (2) the Medicare Part B program under part B of 
title XVIII of the Social Security Act; (3) the Medicaid 
program under title XIX of the Social Security Act; (4) any 
program under which branded prescription drugs are procured by 
the Department of Veterans Affairs; (5) any program under which 
branded prescription drugs are procured by the Department of 
Defense; or (6) the TRICARE retail pharmacy program under 
section 1074g of title 10, United States Code.
    The fees are treated in the same manner as those excise 
taxes identified in subtitle F, ``Procedure and 
Administration'' for which the only avenue for judicial review 
is a civil action for refund. Thus, the fees may be assessed 
and collected using the procedures in subtitle F without regard 
to the restrictions on assessment in section 6213.
    The fee is required to be paid no later than an annual 
payment date determined by the Secretary of the Treasury, but 
in no event later than September 30th each calendar year.
    For purposes of section 275, relating to the 
nondeductibility of specified taxes, the fee is considered to 
be a nondeductible tax described in section 275(a)(6).

                           REASONS FOR CHANGE

    The U.S. pharmaceutical industry is a leader in innovation. 
The industry is an important contributor to the nation's 
economy, employing thousands of people and manufacturing 
pharmaceutical drugs both for the U.S. and foreign markets. The 
Committee believes that the annual fee on branded prescription 
pharmaceutical manufacturers and importers adversely affects 
the industry. The Committee believes that repealing the annual 
fee on branded prescription pharmaceutical manufacturers and 
importers will decrease the cost of healthcare.

                        EXPLANATION OF PROVISION

    Under the provision, the annual fee on branded prescription 
pharmaceutical manufacturers and importers applies for calendar 
years ending before 2018. Thus, the annual fee does not apply 
for any calendar year beginning after 2017.

                             EFFECTIVE DATE

    The provision is effective upon enactment.

B. Repeal of Annual Fee on Health Insurance Providers (sec. _02 of the 
                committee print and sec. 9010 of PPACA)


                              PRESENT LAW

    An annual fee applies to any covered entity engaged in the 
business of providing health insurance with respect to United 
States (``U.S.'') health risks.\3\ The aggregate annual fee for 
all covered entities is the applicable amount. The applicable 
amount is $8 billion for calendar year 2014, $11.3 billion for 
calendar years 2015 and 2016, $13.9 billion for calendar year 
2017, and $14.3 billion for calendar year 2018. However, a one-
year moratorium applies to the annual fee on health insurance 
providers for calendar year 2017. For calendar years after 
2018, the applicable amount is indexed to the rate of premium 
growth.
---------------------------------------------------------------------------
    \3\Sec. 9010 of PPACA.
---------------------------------------------------------------------------
    The aggregate annual fee is apportioned among the providers 
based on a ratio designed to reflect relative market share of 
U.S. health insurance business. For each covered entity, the 
fee for a calendar year is an amount that bears the same ratio 
to the applicable amount as (1) the covered entity's net 
premiums written during the preceding calendar year with 
respect to health insurance for any U.S. health risk, bears to 
(2) the aggregate net written premiums of all covered entities 
during such preceding calendar year with respect to such health 
insurance.

                           REASONS FOR CHANGE

    The Committee understands that the annual fee on health 
insurance providers is passed through to a large extent by 
insurers to consumers in the form of higher health insurance 
premiums. Consumers may bear this burden by paying a higher 
price for the breadth of health coverage they would prefer, or 
by selecting more restricted health coverage for a lower price. 
The Committee believes that health insurance premiums will be 
reduced in the absence of the health insurer fee, and 
therefore, the bill terminates the annual fee on health 
insurance providers.

                        EXPLANATION OF PROVISION

    Under the provision, the annual fee on health insurance 
providers applies only for calendar years beginning after 2013 
and before 2017. Thus, the annual fee does not apply for any 
calendar year beginning after 2016.

                             EFFECTIVE DATE

    The provision is effective upon enactment.
                      III. 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 the Reconciliation Legislative Recommendations 
Relating to Repeal of Certain Consumer Taxes on March 8, 2017.
    The vote on the amendment by Mr. Blumenauer to the 
amendment in the nature of a substitute to Subtitle __: Budget 
Reconciliation Legislative Recommendations Relating to Repeal 
of Certain Consumer Taxes, which would strike the repeal of the 
pharmaceutical company fee and transfer the revenues to the 
Federal Supplemental Medical Insurance trust fund, was not 
agreed to by a roll call vote of 24 nays to 16 yeas (with a 
quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady........................  .......       X   .........  Mr. Neal...........       X   .......  .........
Mr. Johnson......................  .......       X   .........  Mr. Levin..........       X   .......  .........
Mr. Nunes........................  .......       X   .........  Mr. Lewis..........       X   .......  .........
Mr. Tiberi.......................  .......       X   .........  Mr. Doggett........       X   .......  .........
Mr. Reichert.....................  .......       X   .........  Mr. Thompson.......       X   .......  .........
Mr. Roskam.......................  .......       X   .........  Mr. Larson.........       X   .......  .........
Mr. Buchanan.....................  .......       X   .........  Mr. Blumenauer.....       X   .......  .........
Mr. Smith (NE)...................  .......       X   .........  Mr. Kind...........       X   .......  .........
Ms. Jenkins......................  .......       X   .........  Mr. Pascrell.......       X   .......  .........
Mr. Paulsen......................  .......       X   .........  Mr. Crowley........       X   .......  .........
Mr. Marchant.....................  .......       X   .........  Mr. Davis..........       X   .......  .........
Ms. Black........................  .......       X   .........  Ms. Sanchez........       X   .......  .........
Mr. Reed.........................  .......       X   .........  Mr. Higgins........       X   .......  .........
Mr. Kelly........................  .......       X   .........  Ms. Sewell.........       X   .......  .........
Mr. Renacci......................  .......       X   .........  Ms. DelBene........       X   .......  .........
Mr. Meehan.......................  .......       X   .........  Ms. Chu............       X   .......  .........
Ms. Noem.........................  .......       X   .........
Mr. Holding......................  .......       X   .........
Mr. Smith (MO)...................  .......       X   .........
Mr. Rice.........................  .......       X   .........
Mr. Schweikert...................  .......       X   .........
Ms. Walorski.....................  .......       X   .........
Mr. Curbelo......................  .......       X   .........
Mr. Bishop.......................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    Mr. Reichert's motion to table Ms. DelBene's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 24 
yeas and 16 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady........................       X   .......  .........  Mr. Neal...........  .......       X   .........
Mr. Johnson......................       X   .......  .........  Mr. Levin..........  .......       X   .........
Mr. Nunes........................       X   .......  .........  Mr. Lewis..........  .......       X   .........
Mr. Tiberi.......................       X   .......  .........  Mr. Doggett........  .......       X   .........
Mr. Reichert.....................       X   .......  .........  Mr. Thompson.......  .......       X   .........
Mr. Roskam.......................       X   .......  .........  Mr. Larson.........  .......       X   .........
Mr. Buchanan.....................       X   .......  .........  Mr. Blumenauer.....  .......       X   .........
Mr. Smith (NE)...................       X   .......  .........  Mr. Kind...........  .......       X   .........
Ms. Jenkins......................       X   .......  .........  Mr. Pascrell.......  .......       X   .........
Mr. Paulsen......................       X   .......  .........  Mr. Crowley........  .......       X   .........
Mr. Marchant.....................       X   .......  .........  Mr. Davis..........  .......       X   .........
Ms. Black........................       X   .......  .........  Ms. Sanchez........  .......       X   .........
Mr. Reed.........................       X   .......  .........  Mr. Higgins........  .......       X   .........
Mr. Kelly........................       X   .......  .........  Ms. Sewell.........  .......       X   .........
Mr. Renacci......................       X   .......  .........  Ms. DelBene........  .......       X   .........
Mr. Meehan.......................       X   .......  .........  Ms. Chu............  .......       X   .........
Ms. Noem.........................       X   .......  .........
Mr. Holding......................       X   .......  .........
Mr. Smith (MO)...................       X   .......  .........
Mr. Rice.........................       X   .......  .........
Mr. Schweikert...................       X   .......  .........
Ms. Walorski.....................       X   .......  .........
Mr. Curbelo......................       X   .......  .........
Mr. Bishop.......................       X   .......  .........
----------------------------------------------------------------------------------------------------------------

    The legislation was ordered favorably transmitted to the 
House Committee on the Budget as amended by a roll call vote of 
24 yeas and 16 nays (with a quorum being present). The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady........................       X   .......  .........  Mr. Neal...........  .......       X   .........
Mr. Johnson......................       X   .......  .........  Mr. Levin..........  .......       X   .........
Mr. Nunes........................       X   .......  .........  Mr. Lewis..........  .......       X   .........
Mr. Tiberi.......................       X   .......  .........  Mr. Doggett........  .......       X   .........
Mr. Reichert.....................       X   .......  .........  Mr. Thompson.......  .......       X   .........
Mr. Roskam.......................       X   .......  .........  Mr. Larson.........  .......       X   .........
Mr. Buchanan.....................       X   .......  .........  Mr. Blumenauer.....  .......       X   .........
Mr. Smith (NE)...................       X   .......  .........  Mr. Kind...........  .......       X   .........
Ms. Jenkins......................       X   .......  .........  Mr. Pascrell.......  .......       X   .........
Mr. Paulsen......................       X   .......  .........  Mr. Crowley........  .......       X   .........
Mr. Marchant.....................       X   .......  .........  Mr. Davis..........  .......       X   .........
Ms. Black........................       X   .......  .........  Ms. Sanchez........  .......       X   .........
Mr. Reed.........................       X   .......  .........  Mr. Higgins........  .......       X   .........
Mr. Kelly........................       X   .......  .........  Ms. Sewell.........  .......       X   .........
Mr. Renacci......................       X   .......  .........  Ms. DelBene........  .......       X   .........
Mr. Meehan.......................       X   .......  .........  Ms. Chu............  .......       X   .........
Ms. Noem.........................       X   .......  .........
Mr. Holding......................       X   .......  .........
Mr. Smith (MO)...................       X   .......  .........
Mr. Rice.........................       X   .......  .........
Mr. Schweikert...................       X   .......  .........
Ms. Walorski.....................       X   .......  .........
Mr. Curbelo......................       X   .......  .........
Mr. Bishop.......................       X   .......  .........
----------------------------------------------------------------------------------------------------------------

                  IV. BUDGET EFFECTS OF THE PROVISIONS


               A. 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 Repeal 
of Certain Consumer Taxes.''
    The budget reconciliation legislative recommendations, as 
transmitted, are estimated to have the following effects on 
budget receipts for fiscal years 2017-2026:

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         By fiscal year, in billions of dollars--
                          Item                           ---------------------------------------------------------------------------------------------------------------------------------------
                                                             2017       2018       2019       2020       2021       2022       2023       2024       2025       2026      2017-21      2017-26
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Repeal annual fee on branded prescription pharmaceutical      - - -       -3.1       -2.7       -2.7       -2.7       -2.7       -2.7       -2.7       -2.7       -2.7        -11.2        -24.8
 manufacturers and importers............................
Repeal of annual fee on health insurance providers......      - - -      -12.8      -13.5      -14.3      -15.1      -15.9      -16.8      -17.8      -18.7      -19.7        -55.7       -144.7
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details may not add to totals due to rounding.

    Pursuant to clause 8 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 gross budgetary effect 
(before incorporating macroeconomic effects) in any fiscal year 
is less than 0.25 percent of the current projected gross 
domestic product of the United States for that fiscal year; 
therefore, the bill is not ``major legislation'' for purposes 
of requiring that the estimate include the budgetary effects of 
changes in economic output, employment, capital stock and other 
macroeconomic variables.

B. 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 recommendations involve no 
new or increased budget authority. The Committee states further 
that the budget reconciliation legislative recommendations 
involve no new or increased tax expenditures.

      C. 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, refer to Subtitle E.

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


          A. Committee Oversight Findings and Recommendations

    Pursuant to 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 into 
the description portions of this report.

        B. 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 recommendations contain no 
measures that authorize funding, so no statement of general 
performance goals and objectives for which any measure 
authorizing funding is required.

              C. 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 recommendations do not contain any private sector 
mandates. The Committee has determined that the budget 
reconciliation legislative recommendations do not impose any 
Federal intergovernmental mandates on State, local, or tribal 
governments.

                D. 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 recommendations and states that the provisions of 
the legislative recommendations do not involve any Federal 
income tax rate increases within the meaning of the rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 (``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 recommendations contain 
no provisions that amend the Code and that have ``widespread 
applicability'' to individuals or small businesses, within the 
meaning of the rule.

  F. 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 
recommendations and states that the provisions of the 
legislative recommendations do not contain any congressional 
earmarks, limited tax benefits, or limited tariff benefits 
within the meaning of the rule.

                   G. Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
budget reconciliation legislative recommendations do not 
establish or reauthorize: (1) a program of the Federal 
Government known to be duplicative of another Federal program, 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139, or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to section 6104 of title 31, 
United States Code.

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), 
the following statement is made concerning directed rule 
makings: The Committee advises that the budget reconciliation 
legislative recommendations require no directed rule makings 
within the meaning of such section.

     VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION 
              LEGISLATIVE RECOMMENDATIONS, AS TRANSMITTED

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes to existing law made by 
the recommendations, as transmitted, are shown in subtitle E of 
title II.

                         VII. DISSENTING VIEWS

 DISSENTING VIEWS ON RECOMMENDATION TO REPEAL THE HEALTH INSURANCE FEE 
               AND PHARMACEUTICAL FEE, COMMITTEE PRINT 3

    1. Donald Trump promised that ``we're going to have 
insurance for everybody . . . [but it will be] much less 
expensive and much better.'' This bill reveals those promises 
for what they always were: empty campaign rhetoric.''--Families 
USA\1\
---------------------------------------------------------------------------
    \1\http://familiesusa.org/blog/2017/03/healthy-and-wealthy-benefit-
under-house-republican-affordable-care-act-repeal-plan.
---------------------------------------------------------------------------
    2. ``We cannot support the AHCA as drafted because of the 
expected decline in health insurance coverage and the potential 
harm it would cause to vulnerable patient populations.''--
American Medical Association\2\
---------------------------------------------------------------------------
    \2\https://www.ama-assn.org/sites/default/files/media-browser/
public/washington/ama-letter-on-ahca.pdf.
---------------------------------------------------------------------------
    3. ``Repeal-and-replace is a gigantic transfer of wealth 
from the lowest-income Americans to the highest-income 
Americans.''--Edward D. Kleinbard, former chief of staff for 
the Joint Committee on Taxation and professor, University of 
Southern California School of Law.\3\
---------------------------------------------------------------------------
    \3\https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-
care-act-repeal.html?_r=1.
---------------------------------------------------------------------------
    The five reconciliation legislative recommendations 
considered by the Committee on Ways and Means (the 
``Committee'') and referred to the Committee on Budget 
(collectively, the Ways and Means reconciliation package or the 
``reconciliation package'') was a far-reaching attempt to 
undermine our health systems from Medicare to employer 
sponsored health insurance in order to give tax cuts to the 
wealthiest and corporations. After almost 18 hours of debate, 
the Committee mark-up ended with a party-line vote on the 
reconciliation package, which is likely to take health 
insurance away from millions of Americans. This reconciliation 
package, coupled with what was passed out of the Energy and 
Commerce Committee, would harm access to health care for 
middle-class Americans and undermine Medicare's long-term 
viability while cutting taxes for corporations and the 
wealthiest Americans.
    The Committee moved forward irresponsibly, without any 
official accounting about the estimated effect of the 
reconciliation package on health insurance coverage, out-of-
pocket costs, or premium increases. While the Joint Committee 
on Taxation (JCT) estimated that the reconciliation package 
includes nearly $600 billion worth of tax breaks, as of the 
mark-up, the Congressional Budget Office (CBO) was unable to 
provide estimates about the package's effect on American 
families. Additionally the JCT score was incomplete as of the 
mark-up and did not provide an official accounting of all of 
the provisions considered by the Committee. Both the Ways and 
Means and Energy and Commerce Committees moved forward to pass 
recommendations out of each Committee without any sense from 
CBO of coverage losses due to the severe cuts to Medicaid, the 
repeal of the individual and employer-shared responsibility 
provisions of current law, or the changes in the tax credits 
available to help purchase health insurance on the individual 
market.
    CBO provided the Committee an estimate of the effects after 
the reconciliation package was reported to the Committee on 
Budget from the Ways and Means and Energy and Commerce 
Committees. This estimate showed that 24 million Americans 
would lose coverage, with 14 million Americans losing coverage 
in the first year alone.
    The Committee's reconciliation package provided generous 
tax cuts to the wealthiest, while reducing health insurance 
assistance for middle-class Americans. The tax breaks 
considered by the Committee are focused on the wealthy 
individuals and corporations, instead on middle-class 
Americans. About $275 billion in tax breaks would benefit high-
income earners; about 62% of the tax breaks would go to 
millionaires in 2020. Businesses and corporations are receive 
nearly $192 billion in tax cuts. These and other tax breaks add 
up to nearly $600 billion in lost revenue.
    Democrats objected strenuously to the Republican approach 
and instead believe the Committee should focus on policies that 
matter to middle-class Americans under the jurisdiction of this 
Committee, including financing long-term infrastructure, 
reforming the tax system to address income inequality, and 
further building on President Obama's record of job creation. 
Democrats believe that the reconciliation package will 
destabilize the health insurance market, which represents 18 
percent of our gross domestic product.
    The reconciliation package continues Republican efforts to 
undermine and destabilize the health insurance market. It 
undermines current law and the stability of both the individual 
and group health insurance markets by gutting individual and 
employer-shared responsibility provisions. The reconciliation 
package would reduce the uptake of the premium tax credits and 
the Medicaid expansion established in the Affordable Care Act 
(ACA), which have made health care affordable for millions of 
individuals. Reduced uptake of the Medicaid expansion and the 
tax credits disproportionately impacts low- and middle-income 
Americans and places them at risk for health insecurity and 
unexpected medical expenses. Based on independent estimates, 
roughly 24 million Americans would lose their insurance 
coverage because of this reconciliation package when taken 
together with the reconciliation recommendations passed by the 
Energy and Commerce Committee.\4\ Further, this reconciliation 
package reduces the life of the Medicare Trust Fund by three 
years by reducing $170 billion from the Medicare Trust Fund, 
which puts Medicare at risk for 57 million seniors and 
individuals with disabilities.
---------------------------------------------------------------------------
    \4\https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-
cbo-to-estimate-large-coverage-losses-from-the-gop-health-care-plan/.
---------------------------------------------------------------------------
    Individual and employer-shared responsibility provisions 
are key to maintaining the robust and healthy risk pools that 
allow the ACA health insurance reforms to improve consumer 
protections while controlling health care costs. This is 
because well-functioning insurance markets rely on 
participation of both healthy and sick individuals to spread 
risk across the pool. The reconciliation package effectively 
would repeal the individual and employer-shared responsibility 
penalty, leading to premium increases of an estimated 20 
percent in the individual market alone. In spite of President 
Trump and Congressional Republicans' efforts to sabotage the 
ACA, millions of Americans have enrolled in the health 
insurance Marketplaces, many using the available financial 
assistance, and millions more have enrolled in expanded 
Medicaid programs.
    Despite promises made by President Trump, the 
reconciliation package would not cover more people or offer 
more affordable coverage with comparable benefits. Instead, 
this package leads to an estimated coverage loss of 24 million 
people while gutting benefits and consumer protections as a 
mechanism for affordability. When coupled with the legislation 
passed out of the Energy and Commerce Committee, the 
reconciliation package would return to a time when the market 
once again discriminates against those with pre-existing 
conditions and leaves those that might need medical care in the 
future without meaningful coverage. The reconciliation package 
provides for tax credits less generous than current law with no 
assistance with out-of-pocket expenses. Instead, the 
reconciliation package enshrines high deductible health plans 
that would increase out-of-pocket expenses. However, these 
plans do not address the underlying issues of access to quality 
services and the cost of care.
    Since January of 2009, the Republicans voted to repeal or 
undermine the ACA more than 65 times. Democrats offered a 
number of amendments in Committee to point out serious flaws 
with the reconciliation package. For example, at the beginning 
of the mark up, Democrats asked Republicans to postpone mark up 
until CBO could provide a comprehensive report on costs, 
coverage losses, and premium effects of the reconciliation 
package.
    In that regard, Congressman Lloyd Doggett (D-TX) offered a 
motion to postpone the markup for one week to allow time for 
review of the bill and the CBO estimate that was not available 
prior to or during the mark up. For over four decades, CBO has 
been recognized as the official referee of costs and effects of 
legislation passed in the House and Senate. Congress relies on 
CBO's non-partisan estimates to evaluate legislative proposals. 
Democrats were concerned that Republicans deliberately moved 
forward with the reconciliation package without a CBO score in 
an effort to conceal the harmful effects of the reconciliation 
package on nearly all Americans.
    The contrast of this rushed process versus the lengthy and 
transparent process of enacting the ACA is striking. In 2009, 
House Committees posted a draft of the ACA legislation for 
review and comment a month before the mark-up process began, 
holding multiple hearings and providing the public with two 
preliminary CBO estimates on July 8th and July 14th Democrats 
maintain that there is no reason to rush to mark-up this 
reconciliation package without a CBO score, or without a 
hearing to consider the implications of the package. 
Congressman Doggett's amendment was tabled on a party line 
vote.
    This Committee print provided $169.5 billion in tax breaks 
to prescription drug and insurance companies. At the same time, 
Republicans cut Medicaid by more than $370 billion\5\ to help 
pay for this giveaway which would result in millions of low-
income working families to lose their health insurance 
coverage, forcing them to rely on emergency room care that 
Americans all end up paying for in higher health insurance 
premiums.
---------------------------------------------------------------------------
    \5\``House GOP Medicaid Provisions Would Shift $370 Billion in 
Costs To States,'' Center on Budget and Policy Priorities, March 7, 
2017.
---------------------------------------------------------------------------
    Congressman Blumenauer (D-OR) offered an amendment to 
retain current law with respect to taxation of brand 
pharmaceutical companies and invest those tax revenues in 
lowering seniors' drug costs by filling the Medicare Part D 
donut hole. Medicare beneficiaries, even with Medicare Part D 
coverage, still struggle to pay for medications when they reach 
the coverage gap, known as the donut hole. While the ACA filled 
in part of this gap and saved America's seniors and people with 
disabilities an average of $1,200 each year, it should remain a 
priority to continue to reduce the financial burdens for 
seniors and people with disabilities rather than providing 
pharmaceutical companies huge tax breaks. Democrats unanimously 
supported the amendment, but all Committee Republicans voted 
against improving drug coverage under Part D and lowering costs 
for seniors.
    Congresswoman Suzan DelBene (D-WA) offered an amendment 
striking provisions that would restrict women's choice of 
health care providers. Her amendment sought to protect access 
to women's health care, including access to Planned Parenthood. 
Every year, 2.5 million people rely on Planned Parenthood 
health centers for essential health services, and studies 
consistently show that proposals to ``defund'' Planned 
Parenthood would result in people losing access to quality 
health care.\6\ The American Medical Association raised 
concerns with these provisions, saying, ``The AMA cannot 
support provisions that prevent Americans from choosing to 
receive care from physicians and other qualified providers, in 
this specific case, those associated with Planned Parenthood 
affiliates, for otherwise covered services.''\7\ Democrats 
unanimously supported the amendment, but all Committee 
Republicans voted against supporting women's access to health 
care services.

    \6\http://www.cnn.com/2015/08/04/health/planned-parenthood-by-the-
numbers/.
    \7\https://www.ama-assn.org/sites/default/files/media-browser/
public/washington/ama-letter-on-ahca.pdf.

                                           Richard E. Neal,
                                                    Ranking Member.

                            COMMITTEE PRINT

Budget Reconciliation Legislative Recommendations Relating to Repeal of 
                         Certain Consumer Taxes

             Subtitle __--Repeal of Certain Consumer Taxes

SEC. _1. REPEAL OF TAX ON PRESCRIPTION MEDICATIONS.

  Section 9008 of the Patient Protection and Affordable Care 
Act is amended by adding at the end the following new 
subsection:
  ``(l) Termination.--No fee shall be imposed under subsection 
(a)(1) with respect to any calendar year beginning after 
December 31, 2017.''.

SEC. _2. REPEAL OF HEALTH INSURANCE TAX.

  Section 9010 of the Patient Protection and Affordable Care 
Act is amended by adding at the end the following new 
subsection:
  ``(k) Termination.--No fee shall be imposed under subsection 
(a)(1) with respect to any calendar year beginning after 
December 31, 2017.''.

  

                                CONTENTS

                                                                   Page
SUBTITLE C--REPEAL OF TANNING TAX................................   472
  I. SUMMARY AND BACKGROUND.........................................472
 II. EXPLANATION OF PROVISION.......................................473
III. VOTES OF THE COMMITTEE.........................................474
 IV. BUDGET EFFECTS OF THE PROVISIONS...............................475
  V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.....476
 VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION 
     LEGISLATIVE RECOMMENDATIONS, AS TRANSMITTED....................477
VII. DISSENTING VIEWS...............................................478
                   SUBTITLE C--REPEAL OF TANNING TAX


                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    In fulfillment of the reconciliation instructions included 
in section 2002 of the Concurrent Resolution on the Budget for 
Fiscal Year 2017 (S. Con. Res. 3), the Committee on Ways and 
Means ordered favorably transmitted (with a quorum being 
present) the Budget Reconciliation Legislative Recommendations 
Relating to Repeal of Tanning Tax. The Committee recommends 
repeal of the indoor tanning tax imposed by the Patient 
Protection and Affordable Care Act of 2010 (``PPACA''), Pub. L. 
No. 111-148 (March 23, 2010), as amended by the Health Care and 
Education Reconciliation Act of 2010 (``HCERA''), Pub. L. No. 
111-152 (March 30, 2010).\1\
---------------------------------------------------------------------------
    \1\PPACA and HCERA are collectively referred to as the Affordable 
Care Act (``ACA'').
---------------------------------------------------------------------------

                 B. Background and Need for Legislation

    In the Committee's pursuit of comprehensive health care 
reform to relieve unnecessary burdens on insurance markets, the 
broader economy, and taxpayers in need of access to quality 
health care, the Committee wishes to provide relief from taxes 
imposing excessive constraints on choice and innovation. The 
Committee believes that repeal of the indoor tanning tax will 
further these goals.

                         C. Legislative History


Budget resolution

    On January 13, 2017, the House of Representatives approved 
S. Con. Res. 3, the budget resolution for fiscal year 2017. 
Pursuant to section 2002(a)(3) of S. Con. Res. 3, 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 $1,000,000,000 for the period of fiscal 
years 2017 through 2026.

Committee action

    Beginning March 8, 2017, in response to its instructions 
under the budget resolution, the Committee on Ways and Means 
marked up the budget reconciliation legislative recommendations 
relating to repeal of the tanning tax and ordered the 
legislative recommendations, as amended, favorably transmitted 
(with a quorum being present) on March 9, 2017.

Committee hearings

    The Committee on Ways and Means held hearings regarding the 
President's Fiscal Year 2017 budget submission on February 11, 
2016, and February 10, 2016 with Secretary of the Treasury 
Jacob J. Lew and Secretary of Health and Human Services Sylvia 
Burwell, respectively, in which the harmful effects of ACA 
taxes were discussed. Moreover, the Oversight Subcommittee held 
a hearing on March 5, 2013, discussing the tax-related 
provisions of the ACA.

                      II. EXPLANATION OF PROVISION


  A. Repeal of Tanning Tax (Sec. _01 of the Committee Print and Sec. 
                         5000B of the Code\2\)

---------------------------------------------------------------------------
    \2\All section references herein are to the Internal Revenue Code 
of 1986, as amended, (``Code'') unless otherwise stated.
---------------------------------------------------------------------------

                              PRESENT LAW

    A retail sales tax is imposed on indoor tanning 
services.\3\ The tax rate is 10 percent of the amount paid for 
such services, including any amount paid by insurance.\4\ If a 
payment covers charges for indoor tanning services as well as 
other goods and services, the charges for other goods and 
services may be excluded in computing the tax payable on the 
amount paid.\5\
---------------------------------------------------------------------------
    \3\Sec. 5000B.
    \4\The total amount paid is presumed to include the tax if the tax 
is not separately stated. Treas. Reg. sec. 48.5000B-1(d)(1)(i).
    \5\Treas. Reg. sec. 48.5000B-1(c)(2), (d)(2), and (d)(3).
---------------------------------------------------------------------------
    Consumers are liable for the tax, with service providers 
being responsible for collecting and remitting the tax to the 
Federal Government on a quarterly basis.
    Indoor tanning services are services employing any 
electronic product designed to induce skin tanning and which 
incorporates one or more ultraviolet lamps with wavelengths in 
air between 200 and 400 nanometers.\6\ Taxable services do not 
include phototherapy services\7\ performed by a licensed 
medical professional. There is also an exemption for qualified 
physical fitness facilities that meet certain criteria and 
offer tanning as an incidental service to members without a 
separately identifiable fee.\8\
---------------------------------------------------------------------------
    \6\Treas. Reg. sec. 48.5000B-1(c)(1).
    \7\Phototherapy services are services that expose an individual to 
specific wavelengths of light for the treatment of (i) dermatological 
conditions, such as acne, psoriasis, and eczema; (ii) sleep disorders; 
(iii) seasonal affective disorder or other psychiatric disorder; (iv) 
neonatal jaundice; (v) wound healing; and (vi) other medical conditions 
determined by a licensed medical professional to be treatable by 
exposing the individual to specific wavelengths of light. Treas. Reg. 
sec. 48.5000B-1(c)(3).
    \8\Treas. Reg. sec. 48.5000B-1(d)(4).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The indoor tanning industry is an important contributor to 
the nation's economy, employing thousands of people. The 
Committee believes that the tanning tax adversely affects the 
industry. The Committee believes that repealing the tax will 
decrease costs for the industry and for consumers.

                        EXPLANATION OF PROVISION

    Under the provision, the tax on indoor tanning services 
applies for services performed prior to January 1, 2018. Thus, 
the tax does not apply to services performed after December 31, 
2017.

                             EFFECTIVE DATE

    The provision is effective for services performed after 
December 31, 2017.
                      III. 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 the Reconciliation Legislative Recommendation 
Relating to Repeal of Tanning Tax on March 8, 2017.
    The vote on the amendment by Ms. Sanchez to the amendment 
in the nature of a substitute to Subtitle _: Budget 
Reconciliation Legislative Recommendations Relating to Repeal 
of Tanning Tax, which would strike the repeal of the Tanning 
Tax and express the sense of Congress that the Tanning Tax 
should not be repealed, was not agreed to by a roll call vote 
of 24 nays to 16 yeas (with a quorum being present). The vote 
was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Johnson....................  ........        X   .........  Mr. Levin........        X   ........  .........
Mr. Nunes......................  ........        X   .........  Mr. Lewis........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Reichert...................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Roskam.....................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. Smith (NE).................  ........        X   .........  Mr. Kind.........        X   ........  .........
Ms. Jenkins....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Mr. Paulsen....................  ........        X   .........  Mr. Crowley......        X   ........  .........
Mr. Marchant...................  ........        X   .........  Mr. Davis........        X   ........  .........
Ms. Black......................  ........        X   .........  Ms. Sanchez......        X   ........  .........
Mr. Reed.......................  ........        X   .........  Mr. Higgins......        X   ........  .........
Mr. Kelly......................  ........        X   .........  Ms. Sewell.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Ms. DelBene......        X   ........  .........
Mr. Meehan.....................  ........        X   .........  Ms. Chu..........        X   ........  .........
Ms. Noem.......................  ........        X   .........  .................
Mr. Holding....................  ........        X   .........  .................
Mr. Smith (MO).................  ........        X   .........  .................
Mr. Rice.......................  ........        X   .........  .................
Mr. Schweikert.................  ........        X   .........  .................
Ms. Walorski...................  ........        X   .........  .................
Mr. Curbelo....................  ........        X   .........  .................
Mr. Bishop.....................  ........        X   .........  .................
----------------------------------------------------------------------------------------------------------------

    The legislation was ordered favorably transmitted to the 
House Committee on the Budget as amended by a roll call vote of 
24 yeas and 15 nays (with a quorum being present). The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................        X   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........  ........  .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                  IV. BUDGET EFFECTS OF THE PROVISIONS


               A. 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 Recommendation Relating to Repeal of 
Tanning Tax.''
    The budget reconciliation legislative recommendation, as 
transmitted, is estimated to have the following effects on 
budget receipts for fiscal years 2017-2026:

----------------------------------------------------------------------------------------------------------------
                                       Fiscal years in billions of dollars
-----------------------------------------------------------------------------------------------------------------
  2017      2018      2019     2020     2021     2022     2023     2024     2025     2026    2017-21    2017-26
----------------------------------------------------------------------------------------------------------------
  - - -       [1]     -0.1     -0.1     -0.1     -0.1     -0.1     -0.1     -0.1     -0.1       -0.2      -0.6
----------------------------------------------------------------------------------------------------------------
Note: Details do not add to totals due to rounding.
\1\ Loss of less than $50 million.

    Pursuant to clause 8 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 gross budgetary effect 
(before incorporating macroeconomic effects) in any fiscal year 
is less than 0.25 percent of the current projected gross 
domestic product of the United States for that fiscal year; 
therefore, the bill is not ``major legislation'' for purposes 
of requiring that the estimate include the budgetary effects of 
changes in economic output, employment, capital stock and other 
macroeconomic variables.

B. 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.

      C. 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, refer to Subtitle E.

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


          A. Committee Oversight Findings and Recommendations

    Pursuant to 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 into 
the description portions of this report.

        B. 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.

              C. 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 does not contain any private sector 
mandates. The Committee has determined that the budget 
reconciliation legislative recommendation does not impose any 
Federal intergovernmental mandates on State, local, or tribal 
governments.

                D. 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 does not involve any Federal 
income tax rate increases within the meaning of the rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 (``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.

  F. 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.

                   G. Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
budget reconciliation legislative recommendation does not 
establish or reauthorize: (1) a program of the Federal 
Government known to be duplicative of another Federal program, 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139, or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to section 6104 of title 31, 
United States Code.

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), 
the following statement is made concerning directed rule 
makings: The Committee advises that the budget reconciliation 
legislative recommendation requires no directed rule makings 
within the meaning of such section.

     VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION 
              LEGISLATIVE RECOMMENDATIONS, AS TRANSMITTED

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes to existing law made by 
the recommendations, as reported, are shown in Subtitle E of 
title II.

                         VII. DISSENTING VIEWS

DISSENTING VIEWS ON RECOMMENDATION TO REPEAL THE TANNING TAX, COMMITTEE 
                                PRINT 2

    1. Donald Trump promised that ``we're going to have 
insurance for everybody . . . [but it will be] much less 
expensive and much better.'' This bill reveals those promises 
for what they always were: empty campaign rhetoric.''--Families 
USA\1\
---------------------------------------------------------------------------
    \1\ http://familiesusa.org/blog/2017/03/healthy-and-wealthy-
benefit-under-house-republican-affordable-care-act-repeal-plan
---------------------------------------------------------------------------
    2. ``We cannot support the AHCA as drafted because of the 
expected decline in health insurance coverage and the potential 
harm it would cause to vulnerable patient populations.''--
American Medical Association\2\
---------------------------------------------------------------------------
    \2\https://www.ama-assn.org/sites/defaultlfiles/media-browser/
public/washington/ama-letter-on-ahca.pdf.
---------------------------------------------------------------------------
    3. ``Repeal-and-replace is a gigantic transfer of wealth 
from the lowest-income Americans to the highest-income 
Americans.''--Edward D. Kleinbard, former chief of staff for 
the Joint Committee on Taxation and professor, University of 
Southern California School of Law.\3\
---------------------------------------------------------------------------
    \3\https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-
ca re-act-repeal.html?--r=I.
---------------------------------------------------------------------------
    The five reconciliation legislative recommendations 
considered by the Committee on the Ways and Means (the 
``Committee'') and referred to the Committee on Budget 
(collectively, the Ways and Means reconciliation package or the 
``reconciliation package'') was a far-reaching attempt to 
undermine our health systems from Medicare to employer 
sponsored health insurance in order to give tax cuts to the 
wealthiest and corporations. After almost 18 hours of debate, 
the Committee mark-up ended with a party-line vote on the 
reconciliation package, which is likely to take health 
insurance away from millions of Americans. This reconciliation 
package, coupled with what was passed out of the Energy and 
Commerce Committee, would harm access to health care for 
middle-class Americans and undermine Medicare's long-term 
viability while cutting taxes for corporations and the 
wealthiest Americans.
    The Committee moved forward irresponsibly, without any 
official accounting about the estimated effect of the 
reconciliation package on health insurance coverage, out-of-
pocket costs, or premium increases. While the Joint Committee 
on Taxation (JCT) estimated that the reconciliation package 
includes nearly $600 billion worth of tax breaks, as of the 
mark-up, the Congressional Budget Office (CBO) was unable to 
provide estimates about the package's effect on American 
families. Additionally the JCT score was incomplete as of the 
mark-up and did not provide an official accounting of all of 
the provisions considered by the Committee. Both the Ways and 
Means and Energy and Commerce Committees moved forward to pass 
recommendations out of each Committee without any sense from 
CBO of coverage losses due to the severe cuts to Medicaid, the 
repeal of the individual and employer-shared responsibility 
provisions of current law, or the changes in the tax credits 
available to help purchase health insurance on the individual 
market.
    CBO provided the Committee an estimate of the effects after 
the reconciliation package was reported to the Committee on 
Budget from the Ways and Means and Energy and Commerce 
Committees. This estimate showed that 24 million Americans 
would lose coverage, with 14 million Americans losing coverage 
in the first year alone.
    The Committee's reconciliation package provided generous 
tax cuts to the wealthiest, while reducing health insurance 
assistance for middle-class Americans. The tax breaks 
considered by the Committee are focused on wealthy individuals 
and corporations, instead of on middle-class Americans. About 
$275 billion in tax breaks would benefit high-income earners; 
about 62% of the tax breaks would go to millionaires in 2020. 
Businesses and corporations receive nearly $192 billion in tax 
cuts. These and other tax breaks add up to nearly $600 billion 
in lost revenue.
    Democrats objected strenuously to the Republican approach 
and instead believe the Committee should focus on policies that 
matter to middle-class Americans under the jurisdiction of this 
Committee, including financing long-term infrastructure, 
reforming the tax system to address income inequality, and 
further building on President Obama's record of job creation. 
Democrats believe that the reconciliation package will 
destabilize the health insurance market, which represents 18 
percent of our gross domestic product.
    The reconciliation package continues Republican efforts to 
undermine and destabilize the health insurance market. It 
undermines current law and the stability of both the individual 
and group health insurance markets by gutting individual and 
employer-shared responsibility provisions. The reconciliation 
package would reduce the uptake of the premium tax credits and 
the Medicaid expansion established in the Affordable Care Act 
(ACA), which have made health care affordable for millions of 
individuals. Reduced uptake of the Medicaid expansion and the 
tax credits disproportionately impacts low- and middle-income 
Americans and places them at risk for health insecurity and 
unexpected medical expenses. Based on independent estimates, 
roughly 24 million Americans would lose their insurance 
coverage because of this reconciliation package when taken 
together with the reconciliation recommendations passed by the 
Energy and Commerce Committee.\4\ Further, this reconciliation 
package reduces the life of the Medicare Trust Fund by three 
years by reducing $170 billion from the Medicare Trust Fund, 
which puts Medicare at risk for 57 million seniors and 
individuals with disabilities.
---------------------------------------------------------------------------
    \4\https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-
cbo-to-estimate-large-coverage-losses-from-the-gop-health-care-plan/.
---------------------------------------------------------------------------
    Individual and employer-shared responsibility provisions 
are key to maintaining the robust and healthy risk pools that 
allow the ACA health insurance reforms to improve consumer 
protections while controlling health care costs. This is 
because well-functioning insurance markets rely on 
participation of both healthy and sick individuals to spread 
risk across the pool. The reconciliation package effectively 
would repeal the individual and employer-shared responsibility 
penalty, leading to premium increases of an estimated 20 
percent in the individual market alone. In spite of President 
Trump's and Congressional Republicans' efforts to sabotage the 
ACA, millions of Americans have enrolled in the health 
insurance Marketplaces, many using the available financial 
assistance, and millions more have enrolled in expanded 
Medicaid programs.
    Despite promises made by President Trump, the 
reconciliation package would not cover more people or offer 
more affordable coverage with comparable benefits. Instead, 
this package leads to an estimated coverage loss of 24 million 
people while gutting benefits and consumer protections as a 
mechanism for affordability. When coupled with the legislation 
passed out of the Energy and Commerce Committee, the 
reconciliation package would return to a time when the market 
once again discriminates against those with pre-existing 
conditions and leaves those that might need medical care in the 
future without meaningful coverage. The reconciliation package 
provides for tax credits less generous than current law with no 
assistance with out-of-pocket expenses. Instead, the 
reconciliation package enshrines high deductible health plans 
that would increase out-of-pocket expenses. However, these 
plans do not address the underlying issues of access to quality 
services and the cost of care.
    Since January of 2009, the Republicans voted to repeal or 
undermine the ACA more than 65 times. Democrats offered a 
number of amendments in Committee to point out serious flaws 
with the reconciliation package. For example, at the beginning 
of the markup, Democrats asked Republicans to postpone markup 
until CBO could provide a comprehensive report on costs, 
coverage losses, and premium effects of the reconciliation 
package.
    In that regard, Congressman Lloyd Doggett (D-TX) offered a 
motion to postpone the markup for one week to allow time for 
review of the bill and the CBO estimate that was not available 
prior to or during the markup. For over four decades, CBO has 
been recognized as the official referee of costs and effects of 
legislation passed in the House and Senate. Congress relies on 
CBO's non-partisan estimates to evaluate legislative proposals. 
Democrats were concerned that Republicans deliberately moved 
forward with the reconciliation package without a CBO score in 
an effort to conceal the harmful effects of the reconciliation 
package on nearly all Americans.
    The contrast of this rushed process versus the lengthy and 
transparent process of enacting the ACA is striking. In 2009, 
House Committees posted a draft of the ACA legislation for 
review and comment a month before the mark-up process began, 
holding multiple hearings and providing the public with two 
preliminary CBO estimates on July 8th and July 14th. Democrats 
maintain that there is no reason to rush to mark-up this 
reconciliation package without a CBO score, or without a 
hearing to consider the implications of the package. 
Congressman Doggett's amendment was tabled on a party line 
vote.
    The Republican legislation would repeal a 10 percent tax on 
tanning beds. Tanning salons have been the subject of much 
controversy for dishonest and misleading marketing, not to 
mention that improper use can be a health hazard. The World 
Health Organization and the National Toxicology Program 
classify indoor tanning beds as a ``known'' human 
carcinogen.\5\ The Melanoma Research Foundation found that as 
many as 90 percent of all melanoma cases are estimated to be 
caused by ultraviolet (UV) exposure. This includes UV exposure 
from the sun and from artificial sources, such as tanning 
beds.\6\ The Centers for Disease Control and Prevention warns 
that people who begin tanning during adolescence or early 
adulthood have a higher risk of melanoma, the deadliest type of 
skin cancer.
---------------------------------------------------------------------------
    \5\False and Misleading Health Information Provided to Teens by the 
Indoor Tanning Industry: Investigative Report, U.S. House of 
Representatives Committee on Energy and Commerce Minority Staff, 
February 1, 2012.
    \6\https://www.melanoma.org/understand-melanoma/preventing-
melanoma/why-is-tanning-dangerous
---------------------------------------------------------------------------
    According to the 2015 Youth Risk Behavior Surveillance 
System, indoor tanning is used by 7 percent of all high school 
students, 11 percent of high school girls, 16 percent of girls 
in the 12th grade and 15 percent of all white high school 
girls.\7\ Using tanning beds before age 30 has been found to 
increase one's risk of developing melanoma by 75 percent.\8\ 
The American Academy of Dermatology said in a letter to the 
Committee, ``The tanning tax appropriately reflects the 
carcinogenic effects of indoor tanning, and it is the desire of 
the Academy that the current federal tax on this activity 
remains in place as a deterrent to harmful behavior.'' Citing 
these and other public health concerns, Congresswoman Sanchez 
(D-CA) offered an amendment to strike the repeal of the tanning 
tax, which was defeated on party lines.

    \7\https://www.cdc.gov/cancer/skin_basic_info/indoor_tanning.htm
    \8\https://www.melanoma.org/understand-melanoma/preventing-
melanoma/why-is-tanning-dangerous
---------------------------------------------------------------------------
                                           Richard E. Neal,
                                                    Ranking Member.

                            COMMITTEE PRINT

Budget Reconciliation Legislative Recommendations Relating to Repeal of 
                               Tanning Tax

                   Subtitle __--Repeal of Tanning Tax

SEC. _1. REPEAL OF TANNING TAX.

  (a) In General.--The Internal Revenue Code of 1986 is amended 
by striking chapter 49.
  (b) Effective Date.--The amendment made by this section shall 
apply to services performed after December 31, 2017.

  

                                CONTENTS

                                                                   Page
SUBTITLE [D]--REMUNERATION FROM CERTAIN INSURERS.................   486
  I. SUMMARY AND BACKGROUND.........................................486
 II. EXPLANATION OF PROVISION.......................................487
III. VOTES OF THE COMMITTEE.........................................489
 IV. BUDGET EFFECTS OF THE PROVISION................................496
  V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.....497
 VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION 
     LEGISLATIVE RECOMMENDATIONS, AS TRANSMITTED....................498
VII. DISSENTING VIEWS...............................................499
            SUBTITLE [D]--REMUNERATION FROM CERTAIN INSURERS


                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    In fulfillment of the reconciliation instructions included 
in section 2002 of the Concurrent Resolution on the Budget for 
Fiscal Year 2017 (S. Con. Res. 3), the Committee on Ways and 
Means ordered favorably transmitted (with a quorum being 
present) the Budget Reconciliation Legislative Recommendations 
Relating to Remuneration from Certain Insurers. The Committee 
recommends repeal of section 162(m)(6) of the Internal Revenue 
Code of 1986 (``Code''),\1\ which precludes a health insurer 
from deducting compensation provided to a service provider for 
a year to the extent the compensation exceeds $500,000.
---------------------------------------------------------------------------
    \1\All section references herein are to the Code unless otherwise 
stated.
---------------------------------------------------------------------------

                 B. Background and Need for Legislation

    As the Committee continues to actively pursue comprehensive 
health care reform to relieve unnecessary burdens on the 
broader economy and on taxpayers in need of access to quality 
health care, the Committee believes that providing immediate 
relief from taxes imposing excessive constraints on choices and 
innovation serves as an important first step toward its broader 
goals. The Committee believes that repealing the deduction 
limit on compensation provided by certain health insurers to 
service providers will better enable such insurers to obtain 
the services needed to operate efficiently without reducing 
after-tax profits for investors or limiting additional benefits 
from being passed onto consumers. The Committee believes that 
health insurance providers should not be treated differently 
than other types of businesses for the purposes of deducting 
compensation.

                         C. Legislative History


Budget resolution

    On January 13, 2017, the House of Representatives approved 
S. Con. Res. 3, the budget resolution for fiscal year 2017. 
Pursuant to section 2002(a)(3) of S. Con. Res. 3, 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 $1,000,000,000 for the period of fiscal 
years 2017 through 2026.

Committee action

    Beginning March 8, 2017, in response to its instructions 
under the budget resolution, the Committee on Ways and Means 
marked up the budget reconciliation legislative recommendations 
relating to remuneration from certain insurers and ordered the 
legislative recommendations, as amended, favorably transmitted 
(with a quorum being present) on March 9, 2017.

Committee hearings

    The Committee on Ways and Means held hearings regarding the 
President's Fiscal Year 2017 budget submission on February 11, 
2016, and February 10, 2016 with Secretary of the Treasury 
Jacob J. Lew and Secretary of Health and Human Services Sylvia 
Burwell, respectively, in which the harmful effects of ACA 
taxes were discussed. Moreover, the Oversight Subcommittee held 
a hearing on March 5, 2013, discussing the tax-related 
provisions of the ACA.

                      II. EXPLANATION OF PROVISION


  A. Repeal of Deduction Limit on Remuneration From Health Insurance 
                               Providers


                              PRESENT LAW

    An employer generally may deduct reasonable compensation 
for personal services as an ordinary and necessary business 
expense.\2\ However, in the case of a covered health insurance 
provider, the deduction allowable for compensation attributable 
to services performed by an applicable individual during a 
taxable year (``applicable individual remuneration'') is 
limited to $500,000.\3\ In general, an insurance provider is a 
covered health insurance provider if at least 25 percent of the 
insurance provider's gross premium income from health business 
is derived from health insurance plans that provide minimum 
essential coverage.\4\ Applicable individuals include all 
officers, employees, directors, and other workers or service 
providers (such as consultants) performing services for or on 
behalf of a covered health insurance provider.
---------------------------------------------------------------------------
    \2\Sec. 162. However, under section 162(m)(1), in the case of a 
publicly held corporation, a deduction limit of $1 million generally 
applies to compensation of the principal executive officer or the three 
most highly compensated officers for the taxable year other than the 
principal executive officer. Certain types of compensation are excepted 
from the limit, including remuneration payable on a commission basis 
(``commission compensation'') and, if certain outside director and 
shareholder approval requirements are met, remuneration payable solely 
on account of the attainment of one or more performance goals 
(``performance-based compensation'').
    \3\Sec. 162(m)(6). All members of any controlled group of 
corporations (within the meaning of section 414(b)), other businesses 
under common control (within the meaning of section 414(c)), or 
affiliated service group (within the meaning of section 414(m) and (o)) 
are generally treated as a single employer for purposes of the 
deduction limit.
    \4\Minimum essential coverage is defined in section 5000A(f).
---------------------------------------------------------------------------
    Applicable individual remuneration includes all otherwise 
deductible compensation for a year except for payments to a 
qualified retirement plan (including salary reduction 
contributions) and benefits that are excludable from the 
applicable individual's gross income.\5\ The deduction limit 
applies without regard to whether compensation is otherwise 
deductible for the taxable year during which services are 
performed or a subsequent taxable year. In the case of 
compensation that relates to services that an applicable 
individual performs during a taxable year, but that is not 
deductible until a later year, such as nonqualified deferred 
compensation, the unused portion (if any) of the $500,000 limit 
for the year is carried forward until the year in which the 
compensation is otherwise deductible, and the remaining unused 
limit is then applied to the compensation.
---------------------------------------------------------------------------
    \5\Exceptions for commission compensation and performance-based 
compensation do not apply for purposes of this limit.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that the limit on the amount of 
compensation that a covered health insurer may deduct with 
respect to a service provider interferes with the insurer's 
ability to retain the services needed to operate most 
efficiently. In some cases, an insurer must either provide 
lower compensation, which limits its choice of service 
providers, or forego a compensation deduction, which reduces 
after-tax profits for investors or limits additional benefits 
from being passed onto consumers. The Committee believes that 
health insurance providers should not be treated differently 
than other types of businesses for the purposes of deducting 
compensation.

                        EXPLANATION OF PROVISION

    Under the provision, the limit on the deduction of a 
covered health insurance provider for compensation attributable 
to services performed by an applicable individual no longer 
applies.

                             EFFECTIVE DATE

    The provision is effective for taxable years beginning 
after December 31, 2017.
                      III. 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 the Reconciliation Legislative Recommendations 
Relating to Remuneration from Certain Insurers on March 8, 
2017.
    Mr. Tiberi's motion to table Mr. Doggett's motion to 
postpone was agreed to by a roll call vote of 22 yeas to 16 
nays (with a quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................    .....   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................    .....   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    Mr. Tiberi's motion to table Mr. Blumenauer's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 23 
yeas and 16 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................     ....   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    Mr. Tiberi's motion to table Mr. Doggett's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 23 
yeas and 16 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................    .....   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    Mr. Tiberi's motion to table Mr. Levin's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 23 
yeas and 16 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................    .....   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    Mr. Tiberi's motion to table Mr. Crowley's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 23 
yeas and 16 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................    .....   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    Mr. Tiberi's motion to table Mr. Kind's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 23 
yeas and 16 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................    .....   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    Mr. Tiberi's motion to table Mr. Neal's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 23 
yeas and 16 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................    .....   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    Mr. Tiberi's motion to table Mr. Higgins's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 23 
yeas and 15 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................    .....   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........    .....   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    Mr. Tiberi's motion to table Mr. Thompson's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 23 
yeas and 16 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................    .....   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    Mr. Tiberi's motion to table Mr. Lewis's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 23 
yeas and 15 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................    .....   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........  ........  .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    Mr. Tiberi's motion to table Mr. Pascrell's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 22 
yeas and 15 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................    .....   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................    .....   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........    .....   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    Mr. Tiberi's motion to table Mr. Davis's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 20 
yeas and 16 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................    .....   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................    .....   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X
Mr. Holding....................        X
Mr. Smith (MO).................    .....
Mr. Rice.......................        X
Mr. Schweikert.................        X
Ms. Walorski...................        X
Mr. Curbelo....................    .....
Mr. Bishop.....................        X
----------------------------------------------------------------------------------------------------------------

    Mr. Tiberi's motion to table Ms. Sewell's appeal of the 
ruling of the Chair was agreed to by a roll call vote of 23 
yeas and 16 nays (with a quorum being present). The vote was as 
follows:

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
            Representative                        Yea                             Nay                    Present  Representative     Yea                Nay             Present
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Mr. Brady............................  X.......................  .....................................  ........    Mr. Neal      .........  X.......................  ........
Mr. Johnson..........................  X.......................  .....................................  ........   Mr. Levin      .........  X.......................  ........
Mr. Nunes............................  X.......................  .....................................  ........   Mr. Lewis      .........  X.......................  ........
Mr. Tiberi...........................  X.......................  .....................................  ........  Mr. Doggett     .........  X.......................  ........
Mr. Reichert.........................  X.......................  .....................................  ........  Mr. Thompson    .........  X.......................  ........
Mr. Roskam...........................  X.......................  .....................................  ........  Mr. Larson      .........  X.......................  ........
Mr. Buchanan.........................  X.......................  .....................................  ........  Mr. Blumenauer  .........  X.......................  ........
Mr. Smith (NE).......................  X.......................  .....................................  ........    Mr. Kind      .........  X.......................  ........
Ms. Jenkins..........................  ........................  .....................................  ........  Mr. Pascrell    .........  X.......................  ........
Mr. Paulsen..........................  X.......................  .....................................  ........        Mr. Crowle.........  X.......................  ........
Mr. Marchant.........................  X.......................  .....................................  ........   Mr. Davis      .........  X.......................  ........
Ms. Black............................  X.......................  .....................................  ........  Ms. Sanchez     .........  X.......................  ........
Mr. Reed.............................  X.......................  .....................................  ........  Mr. Higgins     .........  X.......................  ........
Mr. Kelly............................  X.......................  .....................................  ........  Ms. Sewell      .........  X.......................  ........
Mr. Renacci..........................  X.......................  .....................................  ........  Ms. DelBene     .........  X.......................  ........
Mr. Meehan...........................  X.......................  .....................................  ........        Ms. Chu   .........  X.......................  ........
Ms. Noem.............................  X.......................  .....................................  ........
Mr. Holding..........................  X.......................  .....................................  ........
Mr. Smith (MO).......................  X.......................  .....................................  ........
Mr. Rice.............................  X.......................  .....................................  ........
Mr. Schweikert.......................  X.......................  .....................................  ........
Ms. Walorski.........................  X.......................  .....................................  ........
Mr. Curbelo..........................  X.......................  .....................................  ........
Mr. Bishop...........................  X.......................  .....................................  ........
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    The legislation was ordered favorably transmitted to the 
House Committee on the Budget as amended by a roll call vote of 
23 yeas and 16 nays (with a quorum being present). The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Ms. Jenkins....................    .....   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Davis........  ........        X   .........
Ms. Black......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Reed.......................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Kelly......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Meehan.....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                  IV. BUDGET EFFECTS OF THE PROVISION


               A. 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 
Remuneration from Certain Insurers.''
    The budget reconciliation legislative recommendations, as 
transmitted, are estimated to have the following effects on 
budget receipts for fiscal years 2017-2026:

----------------------------------------------------------------------------------------------------------------
                                    By fiscal years, in billions of dollars--
-----------------------------------------------------------------------------------------------------------------
    2017       2018     2019     2020     2021     2022     2023     2024     2025     2026    2017-21   2017-26
----------------------------------------------------------------------------------------------------------------
    - - -        [1]      [1]      [1]     -0.1     -0.1     -0.1     -0.1     -0.1     -0.1     -0.1     -0.4
----------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding.

    Pursuant to clause 8 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 bill amending the Internal Revenue Code of 1986: the gross 
budgetary effect (before incorporating macroeconomic effects) 
in any fiscal year is less than 0.25 percent of the current 
projected gross domestic product of the United States for that 
fiscal year; therefore, the bill is not ``major legislation'' 
for purposes of requiring that the estimate include the 
budgetary effects of changes in economic output, employment, 
capital stock and other macroeconomic variables.

B. 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.

      C. 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, refer to Subtitle E.

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


          A. Committee Oversight Findings and Recommendations

    Pursuant to 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 into 
the description portions of this report.

        B. 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 recommendations contain no 
measure that authorizes funding, so no statement of general 
performance goals and objectives for which any measure 
authorizing funding is required.

              C. 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 recommendations do not contain any private sector 
mandates. The Committee has determined that the budget 
reconciliation legislative recommendations do not impose any 
Federal intergovernmental mandates on State, local, or tribal 
governments.

                D. 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 recommendations and states that the provisions of 
the legislative recommendations do not involve any Federal 
income tax rate increases within the meaning of the rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 (``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.

  F. 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 
recommendations and states that the provisions of the 
legislative recommendations do not contain any congressional 
earmarks, limited tax benefits, or limited tariff benefits 
within the meaning of the rule.

                   G. Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
budget reconciliation legislative recommendation does not 
establish or reauthorize: (1) a program of the Federal 
Government known to be duplicative of another Federal program, 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139, or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to section 6104 of title 31, 
United States Code.

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), 
the following statement is made concerning directed rule 
makings: The Committee advises that the budget reconciliation 
legislative recommendations require no directed rule makings 
within the meaning of such section.

     VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION 
               LEGISLATIVE RECOMMENDATION, AS TRANSMITTED

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes to existing law made by 
the recommendations, as reported, are shown in Subtitle E of 
title II.

                         VII. DISSENTING VIEWS

  DISSENTING VIEWS ON RECOMMENDATION TO PROVIDE A TAX BREAK TO HEALTH 
    INSURANCE COMPANIES THAT PAY EXCESSIVE EXECUTIVE COMPENSATION, 
                           COMMITTEE PRINT 1

    1. Donald Trump promised that ``we're going to have 
insurance for everybody . . . [but it will be] much less 
expensive and much better.'' This bill reveals those promises 
for what they always were: empty campaign rhetoric.''--Families 
USA\1\
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    \1\http://familiesusa.org/blog/2017/03/healthy-and-wealthy-benefit-
under-house-repubican-affordable-care-act-repeal-plan
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    2. ``We cannot support the AHCA as drafted because of the 
expected decline in health insurance coverage and the potential 
harm it would cause to vulnerable patient populations.''--
American Medical Association\2\
---------------------------------------------------------------------------
    \2\https://www.ama-assn.org/sites/default/files/media-browser/
public/washington/ama-letter-on-ahca.pdf
---------------------------------------------------------------------------
    3. ``Repeal-and-replace is a gigantic transfer of wealth 
from the lowest-income Americans to the highest-income 
Americans.''--Edward D. Kleinbard, former chief of staff for 
the Joint Committee on Taxation and professor, University of 
Southern California School of Law.\3\
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    \3\https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-
care-act-repeal.html?_r=l
---------------------------------------------------------------------------
    The five reconciliation legislative recommendations 
considered by the Committee on Ways and Means (the 
``Committee'') and referred to the Committee on Budget 
(collectively, the Ways and Means reconciliation package or the 
``reconciliation package'') was a far-reaching attempt to 
undermine our health systems from Medicare to employer 
sponsored health insurance in order to give tax cuts to the 
wealthiest and corporations. After almost 18 hours of debate, 
the Committee mark-up ended with a party-line vote on the 
reconciliation package, which is likely to take health 
insurance away from millions of Americans. This reconciliation 
package, coupled with what was passed out of the Energy and 
Commerce Committee, would harm access to health care for 
middle-class Americans and undermine Medicare's long-term 
viability while cutting taxes for corporations and the 
wealthiest Americans.
    The Committee moved forward irresponsibly, without any 
official accounting about the estimated effect of the 
reconciliation package on health insurance coverage, out-of-
pocket costs, or premium increases. While the Joint Committee 
on Taxation (JCT) estimated that the reconciliation package 
includes nearly $600 billion worth of tax breaks, as of the 
mark-up, the Congressional Budget Office (CBO) was unable to 
provide estimates about the package's effect on American 
families. Additionally the JCT score was incomplete as of the 
mark-up and did not provide an official accounting of all of 
the provisions considered by the Committee. Both the Ways and 
Means and Energy and Commerce Committees moved forward to pass 
recommendations out of each Committee without any sense from 
CBO of coverage losses due to the severe cuts to Medicaid, the 
repeal of the individual and employer-shared responsibility 
provisions of current law, or the changes in the tax credits 
available to help purchase health insurance on the individual 
market.
    CBO provided the Committee an estimate of the effects after 
the reconciliation package was reported to the Committee on 
Budget from the Ways and Means and Energy and Commerce 
Committees. This estimate showed that 24 million Americans 
would lose coverage, with 14 million Americans losing coverage 
in the first year alone.
    The Committee's reconciliation package provided generous 
tax cuts to the wealthiest, while reducing health insurance 
assistance for middle-class Americans. The tax breaks 
considered by the Committee are focused on the wealthy 
individuals and corporations, instead on middle-class 
Americans. About $275 billion in tax breaks would benefit high-
income earners; about 62% of the tax breaks would go to 
millionaires in 2020. Businesses and corporations would receive 
nearly $192 billion in tax cuts. These and other tax breaks add 
up to nearly $600 billion in lost revenue.
    Democrats objected strenuously to the Republican approach 
and instead believe the Committee should focus on policies that 
matter to middle-class Americans under the jurisdiction of this 
Committee, including financing long-term infrastructure, 
reforming the tax system to address income inequality, and 
further building on President Obama's record of job creation. 
Democrats believe that the reconciliation package will 
destabilize the health insurance market, which represents 18 
percent of our gross domestic product.
    The reconciliation package continues Republican efforts to 
undermine and destabilize the health insurance market. It 
undermines current law and the stability of both the individual 
and group health insurance markets by gutting individual and 
employer-shared responsibility provisions. The reconciliation 
package would reduce the uptake of the premium tax credits and 
the Medicaid expansion established in the Affordable Care Act 
(ACA), which have made health care affordable for millions of 
individuals. Reduced uptake of the Medicaid expansion and the 
tax credits disproportionately impacts low- and middle-income 
Americans and places them at risk for health insecurity and 
unexpected medical expenses. Based on independent estimates, 
roughly 24 million Americans would lose their insurance 
coverage because of this reconciliation package when taken 
together with the reconciliation recommendations passed by the 
Energy and Commerce Committee.\4\ Further, this reconciliation 
package reduces the life of the Medicare Trust Fund by three 
years by reducing $170 billion from the Medicare Trust Fund, 
which puts Medicare at risk for 57 million seniors and 
individuals with disabilities.
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    \4\https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-
cbo-to-estimate-large-coverage-losses-from-the-gop-health-care-plan/
---------------------------------------------------------------------------
    Individual and employer-shared responsibility provisions 
are key to maintaining the robust and healthy risk pools that 
allow the ACA health insurance reforms to improve consumer 
protections while controlling health care costs. This is 
because well-functioning insurance markets rely on 
participation of both healthy and sick individuals to spread 
risk across the pool. The reconciliation package effectively 
would repeal the individual and employer-shared responsibility 
penalty, leading to premium increases of an estimated 20 
percent in the individual market alone. In spite of President 
Trump and Congressional Republicans' efforts to sabotage the 
ACA, millions of Americans have enrolled in the health 
insurance Marketplaces, many using the available financial 
assistance, and millions more have enrolled in expanded 
Medicaid programs.
    Despite promises made by President Trump, the 
reconciliation package would not cover more people or offer 
more affordable coverage with comparable benefits. Instead, 
this package leads to an estimated coverage loss of 24 million 
people while gutting benefits and consumer protections as a 
mechanism for affordability. When coupled with the legislation 
passed out of the Energy and Commerce Committee, the 
reconciliation package would return to a time when the market 
once again discriminates against those with pre-existing 
conditions and leaves those that might need medical care in the 
future without meaningful coverage. The reconciliation package 
provides for tax credits less generous than current law with no 
assistance with out-of-pocket expenses. Instead, the 
reconciliation package enshrines high deductible health plans 
that would increase out-of-pocket expenses. However, these 
plans do not address the underlying issues of access to quality 
services and the cost of care.
    Since January of 2009, the Republicans voted to repeal or 
undermine the ACA more than 65 times. Democrats offered a 
number of amendments in Committee to point out serious flaws 
with the reconciliation package. For example, at the beginning 
of the mark up, Democrats asked Republicans to postpone mark up 
until CBO could provide a comprehensive report on costs, 
coverage losses, and premium effects of the reconciliation 
package.
    In that regard, Congressman Lloyd Doggett (D-TX) offered a 
motion to postpone the markup for one week to allow time for 
review of the bill and the CBO estimate that was not available 
prior to or during the mark up. For over four decades, CBO has 
been recognized as the official referee of costs and effects of 
legislation passed in the House and Senate. Congress relies on 
CBO's non-partisan estimates to evaluate legislative proposals. 
Democrats were concerned that Republicans deliberately moved 
forward with the reconciliation package without a CBO score in 
an effort to conceal the harmful effects of the reconciliation 
package on nearly all Americans.
    The contrast of this rushed process versus the lengthy and 
transparent process of enacting the ACA is striking. In 2009, 
House Committees posted a draft of the ACA legislation for 
review and comment a month before the mark-up process began, 
holding multiple hearings and providing the public with two 
preliminary CBO estimates on July 8th and July 14th. Democrats 
maintain that there is no reason to rush to mark-up this 
reconciliation package without a CBO score, or without a 
hearing to consider the implications of the package. 
Congressman Doggett's amendment was tabled on a party line 
vote.
    The reconciliation recommendation contained in this 
Committee Print gives a $400 million tax break to corporations 
by providing a deduction for health insurance company executive 
salaries in excess of $500,000. In 2013, the 10 biggest health 
insurance companies paid their top 57 executives a total of 
$300 million. Democrats expressed significant concerns that 
this reconciliation recommendation was a boondoggle for health 
insurance company executives. Because the ACA capped the amount 
insurance companies could deduct for executive salaries at a 
lower amount, these companies were able to deduct only 27% of 
this total. If the Republicans reopen this loophole, these 
insurance companies would be able to deduct 96%.\5\ Opening a 
tax loophole for executive compensation would do nothing to 
make insurance more affordable for middle-class Americans.
---------------------------------------------------------------------------
    \5\http://www.ips-dc.org/wp-content/uploads/2014/08/EE14_Final1.pdf
---------------------------------------------------------------------------
    The reconciliation recommendations before the Committee 
were structured in such a way to significantly curtail the 
germaneness of amendments that Democrats might wish to offer. 
Nevertheless, Democrats offered a series of amendments to 
highlight the reconciliation package's serious shortcomings, 
virtually all of which were ruled non-germane by Chairman Kevin 
Brady (R-TX) and appealed by Democrat Members. The appeals were 
then defeated by party-line votes.
    Congressman Earl Blumenauer (D-OR) offered an amendment to 
ensure the reconciliation package met the test that President 
Trump laid out for his health care plan. The amendment stated 
that the reconciliation package does not take effect unless the 
CBO certifies that everybody gets health insurance as a result 
of the package. President Trump noted, ``Everybody's got to be 
covered. This is an un-Republican thing for me to say because a 
lot of times they say, `No, no, the lower 25 percent that can't 
afford private.' But--I am going to take care of everybody. I 
don't care if it costs me votes or not. Everybody's going to be 
taken care of much better than they're taken care of now . . . 
They're going to be taken care of.''\6\ Chairman Brady ruled 
the amendment not in order.
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    \6\http://www.cbsnews.com/news/donald-trump-60-minutes-scott-
pelley/
---------------------------------------------------------------------------
    Tax Policy Subcommittee Ranking Member Congressman Doggett 
(D-TX) offered an amendment to request that the Ways and Means 
Committee use its oversight authority to obtain and review 
President Trump's tax returns from the Treasury Department in 
accordance with 6103(f)(1). Chairman Brady ruled the amendment 
not in order.
    Health Subcommittee Ranking Member Levin (D-MI) offered an 
amendment to require that a CBO score of the GOP health care 
bill be made public for at least 7 days before a vote on the 
bill in the House, to allow for transparency and time for 
Members and the public to understand the effects of the 
legislation. Despite Chairman Brady's call for transparency, 
Chairman Brady ruled the amendment not in order.
    Congressman Joe Crowley (D-NY) offered an amendment 
identical to one that Chairman Brady offered in the 2009 mark 
up of the health care bill relating to transparency. The 
amendment would have expressed the Sense of the Congress that 
prior to voting on this bill, each Member certifies in the 
Congressional Record that he or she has read the entire bill. 
The amendment would further express the sense that the bill 
should be available to the public for 72 hours prior to the 
vote. Although this exact amendment was ruled germane in 2009 
by then Chairman Charles Rangel (D-NY), Chairman Brady ruled 
the amendment not in order.
    Given the reconciliation package proposes enormous tax cuts 
of nearly $600 billion and likely dramatic declines in the 
number of Americans with health insurance, Congressman Ron Kind 
(D-WI) offered an amendment to promote fiscal and moral 
responsibility. His amendment would have required the 
Republican health care bill to be fully paid for and not 
increase the number of uninsured Americans. This amendment was 
again ruled not in order by Chairman Brady.
    I offered an amendment to protect against job loss at local 
hospitals. Hospital associations have noted that repealing the 
ACA combined with the loss of health insurance for millions of 
Americans would lead to a large increase in uncompensated care 
that could threaten hospital viability. Uninsured people often 
must pay ``up front'' before services will be rendered. Between 
2013 and 2014, total uncompensated care costs for hospitals 
(including charity care costs and bad debt) dropped from $34.9 
billion to $28.9 billion, a $6 billion or 17% drop, with nearly 
all of the decrease occurring in expansion states. One hospital 
association stated in response to this bill that, ``Our 
hospitals could not sustain such reductions without scaling 
back services or eliminating jobs.''\7\ Repealing all or part 
of the ACA would increase the number of uninsured, increasing 
hospital uncompensated care costs and bad debt from unpaid 
medical bills. Chairman Brady ruled the amendment non-germane.
---------------------------------------------------------------------------
    \7\https://essentialhospitals.org/general/statement-on-house-
reconciliation-legislation/
---------------------------------------------------------------------------
    Congressman Brian Higgins (D-NY) offered an amendment to 
protect older Americans from increased costs or reduced 
benefits. Independent analysis indicated that under the GOP 
bill, in 2020 the average enrollee who purchases their own 
insurance would see costs increase by $2,409. For those age 55-
64, they would see costs increase $6,971. Independent analyses 
found that this price increase for older Americans will cause 
nearly half-a-million older Americans to become uninsured.
    Organizations representing older Americans have expressed 
serious concerns with the Republican proposal. AARP noted, ``We 
write today to express our opposition to the American Health 
Care Act. This bill would weaken Medicare's fiscal 
sustainability, dramatically increase health care costs for 
Americans aged 50-64, and put at risk the health care of 
millions of children and adults with disabilities, and poor 
seniors who depend on the Medicaid program for long-term 
services and supports and other benefits.'' The organization 
continues to observe that, ``Age rating plus premium increases 
equal an unaffordable age tax.'' Chairman Brady ruled 
Congressman Higgins' amendment out of order.
    Congressman Mike Thompson (D-CA) offered an amendment that 
would enable states to opt out of the GOP health care bill and 
keep the health care options provided under the ACA. Millions 
of Americans across the nation have benefitted from the past 
seven years of the Affordable Care Act. Others have 
comprehensive coverage today that they would like to keep. The 
Republican legislation replaces current flexible and consumer-
friendly law with a one-size-fits-all Republican mandated plan 
that would impose significant hardship on states. Many 
Governors have expressed concern that repealing the ACA would 
harm their residents. Regarding the GOP plan, the Democratic 
Governors Association noted, ``Yet the only flexibility being 
offered is deciding which of our vulnerable communities to 
deprive of health coverage--those battling opioid addiction, 
low-income families, senior citizens, or people with 
disabilities.''
    Further building on the theme of ensuring Americans do not 
lose what they have today, Congressman John Lewis (D-GA) 
offered an amendment that would require that the Republican 
bill not result in loss of coverage or an increase in the 
number of uninsured individuals. The Brookings Institution 
estimates that coverage loss under the legislation could range 
from a low of 15 million to more than 20 million Americans.\8\ 
Adults who are uninsured are three times more likely than 
insured adults to say they have not seen or spoken with a 
medical provider about their health in the past year.\9\ 
Uninsured Americans are less likely to receive recommended 
screening tests such as blood pressure checks, cholesterol 
checks, blood sugar screening, pap smear or mammogram (among 
women), and colon cancer screening.\10\ Lacking insurance also 
is a major factor driving individuals into debt. Uninsured 
people are more likely than those with insurance (53% vs. 20%) 
to report having trouble paying or being unable to pay medical 
bills in the past year.\11\ In 2015, 27% of uninsured adults 
reported that medical bills caused them to use up all or most 
of their savings, 21% said they led to difficulties paying for 
basic necessities, 22% said it led them to borrow money, and 
27% said it led to being contacted by a collection agency.\12\ 
Democrats believe it is impotiant for health and financial 
security that Americans are able to retain insurance coverage. 
The coverage losses under the Republican bill are likely to 
worsen health outcomes and drive millions into debt. Chairman 
Brady ruled Congressman Thompson's amendment out of order.
---------------------------------------------------------------------------
    \8\https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-
cbo-to-estimate-large-coverage-losses-from-the gop-health-care-plan/
    \9\http://files.kff.org/attachment/Report-The-Uninsured-A%20Primer-
Key-Facts-about-Health-lns urance-and-the Unisured-in-America-in-the-
Era-of-Health-Reform
    \10\http://files.kff.org/attachment/Report-The-Uninsured-
A%20Primer-Key-Facts-about-Health-Insurance-and-the-Unisured-in-
America-in-the-Era-of-Health-Reform
    \11\http://kff.org/uninsured/fact-sheet/key-facts-about-the-
uninsured-population/
    \12\http://kff.org/report-section/the-uninsured-a-primer-key-facts-
about-health-insurance-and-the-uninsured-in-the-wake-of-national-
health-reform-what-are-the-financial-implications-of-lacking-coverage/
---------------------------------------------------------------------------
    Congressman Bill Pascrell (D-NJ) offered an amendment to 
prevent middle-class tax increases and require the GOP health 
care bill to not increase taxes on families earning less than 
$250,000 per year. This amendment was nearly identical to an 
amendment offered by Rep. Cathy McMorris Rodgers (R-WA) during 
the passage of the ACA in 2009. Democrats are concerned that 
while more than 60 percent of the tax giveaways in the 
Republican package go to millionaires, ordinary Americans will 
suffer tax increases as Republicans dramatically reduce the 
value of the tax subsidy for individuals purchasing their own 
health insurance. Chairman Brady again ruled this amendment out 
of order.
    Congressman Danny Davis (D-IL) offered an amendment to 
prohibit provisions of the bill from taking effect if the 
Institute of Medicine certified that coverage for individuals 
with mental health and substance abuse issues would decrease, 
or out-of-pocket costs would increase. The United States is 
struggling to improve access to mental health treatment and 
also with an epidemic of opiate addiction. Numerous studies 
have documented that repealing current law, including 
provisions that extend coverage to working Americans, would set 
efforts to improve treatment for mental health and substance 
abuse back significantly.\13\ Chairman Brady ruled Congressman 
Davis' amendment out of order.
---------------------------------------------------------------------------
    \13\http://thehill.com/blogs/pundits-blog/healthcare/313672-keep-
obamacare-to-keep-progress-on-treating-opioiddisorders; https://
www.acponline.org/system/files/documents/advocacy/where_we_stand/
assets/fact_sheet_impact_a ca_repeal_2016.pdf
---------------------------------------------------------------------------
     Recognizing that rural America has benefitted 
significantly from the current law, Congresswoman Terri Sewell 
(D-AL) offered an amendment to protect rural hospitals and jobs 
from the negative effects of the Republican bill. Rural 
individuals saw greater gains in insurance coverage under the 
Affordable Care Act compared with urban individuals (7.2 
percentage point increase versus 6.3 percentage point increase 
for urban areas) and some rural communities experienced even 
larger decreases in the number of uninsured. Historically, 
rural residents are not only more likely to be uninsured but 
also suffer longer periods of uninsurance, leading rural 
residents to be denied coverage or charged more for pre-
existing conditions. Further, rural communities tend to be 
high-cost areas for insurance coverage. As a result, the flat 
tax credits not pegged to local affordability would 
particularly harm rural communities. Decreased stability in 
insurance markets would make insurance companies less likely to 
offer comprehensive coverage in rural areas. The Republican 
bill undermines current law protections on access to affordable 
coverage and could disproportionately harm those in rural 
areas. Chairman Brady ruled Congressman Sewell's amendment out 
of order.
    Congresswoman Linda Sanchez (D-CA) offered an amendment to 
repeal the high-cost plan excise tax (often called the Cadillac 
tax). The tax unfairly reduces health benefits for employees 
who have these plans, particularly those with expensive chronic 
illnesses. The AFL-CIO noted, ``Far from providing an 
improvement on the coverage provided by the ACA, this 
Republican alternative will result in millions of Americans 
losing their coverage. . . . Estimates from the Mercer Firm 
find that by the time the AHCA imposes the tax in 2025, the 
coverage provided by more than 40% of employers with 50+ 
workers would be impacted by the tax. CBO predicts that the 
vast majority of employers confronted with this tax are 
expected to shift costs to their workers by increasing 
deductibles, copays, co-insurance, and maximum out of pocket 
limits to avoid paying the tax.''\14\ One study notes, ``The 
tax subsidy is a big help for people with (2009) family incomes 
of $38,550 to $100,000, but not for those with lower or higher 
incomes.'' The authors further comment that the new tax on 
benefits ``will hit the middle class hardest and spare the 
wealthy.''\15\ The Republican bill repeals the revenue raisers 
in the Affordable Care Act that affect the wealthy and 
corporations, but would not repeal the tax that could affect 
middle-class workers. Chairman Brady ruled Congresswoman 
Sanchez's amendment out of order.
---------------------------------------------------------------------------
    \14\AFL-CIO letter from William Samuels to Congresswoman Sanchez, 
March 8, 2017.
    \15\``The `Cadillac Tax' on Health Benefits in the United States 
Will Hit the Middle Class Hardest: Refuting the Myth that Health 
Benefit Tax Subsidies Are Regressive,'' by Steffie Woolhandler, M.D., 
M.P.H., and David U. Himmelstein, M.D., International Journal of Health 
Services, OnlineFirst ahead of print, first published on March 9, 2016, 
as doi:10.1177/0020731416637163
---------------------------------------------------------------------------
    Finally, once all amendments were voted down on partisan 
votes, Republicans defeated an amendment on party lines that 
would have struck the provision providing a tax break to health 
insurance companies.
                                   Richard E. Neal,
                                           Ranking Member.
                      Ranking Member Richard Neal


                           Opening Statement


               Ways and Means Committee ACA Repeal Markup


                        Wednesday, March 8, 2017

    Mr. Chairman, I am disappointed we are here today to 
consider legislation that reflects not only bad policy, but bad 
process. And a number of important groups agree: AARP, AMA and 
AHA all oppose this bill. This bill suffers from an identity 
crisis. Is this a health care bill or a tax cut bill?
    Does it lower costs? No.
    Does it bend the cost curve? No.
    Does it cover more Americans? No.
    Does it cut the deficit? No.
    Even the President wants more information--earlier this 
year he called it an ``unbelievably complex subject. Nobody 
knew healthcare could be so complicated.'' This Republican 
bill--which they cleverly broke up into separate parts to try 
to distract the American public--fails to protect 152 million 
Americans with pre-existing conditions and would allow insurers 
to charge older people five times as much as younger people, 
essentially implementing an ``age tax''. It forces millions to 
pay more for less care.
    Transparency is clearly lacking in this process. As 
recently as last week, I called upon House Republicans to 
provide an open and transparent process when they consider any 
health care legislation aimed at repealing or replacing the 
Affordable Care Act. The goal: to ensure all Americans had the 
opportunity to fully understand and consider how any Republican 
health care plan could impact them. Instead, the Republicans 
hid a draft bill somewhere in the basement of the Capitol with 
armed police officers. That is as far as you can get from 
transparency. The American public deserve better from their 
representatives. Also to consider a bill of this magnitude 
without a CBO score is not only puzzling and concerning, but 
also irresponsible. When the Democrats created the Affordable 
Care Act, it was a thoroughly transparent and open process. 
Let's look at the numbers:

In the House

       79 bipartisan health insurance reform hearings 
and markups over 2 years
       100 hours in hearings
       181 witnesses from both sides of the aisle
       239 Republican and Democrat amendments--121 were 
accepted
       30 days of online review of the original House 
bill before the first markup
       72 hours--number of hours the House bill was 
online for review before final vote
       3,000 health care town halls and public events

In the Senate

       53 health insurance reform hearings in the 
Senate Finance Committee
       8 days of markups with 135 amendments considered 
in Senate Finance Committee
       47 bipartisan hearings and other open dialogues 
with 300 amendments during a 13 day markup in the Senate HELP 
Committee
       25 consecutive days in session to discuss health 
reform in the Senate
       160 hours total in the Senate considering health 
reform legislation
       147 Republican amendments in the final Senate 
bill
    This bill sabotages the Marketplaces where close to 10 
million Americans today get coverage and starts a death spiral 
from which we will never recover. Healthy people won't bother 
with coverage or only buy bare bones policies. Sick people who 
need coverage would buy policies--if they are even available--
that will undoubtedly become more and more expensive and 
unaffordable, especially in light of the inadequate tax 
credits.
    The most egregious part of the Republican plan slashes 
Medicaid funding to pay for tax cuts that benefit the rich. 
Medicaid helps pay the costs for more than 60% of all nursing 
home residents nationwide, and helps families afford quality 
nursing home care for their elderly parents and family members 
with disabilities. The Republican Medicaid proposal makes it 
harder and much costlier for families to find long-term care 
for elderly parents or children with severe disabilities.
    In addition, it would end the Medicaid expansion--a move 
that would have devastating consequences in my state of 
Massachusetts where it has been a critical tool for thousands 
of individuals and families with loved ones in long-term care 
facilities or who have dementia. It also provides 
rehabilitation options for individuals and families in the 
grips of opioid addiction. The reality is that Medicaid is now 
a middle-class benefit.
    The measure also would cut the span of Medicare by two 
years at a time when millions of baby boomers are joining and 
will rely heavily on this critical program. It's a $170 billion 
tax giveaway to the wealthy, while starving the Medicare trust 
fund.
    Hospitals would face crippling debt as they face increased 
uncompensated care and lower reimbursement rates. In turn, this 
would lead to job loss in many hospitals and have a negative 
ripple effect in communities where hospitals are the largest 
employer. For example, in Western Massachusetts, Baystate 
Healthy provides 12,000 jobs and has a $4 billion statewide 
economic impact.
    Let's call this bill what it is: a plan that creates chaos 
in the insurance market that directly impacts patients and 
providers, hurts hospitals, the communities they serve and 
their regional economies.
    Before concluding, I would like to note that today's markup 
is really the Republicans' first step on tax reform. This 
legislation is a tax bill; almost every provision amends the 
Internal Revenue Code. So, we need to view this bill through 
the lens of tax reform as well. And through that lens, the bill 
fails the test set out by Secretary Mnuchin for tax reform 
that, ``there will be no absolute tax cut for the upper 
class.'' The Republican bill absolutely provides a tax cut for 
the wealthy and health care industry of almost $600 billion 
dollars. In fact, it has been estimated that 400 households 
with the highest-income would receive tax cuts averaging about 
$7 million apiece each year. At the same time, the bill hurts 
the middle-class through less generous tax credits, cuts to 
Medicaid and higher premiums with less quality care.
    Bottom line: this is ultimately about affordability. If 
Republicans take away critical coverage benefits in the ACA 
coupled with hurting the middle-class, it would drastically 
increase costs and lower coverage and quality care. As the 
Republicans have heard loud and clear during town halls, people 
are afraid of losing their health insurance. It would be 
irresponsible for Republicans to take away health care programs 
on which their constituents across a broad age and economic 
spectrum depend.

                            COMMITTEE PRINT

     Budget Reconciliation Legislative Recommendations Relating to 
                   Remuneration from Certain Insurers

            Subtitle __--Remuneration From Certain Insurers

SEC. _1. REMUNERATION FROM CERTAIN INSURERS.

  Paragraph (6) of section 162(m) of the Internal Revenue Code 
of 1986 is amended by adding at the end the following new 
subparagraph:
                  ``(I) Termination.--This paragraph shall not 
                apply to taxable years beginning after December 
                31, 2017.''.

  

                                CONTENTS

                                                                   Page
SUBTITLE E--REVENUE PROVISIONS...................................   514
  I. SUMMARY AND BACKGROUND.........................................514
 II. EXPLANATION OF PROVISION.......................................515
III. VOTES OF THE COMMITTEE.........................................517
 IV. BUDGET EFFECTS OF THE PROVISION................................518
  V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.....553
 VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION 
     LEGISLATIVE RECOMMENDATIONS, AS TRANSMITTED....................555
VII. DISSENTING VIEWS...............................................731
           SUBTITLE [E]--REPEAL OF NET INVESTMENT INCOME TAX


                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    In fulfillment of the reconciliation instructions included 
in section 2002 of the Concurrent Resolution on the Budget for 
Fiscal Year 2017 (S. Con. Res. 3), the Committee on Ways and 
Means ordered favorably transmitted (with a quorum being 
present) the Budget Reconciliation Legislative Recommendations 
Relating to Repeal of the Net Investment Income Tax. The 
Committee recommends the repeal of the net investment income 
tax. The Patient Protection and Affordable Care Act of 2010 
(``PPACA''), Pub. L. No. 111-148 (March 23, 2010), as amended 
by the Health Care and Education Reconciliation Act of 2010 
(``HCERA''), Pub. L. No. 111-152 (March 30, 2010),\1\ imposes a 
tax of 3.8-percent on net investment income for taxpayers whose 
modified adjusted gross income exceeds $250,000 (in the case of 
joint filers) and $200,000 (in the case of other filers). The 
Committee's recommendation strikes chapter 2A of subtitle A of 
the Internal Revenue Code of 1986, as added and amended by 
PPACA and HCERA.
---------------------------------------------------------------------------
    \1\PPACA and HCERA are collectively referred to as the Affordable 
Care Act (``ACA'').
---------------------------------------------------------------------------

                 B. Background and Need for Legislation

    As the Committee continues to actively pursue comprehensive 
health care reform to relieve unnecessary burdens on the 
broader economy and on taxpayers in need of access to quality 
health care, the Committee believes that repealing the 
additional 3.8-percent tax on net investment income will 
improve the efficiency of capital markets and promote long-run 
economic growth.

                         C. Legislative History


Budget resolution

    On January 13, 2017, the House of Representatives approved 
S. Con. Res. 3, the budget resolution for fiscal year 2017. 
Pursuant to section 2002(a)(3) of S. Con. Res. 3, 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 $1,000,000,000 for the period of fiscal 
years 2017 through 2026.

Committee action

    Beginning March 8, 2017, in response to its instructions 
under the budget resolution, the Committee on Ways and Means 
marked up the budget reconciliation legislative recommendations 
relating to repeal of the tax on net investment income under 
PPACA and ordered the legislative recommendations, as amended, 
favorably transmitted (with a quorum being present) on March 9, 
2017.

Committee hearings

    The Committee on Ways and Means held hearings regarding the 
President's Fiscal Year 2017 budget submission on February 11, 
2016, and February 10, 2016, with Secretary of the Treasury 
Jacob J. Lew and Secretary of Health and Human Services Sylvia 
Burwell, respectively, in which the harmful effects of ACA 
taxes were discussed. Moreover, the Oversight Subcommittee held 
a hearing on March 5, 2013, discussing the tax-related 
provisions of the ACA.

                      II. EXPLANATION OF PROVISION


                 A. Repeal of Net Investment Income Tax


                              PRESENT LAW

In general

    A tax is imposed with respect to the net investment income 
of certain high-income individuals, estates and trusts.\2\ In 
the case of an individual, the tax is 3.8 percent of the lesser 
of net investment income or the excess of modified adjusted 
gross income over the threshold amount.
---------------------------------------------------------------------------
    \2\Sec. 1411.
---------------------------------------------------------------------------
    The threshold amount is $250,000 in the case of a joint 
return or surviving spouse, $125,000 in the case of a married 
individual filing a separate return, and $200,000 in any other 
case.
    Modified adjusted gross income is adjusted gross income 
increased by the amount excluded from income as foreign earned 
income under section 911(a)(1) (net of the deductions and 
exclusions disallowed with respect to the foreign earned 
income).
    In the case of an estate or trust, the tax is 3.8 percent 
of the lesser of undistributed net investment income or the 
excess of adjusted gross income (as defined in section 67(e)) 
over the dollar amount at which the highest income tax bracket 
applicable to an estate or trust begins.
    The tax does not apply to a nonresident alien or to a 
trust, all the unexpired interests in which are devoted to 
charitable purposes. The tax also does not apply to a trust 
that is exempt from tax under section 501 or a charitable 
remainder trust exempt from tax under section 664.
    The tax is subject to the individual estimated tax 
provisions. The tax is not deductible in computing any tax 
imposed by subtitle A of the Internal Revenue Code (relating to 
income taxes).

Net investment income

    Net investment income is investment income reduced by the 
deductions properly allocable to such income.
    Investment income is the sum of (i) gross income from 
interest, dividends, annuities, royalties, and rents (other 
than income derived from any trade or business to which the tax 
does not apply), (ii) other gross income derived from any 
business to which the tax applies, and (iii) net gain (to the 
extent taken into account in computing taxable income) 
attributable to the disposition of property other than property 
held in a trade or business to which the tax does not apply.\3\
---------------------------------------------------------------------------
    \3\Gross income does not include items, such as interest on tax-
exempt bonds, veterans' benefits, and excluded gain from the sale of a 
principal residence, which are excluded from gross income under the 
income tax.
---------------------------------------------------------------------------
    In the case of a trade or business, the tax applies if the 
trade or business is a passive activity with respect to the 
taxpayer or the trade or business consists of trading financial 
instruments or commodities (as defined in section 475(e)(2)). 
The tax does not apply to other trades or businesses conducted 
by a sole proprietor, partnership, or S corporation.
    In the case of the disposition of a partnership interest or 
stock in an S corporation, gain or loss is taken into account 
only to the extent gain or loss would be taken into account by 
the partner or shareholder if the entity had sold all its 
properties for fair market value immediately before the 
disposition. Thus, only net gain or loss attributable to 
property held by the entity which is not property attributable 
to an active trade or business is taken into account.\4\
---------------------------------------------------------------------------
    \4\For this purpose, a business of trading financial instruments or 
commodities is not treated as an active trade or business.
---------------------------------------------------------------------------
    Income, gain, or loss on working capital is not treated as 
derived from a trade or business. Investment income does not 
include distributions from a qualified retirement plan or 
amounts subject to SECA tax.

                           REASONS FOR CHANGE

    The Committee believes that the 3.8-percent tax on net 
investment income adversely affects the efficiency of capital 
markets, by discouraging taxpayers from disposing of their 
assets and reinvesting the proceeds in a more productive use, 
exacerbating the ``lock-in'' effect. Furthermore, the Committee 
believes that repealing the net investment income tax will 
promote savings and investment for households. Finally, the 
Committee believes that repealing the tax on net investment 
income will promote long-run economic growth.

                        DESCRIPTION OF PROVISION

    The provision repeals the 3.8-percent tax on net investment 
income.

                             EFFECTIVE DATE

    The provision is effective for taxable years beginning 
after December 31, 2017.
                      III. 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 the Reconciliation Legislative Recommendations 
Relating to Repeal of the Net Investment Income Tax on March 8, 
2017:
    The vote on the amendment by Mr. Davis to the amendment in 
the nature of a substitute to Subtitle __: Budget 
Reconciliation Legislative Recommendations Relating to Repeal 
of Net Investment Tax, which would require the taxpayer 
benefiting from the investment tax benefit to have a clean drug 
test, was not agreed to by a roll call vote of 24 nays to 15 
yeas (with a quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady........................  .......       X   .........  Mr. Neal...........       X   .......  .........
Mr. Johnson......................  .......       X   .........  Mr. Levin..........       X   .......  .........
Mr. Nunes........................  .......       X   .........  Mr. Lewis..........       X   .......  .........
Mr. Tiberi.......................  .......       X   .........  Mr. Doggett........       X   .......  .........
Mr. Reichert.....................  .......       X   .........  Mr. Thompson.......       X   .......  .........
Mr. Roskam.......................  .......       X   .........  Mr. Larson.........       X   .......  .........
Mr. Buchanan.....................  .......       X   .........  Mr. Blumenauer.....  .......  .......  .........
Mr. Smith (NE)...................  .......       X   .........  Mr. Kind...........       X   .......  .........
Ms. Jenkins......................  .......       X   .........  Mr. Pascrell.......       X   .......  .........
Mr. Paulsen......................  .......       X   .........  Mr. Crowley........       X   .......  .........
Mr. Marchant.....................  .......       X   .........  Mr. Davis..........       X   .......  .........
Ms. Black........................  .......       X   .........  Ms. Sanchez........       X   .......  .........
Mr. Reed.........................  .......       X   .........  Mr. Higgins........       X   .......  .........
Mr. Kelly........................  .......       X   .........  Ms. Sewell.........       X   .......  .........
Mr. Renacci......................  .......       X   .........  Ms. DelBene........       X   .......  .........
Mr. Meehan.......................  .......       X   .........  Ms. Chu............       X   .......  .........
Ms. Noem.........................  .......       X
Mr. Holding......................  .......       X
Mr. Smith (MO)...................  .......       X
Mr. Rice.........................  .......       X
Mr. Schweikert...................  .......       X
Ms. Walorski.....................  .......       X
Mr. Curbelo......................  .......       X
Mr. Bishop.......................  .......       X
----------------------------------------------------------------------------------------------------------------

    The legislation was ordered favorably transmitted to the 
House Committee on the Budget as amended by a roll call vote of 
24 yeas and 15 nays (with a quorum being present). The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady........................       X   .......  .........  Mr. Neal...........  .......       X   .........
Mr. Johnson......................       X   .......  .........  Mr. Levin..........  .......       X   .........
Mr. Nunes........................       X   .......  .........  Mr. Lewis..........  .......       X   .........
Mr. Tiberi.......................       X   .......  .........  Mr. Doggett........  .......       X   .........
Mr. Reichert.....................       X   .......  .........  Mr. Thompson.......  .......       X   .........
Mr. Roskam.......................       X   .......  .........  Mr. Larson.........  .......       X   .........
Mr. Buchanan.....................       X   .......  .........  Mr. Blumenauer.....  .......  .......  .........
Mr. Smith (NE)...................       X   .......  .........  Mr. Kind...........  .......       X   .........
Ms. Jenkins......................       X   .......  .........  Mr. Pascrell.......  .......       X   .........
Mr. Paulsen......................       X   .......  .........  Mr. Crowley........  .......       X   .........
Mr. Marchant.....................       X   .......  .........  Mr. Davis..........  .......       X   .........
Ms. Black........................       X   .......  .........  Ms. Sanchez........  .......       X   .........
Mr. Reed.........................       X   .......  .........  Mr. Higgins........  .......       X   .........
Mr. Kelly........................       X   .......  .........  Ms. Sewell.........  .......       X   .........
Mr. Renacci......................       X   .......  .........  Ms. DelBene........  .......       X   .........
Mr. Meehan.......................       X   .......  .........  Ms. Chu............  .......       X   .........
Ms. Noem.........................       X
Mr. Holding......................       X
Mr. Smith (MO)...................       X
Mr. Rice.........................       X
Mr. Schweikert...................       X
Ms. Walorski.....................       X
Mr. Curbelo......................       X
Mr. Bishop.......................       X
----------------------------------------------------------------------------------------------------------------

                  IV. BUDGET EFFECTS OF THE PROVISION


               A. 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 ``Repeal of Net 
Investment Income Tax.''
    The budget reconciliation legislative recommendations, as 
transmitted, are estimated to have the following effects on 
budget receipts for fiscal years 2016-2025:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        By fiscal year, in billions of dollars--
---------------------------------------------------------------------------------------------------------------------------------------------------------
                   2017                       2018      2019      2020      2021      2022      2023      2024      2025      2026     2017-21   2017-26
--------------------------------------------------------------------------------------------------------------------------------------------------------
-1.5......................................     -10.5      -7.5     -16.7     -17.8     -18.7     -19.7     -20.7     -21.7     -22.7     -54.1    -157.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding.

    Pursuant to clause 8 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 bill amending the Internal Revenue Code of 1986: the gross 
budgetary effect (before incorporating macroeconomic effects) 
in any fiscal year is less than 0.25 percent of the current 
projected gross domestic product of the United States for that 
fiscal year; therefore, the bill is not ``major legislation'' 
for purposes of requiring that the estimate include the 
budgetary effects of changes in economic output, employment, 
capital stock and other macroeconomic variables.

B. 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 recommendations involve no 
new or increased budget authority. The Committee states further 
that the budget reconciliation legislative recommendations 
involve no new or increased tax expenditures.

      C. 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.

                      CONGRESSIONAL BUDGET OFFICE
                             COST ESTIMATE

                              ----------                              

                                                    March 13, 2017.

                        American Health Care Act

 Budget Reconciliation Recommendations of the House Committees on Ways 
            and Means and Energy and Commerce, March 9, 2017

                                SUMMARY

    The Concurrent Resolution on the Budget for Fiscal Year 
2017 directed the House Committees on Ways and Means and Energy 
and Commerce to develop legislation to reduce the deficit. The 
Congressional Budget Office and the staff of the Joint 
Committee on Taxation (JCT) have produced an estimate of the 
budgetary effects of the American Health Care Act, which 
combines the pieces of legislation approved by the two 
committees pursuant to that resolution. In consultation with 
the budget committees, CBO used its March 2016 baseline with 
adjustments for subsequently enacted legislation, which 
underlies the resolution, as the benchmark to measure the cost 
of the legislation.

                     Effects on the Federal Budget

    CBO and JCT estimate that enacting the legislation would 
reduce federal deficits by $337 billion over the 2017-2026 
period. That total consists of $323 billion in on-budget 
savings and $13 billion in off-budget savings. Outlays would be 
reduced by $1.2 trillion over the period, and revenues would be 
reduced by $0.9 trillion.
    The largest savings would come from reductions in outlays 
for Medicaid and from the elimination of the Affordable Care 
Act's (ACA's) subsidies for nongroup health insurance. The 
largest costs would come from repealing many of the changes the 
ACA made to the Internal Revenue Code--including an increase in 
the Hospital Insurance payroll tax rate for high-income 
taxpayers, a surtax on those taxpayers' net investment income, 
and annual fees imposed on health insurers--and from the 
establishment of a new tax credit for health insurance.
    Pay-as-you-go procedures apply because enacting the 
legislation would affect direct spending and revenues. CBO and 
JCT estimate that enacting the legislation would not increase 
net direct spending or on-budget deficits by more than $5 
billion in any of the four consecutive 10-year periods 
beginning in 2027.

                  Effects on Health Insurance Coverage

    To estimate the budgetary effects, CBO and JCT projected 
how the legislation would change the number of people who 
obtain federally subsidized health insurance through Medicaid, 
the nongroup market, and the employment-based market, as well 
as many other factors.
    CBO and JCT estimate that, in 2018, 14 million more people 
would be uninsured under the legislation than under current 
law. Most of that increase would stem from repealing the 
penalties associated with the individual mandate. Some of those 
people would choose not to have insurance because they chose to 
be covered by insurance under current law only to avoid paying 
the penalties, and some people would forgo insurance in 
response to higher premiums.
    Later, following additional changes to subsidies for 
insurance purchased in the nongroup market and to the Medicaid 
program, the increase in the number of uninsured people 
relative to the number under current law would rise to 21 
million in 2020 and then to 24 million in 2026. The reductions 
in insurance coverage between 2018 and 2026 would stem in large 
part from changes in Medicaid enrollment--because some states 
would discontinue their expansion of eligibility, some states 
that would have expanded eligibility in the future would choose 
not to do so, and per-enrollee spending in the program would be 
capped. In 2026, an estimated 52 million people would be 
uninsured, compared with 28 million who would lack insurance 
that year under current law.

                Stability of the Health Insurance Market

    Decisions about offering and purchasing health insurance 
depend on the stability of the health insurance market--that 
is, on having insurers participating in most areas of the 
country and on the likelihood of premiums' not rising in an 
unsustainable spiral. The market for insurance purchased 
individually (that is, nongroup coverage) would be unstable, 
for example, if the people who wanted to buy coverage at any 
offered price would have average health care expenditures so 
high that offering the insurance would be unprofitable. In CBO 
and JCT's assessment, however, the nongroup market would 
probably be stable in most areas under either current law or 
the legislation.
    Under current law, most subsidized enrollees purchasing 
health insurance coverage in the nongroup market are largely 
insulated from increases in premiums because their out-of-
pocket payments for premiums are based on a percentage of their 
income; the government pays the difference. The subsidies to 
purchase coverage combined with the penalties paid by uninsured 
people stemming from the individual mandate are anticipated to 
cause sufficient demand for insurance by people with low health 
care expenditures for the market to be stable.
    Under the legislation, in the agencies' view, key factors 
bringing about market stability include subsidies to purchase 
insurance, which would maintain sufficient demand for insurance 
by people with low health care expenditures, and grants to 
states from the Patient and State Stability Fund, which would 
reduce the costs to insurers of people with high health care 
expenditures. Even though the new tax credits would be 
structured differently from the current subsidies and would 
generally be less generous for those receiving subsidies under 
current law, the other changes would, in the agencies' view, 
lower average premiums enough to attract a sufficient number of 
relatively healthy people to stabilize the market.

                          Effects on Premiums

    The legislation would tend to increase average premiums in 
the nongroup market prior to 2020 and lower average premiums 
thereafter, relative to projections under current law. In 2018 
and 2019, according to CBO and JCT's estimates, average 
premiums for single policyholders in the nongroup market would 
be 15 percent to 20 percent higher than under current law, 
mainly because the individual mandate penalties would be 
eliminated, inducing fewer comparatively healthy people to sign 
up.
    Starting in 2020, the increase in average premiums from 
repealing the individual mandate penalties would be more than 
offset by the combination of several factors that would 
decrease those premiums: grants to states from the Patient and 
State Stability Fund (which CBO and JCT expect to largely be 
used by states to limit the costs to insurers of enrollees with 
very high claims); the elimination of the requirement for 
insurers to offer plans covering certain percentages of the 
cost of covered benefits; and a younger mix of enrollees. By 
2026, average premiums for single policyholders in the nongroup 
market under the legislation would be roughly 10 percent lower 
than under current law, CBO and JCT estimate.
    Although average premiums would increase prior to 2020 and 
decrease starting in 2020, CBO and JCT estimate that changes in 
premiums relative to those under current law would differ 
significantly for people of different ages because of a change 
in age-rating rules. Under the legislation, insurers would be 
allowed to generally charge five times more for older enrollees 
than younger ones rather than three times more as under current 
law, substantially reducing premiums for young adults and 
substantially raising premiums for older people.

                 Uncertainty Surrounding the Estimates

    The ways in which federal agencies, states, insurers, 
employers, individuals, doctors, hospitals, and other affected 
parties would respond to the changes made by the legislation 
are all difficult to predict, so the estimates in this report 
are uncertain. But CBO and JCT have endeavored to develop 
estimates that are in the middle of the distribution of 
potential outcomes.

                         Macroeconomic Effects

    Because of the magnitude of its budgetary effects, this 
legislation is ``major legislation,'' as defined in the rules 
of the House of Representatives.\1\ Hence, it triggers the 
requirement that the cost estimate, to the greatest extent 
practicable, include the budgetary impact of its macroeconomic 
effects. However, because of the very short time available to 
prepare this cost estimate, quantifying and incorporating those 
macroeconomic effects have not been practicable.
---------------------------------------------------------------------------
    \1\Cl. 8 of Rule XIII of the Rules of the House of Representatives, 
H.R. Res. 5, 115th Congress (2017).
---------------------------------------------------------------------------

             Intergovernmental and Private-Sector Mandates

    JCT and CBO have reviewed the provisions of the legislation 
and determined that they would impose no intergovernmental 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    JCT and CBO have determined that the legislation would 
impose private-sector mandates as defined in UMRA. On the basis 
of information from JCT, CBO estimates the aggregate cost of 
the mandates would exceed the annual threshold established in 
UMRA for private-sector mandates ($156 million in 2017, 
adjusted annually for inflation).

                  MAJOR PROVISIONS OF THE LEGISLATION

    Budgetary effects related to health insurance coverage 
would stem primarily from the following provisions:

     LEliminating penalties associated with the 
requirements that most people obtain health insurance coverage 
and that large employers offer their employees coverage that 
meets specified standards.

     LReducing the federal matching rate for adults 
made eligible for Medicaid by the ACA to equal the rate for 
other enrollees in the state, beginning in 2020.

     LCapping the growth in per-enrollee payments for 
most Medicaid beneficiaries to no more than the medical care 
component of the consumer price index starting in 2020.

     LRepealing current-law subsidies for health 
insurance coverage obtained through the nongroup market--which 
include refundable tax credits for premium assistance and 
subsidies to reduce cost-sharing payments--as well as the Basic 
Health Program, beginning in 2020.

     LCreating a new refundable tax credit for health 
insurance coverage purchased through the nongroup market 
beginning in 2020.

     LAppropriating funding for grants to states 
through the Patient and State Stability Fund beginning in 2018.

     LRelaxing the current-law requirement that 
prevents insurers from charging older people premiums that are 
more than three times larger than the premiums charged to 
younger people in the nongroup and small-group markets. Unless 
a state sets a different limit, the legislation would allow 
insurers to charge older people five times more than younger 
ones, beginning in 2018.

     LRemoving the requirement, beginning in 2020, that 
insurers who offer plans in the nongroup and small-group 
markets generally must offer plans that cover at least 60 
percent of the cost of covered benefits.

     LRequiring insurers to apply a 30 percent 
surcharge on premiums for people who enroll in insurance in the 
nongroup or small-group markets if they have been uninsured for 
more than 63 days within the past year.

    Other parts of the legislation would repeal or delay many 
of the changes the ACA made to the Internal Revenue Code that 
were not directly related to the law's insurance coverage 
provisions. Those with the largest budgetary effects include:

     LRepealing the surtax on certain high-income 
taxpayers' net investment income;

     LRepealing the increase in the Hospital Insurance 
payroll tax rate for certain high-income taxpayers;

     LRepealing the annual fee on health insurance 
providers; and

     LDelaying when the excise tax imposed on some 
health insurance plans with high premiums would go into effect.

    In addition, the legislation would make several changes to 
other health-related programs that would have smaller budgetary 
effects.

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    CBO and JCT estimate that, on net, enacting the legislation 
would decrease federal deficits by $337 billion over the 2017-
2026 period (see Table 1). That change would result from a $1.2 
trillion decrease in direct spending, partially offset by an 
$883 billion reduction in revenues.

                           BASIS OF ESTIMATE

    For this estimate, CBO and JCT assume that the legislation 
will be enacted by May 2017. Costs and savings are measured 
relative to CBO's March 2016 baseline projections, with 
adjustments for legislation that was enacted after that 
baseline was produced.
    The largest budgetary effects would stem from provisions in 
the recommendations from both committees that would affect 
insurance coverage. Those provisions, taken together, would 
reduce projected deficits by $935 billion over the 2017-2026 
period. Other provisions would increase deficits by $599 
billion, mostly by reducing tax revenues. All told, deficits 
would be reduced by $337 billion over that period, CBO and JCT 
estimate. (See Table 2 for the estimated budgetary effects of 
each major provision.)

       Budgetary Effects of Health Insurance Coverage Provisions

    The $935 billion in estimated deficit reduction over the 
2017-2026 period that would stem from the insurance coverage 
provisions includes the following amounts (shown in Table 3):

     LA reduction of $880 billion in federal outlays 
for Medicaid;

     LSavings of $673 billion, mostly stemming from the 
elimination of the ACA's subsidies for nongroup health 
insurance--which include refundable tax credits for premium 
assistance and subsidies to reduce cost-sharing payments--in 
2020;

     LSavings of $70 billion mostly associated with 
shifts in the mix of taxable and nontaxable compensation 
resulting from net decreases in the number of people estimated 
to enroll in employment-based health insurance coverage; and

     LSavings of $6 billion from the repeal of a tax 
credit for certain small employers that provide health 
insurance to their employees.

    Those decreases would be partially offset by:

     LA cost of $361 billion for the new tax credit for 
health insurance established by the legislation in 2020;

     LA reduction in revenues of $210 billion from 
eliminating the penalties paid by uninsured people and 
employers;

     LAn increase in spending of $80 billion for the 
new Patient and State Stability Fund grant program; and

     LA net increase in spending of $43 billion under 
the Medicare program stemming from changes in payments to 
hospitals that serve a disproportionate share of low-income 
patients.

    Methodology. The legislation would change the pricing of 
nongroup insurance and the eligibility for and the amount of 
subsidies to purchase that insurance. It would also lead to 
changes in Medicaid eligibility and per capita spending. The 
legislation's effects on health insurance coverage would depend 
in part on how responsive individuals are to changes in the 
prices, after subsidies, they would have to pay for nongroup 
insurance; on changes in their eligibility for public coverage; 
and on their underlying desire for such insurance. Effects on 
coverage would also stem from how responsive firms are to 
changes in those post subsidy prices and in the attractiveness 
of other aspects of nongroup alternatives to employment-based 
insurance.
    To capture those complex interactions, CBO uses a 
microsimulation model to estimate how rates of coverage and 
sources of insurance would change as a result of alterations in 
eligibility and subsidies for--and thus the net cost of--
various insurance options. Based on survey data, that model 
incorporates a wide range of information about a representative 
sample of individuals and families, including their income, 
employment, health status, and health insurance coverage. The 
model also incorporates information from the research 
literature about the responsiveness of individuals and 
employers to price changes and the responsiveness of 
individuals to changes in eligibility for public coverage. CBO 
regularly updates the model so that it incorporates information 
from the most recent administrative data on insurance coverage 
and premiums. CBO and JCT use that model--in combination with 
models of tax revenues, models of Medicaid spending and actions 
by states, projections of trends in early retirees' health 
insurance coverage, and other available information--to inform 
their estimates of the numbers of people with certain types of 
coverage and the associated federal budgetary costs.\2\
---------------------------------------------------------------------------
    \2\For additional information, see Congressional Budget Office, 
``Methods for Analyzing Health Insurance Coverage'' (accessed March 13, 
2017), www.cbo.gov/topics/health-care/methods-analyzing-health-
insurance-coverage.

    Effects of Repealing Mandate Penalties. Eliminating the 
penalties associated with two requirements, while keeping the 
requirements themselves in place, would affect insurance 
coverage in various ways. Those two requirements are that most 
people obtain health insurance coverage (also called the 
individual mandate) and that large employers offer their 
employees health insurance coverage that meets specified 
standards (also called the employer mandate). Eliminating their 
associated penalties would reduce federal revenues starting in 
2017, but CBO and JCT estimate that doing so would also 
substantially reduce the number of people with health insurance 
coverage and, accordingly, would reduce the costs incurred by 
the federal government in subsidizing some health insurance 
coverage. The estimated savings stemming from fewer people 
enrolling in Medicaid, in health insurance obtained through the 
nongroup market, and in employment-based health insurance 
coverage would exceed the estimated loss of revenues from 
eliminating mandate penalties.
    CBO and JCT estimate that repealing the individual mandate 
penalties would also result in higher health insurance premiums 
in the nongroup market after 2017.\3\ Insurers would still be 
required to provide coverage to any applicant, would not be 
able to vary premiums to reflect enrollees' health status or to 
limit coverage of preexisting medical conditions, and would be 
limited in how premiums could vary by age. Those features are 
most attractive to applicants with relatively high expected 
costs for health care, so CBO and JCT expect that repealing the 
individual mandate penalties would tend to reduce insurance 
coverage less among older and less healthy people than among 
younger and healthier people. Thus, the agencies estimate that 
repealing those penalties, taken by itself, would increase 
premiums. Nevertheless, CBO and JCT anticipate that a 
significant number of relatively healthy people would still 
purchase insurance in the nongroup market because of the 
availability of government subsidies.
---------------------------------------------------------------------------
    \3\CBO and JCT expect that insurers would not be able to change 
their 2017 premiums because those premiums have already been set.

    Major Changes to Medicaid. CBO estimates that several major 
provisions affecting Medicaid would decrease direct spending by 
$880 billion over the 2017-2026 period. That reduction would 
stem primarily from lower enrollment throughout the period, 
culminating in 14 million fewer Medicaid enrollees by 2026, a 
reduction of about 17 percent relative to the number under 
current law. Some of that decline would be among people who are 
currently eligible for Medicaid benefits, and some would be 
among people who CBO projects would be made eligible as a 
result of state actions in the future under current law (that 
is, from additional states adopting the optional expansion of 
eligibility authorized by the ACA). Some decline in spending 
and enrollment would begin immediately, but most of the changes 
would begin in 2020, when the legislation would terminate the 
enhanced federal matching rate for new enrollees under the 
ACA's expansion of Medicaid and would place a per capita-based 
cap on the federal government's payments to states for medical 
assistance provided through Medicaid. By 2026, Medicaid 
spending would be about 25 percent less than what CBO projects 
---------------------------------------------------------------------------
under current law.

    Changes Before 2020. Under current law, the penalties 
associated with the individual mandate apply to some Medicaid-
eligible adults and children. (For example, the penalties apply 
to single individuals with income above about 90 percent of the 
federal poverty guidelines, also known as the federal poverty 
level, or FPL). CBO estimates that, without those penalties, 
fewer people would enroll in Medicaid, including some who are 
not subject to the penalties but might think they are. Some 
people might be uncertain about what circumstances trigger the 
penalty and others might be uncertain about their annual 
income. The estimated lower enrollment would result in less 
spending for the program. Those effects on enrollment and 
spending would continue throughout the 2017-2026 period.

    Termination of Enhanced Federal Matching Funds for New 
Enrollees From Expanding Eligibility for Medicaid. Under 
current law, states are permitted, but not required, to expand 
eligibility for Medicaid to adults under 65 whose income is 
equal to or less than 138 percent of the FPL (referred to here 
as ``newly eligible''). The federal government pays a larger 
share of the medical costs for those people than it pays for 
those who were previously eligible. Beginning in 2020, the 
legislation would reduce the federal matching rate for newly 
eligible adults from 90 percent of medical costs to the rate 
for other enrollees in the state. (The federal matching rate 
for other enrollees ranges from 50 percent to 75 percent, 
depending on the state, with an average of about 57 percent.) 
The lower federal matching rate would apply only to those newly 
enrolled after December 31, 2019.
    The 31 states and the District of Columbia that have 
already expanded Medicaid to the newly eligible cover roughly 
half of that population nationwide. CBO projects that under 
current law, additional states will expand their Medicaid 
programs and that, by 2026, roughly 80 percent of newly 
eligible people will reside in states that have done so. Under 
the legislation, largely because states would pay for a greater 
share of enrollees' costs, CBO expects that no additional 
states would expand eligibility, thereby reducing both 
enrollment in and spending for Medicaid. According to CBO's 
estimates, that effect would be modest in the near term, but by 
2026, on an average annual basis, 5 million fewer people would 
be enrolled in Medicaid than would have been enrolled under 
current law (see Figure 1).
    CBO also anticipates some states that have already expanded 
their Medicaid programs would no longer offer that coverage, 
reducing the share of the newly eligible population residing in 
a state with expanded eligibility to about 30 percent in 2026. 
That estimate reflects different possible outcomes without any 
explicit prediction about which states would make which 
choices. In considering the possible outcomes, CBO took into 
account several factors: the extent of optional coverage 
provided to the newly eligible population and other groups 
before the ACA's enactment (as a measure of a state's 
willingness to provide coverage above statutory minimums), 
states' ability to bear costs under the legislation, and 
potential methods to mitigate those costs (such as changes to 
benefit packages and payment rates). Some states might also 
begin to take action prior to 2020 in anticipation of future 
changes that would result from the legislation to avoid abrupt 
changes to eligibility and other program features. How 
individual states would ultimately respond is highly uncertain.
    Because the lower federal matching rate would apply only to 
those newly enrolled after December 31, 2019 (or who experience 
a break in eligibility after that date), CBO estimates that 
reductions in spending for the newly eligible would increase 
over several years, as ``grandfathered'' enrollees would cycle 
off the program and be replaced by new enrollees. On the basis 
of historical data (and taking into account the increased 
frequency of eligibility redeterminations required by the 
legislation), CBO projects that fewer than one-third of those 
enrolled as of December 31, 2019, would have maintained 
continuous eligibility two years later. Under the legislation, 
the higher federal matching rate would apply for fewer than 5 
percent of newly eligible enrollees by the end of 2024, CBO 
estimates.

    Per Capita-Based Cap on Medicaid Payments for Medical 
Assistance. Under current law, the federal government and state 
governments share in the financing and administration of 
Medicaid. In general, states pay health care providers for 
services to enrollees, and the federal government reimburses 
states for a percentage of their expenditures. All federal 
reimbursement for medical services is open-ended, meaning that 
if a state spends more because enrollment increases or costs 
per enrollee rise, additional federal payments are 
automatically generated.
    Under the legislation, beginning in 2020, the federal 
government would establish a limit on the amount of 
reimbursement it provides to states. That limit would be set by 
calculating the average per-enrollee cost of medical services 
for most enrollees who received full Medicaid benefits in 2016 
for each state. The Secretary of Health and Human Services 
would then inflate the average per-enrollee costs for each 
state by the growth in the consumer price index for medical 
care services (CPI-M). The final limit on federal reimbursement 
for each state for 2020 and after would be the average cost per 
enrollee for five specified groups of enrollees (the elderly, 
disabled people, children, newly eligible adults, and all other 
adults), reflecting growth in the CPI-M from 2016 multiplied by 
the number of enrollees in each category in that year. If a 
state spent more than the limit on federal reimbursement, the 
federal government would provide no additional funding to match 
that spending.
    The limit on federal reimbursement would reduce outlays 
because (after the changes to the Medicaid expansion population 
have been accounted for) Medicaid spending would grow on a per-
enrollee basis at a faster rate than the CPI-M, according to 
CBO's projections: at an average annual rate of 4.4 percent for 
Medicaid and 3.7 percent for the CPI-M over the 2017-2026 
period. With less federal reimbursement for Medicaid, states 
would need to decide whether to commit more of their own 
resources to finance the program at current-law levels or 
whether to reduce spending by cutting payments to health care 
providers and health plans, eliminating optional services, 
restricting eligibility for enrollment, or (to the extent 
feasible) arriving at more efficient methods for delivering 
services. CBO anticipates that states would adopt a mix of 
those approaches, which would result in additional savings to 
the federal government. (Other provisions affecting Medicaid 
are discussed below.)

    Changes to Subsidies and Market Rules for Nongroup Health 
Insurance Before 2020. Under the legislation, existing 
subsidies for health insurance coverage purchased in the 
nongroup market would largely remain in effect until 2020--but 
the premium tax credits would differ by the age of the 
individual in 2019. Aside from the changes in enrollment and 
premiums as a result of eliminating the individual mandate 
penalties (mentioned earlier), the other changes discussed in 
this section would have small effects on coverage and federal 
subsidies in the nongroup market.

    Nongroup Market Subsidies. Subsidies under current law fall 
into two categories: subsidies to cover a portion of 
participants' health insurance premiums (which take the form of 
refundable tax credits) and subsidies to reduce their cost-
sharing amounts (out-of-pocket payments required under 
insurance policies). The first category of subsidies, also 
called premium tax credits, is generally available to people 
with income between 100 percent and 400 percent of the FPL, 
with certain exceptions. The second category, also called cost-
sharing subsidies, is available to those who are eligible for 
premium tax credits, generally have a household income between 
100 percent and 250 percent of the FPL, and enroll in an 
eligible plan.
    Under current law, those subsidies can be obtained only by 
purchasing nongroup coverage through a health insurance 
marketplace. Under the legislation, premium tax credits--but 
not cost-sharing subsidies--would also be available for most 
plans purchased in the nongroup market outside of marketplaces 
beginning in 2018. However, the tax credits for those plans 
could not be advanced and could only be claimed on a person's 
tax return. CBO and JCT estimate that roughly 2 million people 
who are expected to enroll in plans purchased in the nongroup 
market outside of marketplaces in 2018 and 2019 under current 
law would newly receive premium tax credits for that coverage 
under the legislation.
    The premium tax credits would differ by the age of the 
individual for one year in 2019, while cost-sharing subsidies 
would remain unchanged prior to 2020. For those with household 
income exceeding 150 percent of the FPL, the legislation would 
generally reduce the percentage of income that younger people 
had to pay toward their premiums and increase that percentage 
for older people.\4\ CBO and JCT expect that roughly 1 million 
more people would enroll in coverage obtained through the 
nongroup market as a result of the change in the structure of 
premium tax credits. That increase would be the net result of 
higher enrollment among younger people and lower enrollment 
among older people.
---------------------------------------------------------------------------
    \4\For families, the age of the oldest taxpayer would be used to 
determine the age-adjusted percentage of income that must be paid 
toward the premiums. As under current law, the premium tax credits 
would cover the amount by which the reference premium--that is, the 
premium for the second-lowest-cost ``silver'' plan that covers the 
eligible people in the household in the area in which they reside--
exceeds that percentage of income. A silver plan covers about 70 
percent of the costs of covered benefits.

    Patient and State Stability Fund Grants. Beginning in 2018 
and ending after 2026, the federal government would make a 
total of $100 billion in allotments to states that they could 
use for a variety of purposes, including reducing premiums for 
insurance in the nongroup market. CBO and JCT estimate that 
federal outlays for grants from the Patient and State Stability 
Fund would total $80 billion over the 2018-2026 period.
    By the agencies' estimates, the grants would reduce 
premiums for insurance in the nongroup market in many states. 
CBO and JCT expect that states would use those grants mostly to 
reimburse insurers for some of the costs of enrollees with 
claims above a threshold. For states that did not develop plans 
to spend the funds, the federal government would make payments 
to insurers in the individual market who have enrollees with 
relatively high claims. Before 2020, CBO expects, the Secretary 
of Health and Human Services would make payments to insurers on 
the behalf of most states because most would not have enough 
time to set up their own programs before insurers had to set 
premiums for 2018. As a result, CBO estimates that most states 
would rely on the federal default program for one or more years 
until they had more time to establish their own programs.

    Continuous Coverage Provisions. Insurers would be required 
to impose a penalty on people who enrolled in insurance in the 
nongroup or small-group markets if they had been uninsured for 
more than 63 days within the past year. When they purchased 
insurance in the nongroup or small-group market, they would be 
subject to a surcharge equal to 30 percent of their monthly 
premium for up to 12 months. The requirement would apply to 
people enrolling during a special enrollment period in 2018 
and, beginning in 2019, to people enrolling at any time during 
the year.
    CBO and JCT expect that increasing the future price of 
insurance through the surcharge for people who do not have 
continuous coverage would increase the number of people with 
insurance in 2018 and reduce that number in 2019 and later 
years. By the agencies' estimates, roughly 1 million people 
would be induced to purchase insurance in 2018 to avoid 
possibly having to pay the surcharge in the future. In most 
years after 2018, however, roughly 2 million fewer people would 
purchase insurance because they would either have to pay the 
surcharge or provide documentation about previous health 
insurance coverage. The people deterred from purchasing 
coverage would tend to be healthier than those who would not be 
deterred and would be willing to pay the surcharge.

    Age Rating Rules. Beginning in 2018, the legislation would 
expand the limits on how much insurers in the nongroup and 
small-group markets can vary premiums on the basis of age. 
However, CBO and JCT expect that the provision could not be 
implemented until 2019 because there would be insufficient time 
for the federal government, states, and insurers to incorporate 
the changes and then set premiums for 2018. Under current law, 
a 64-year-old can generally be charged premiums that cost up to 
three times as much as those offered to a 21-year-old. Under 
the legislation, that allowable difference would shift to five 
times as much unless a state chose otherwise. That change would 
tend to reduce premiums for younger people and increase 
premiums for older people.
    However, CBO and JCT estimate that the structure of the 
premium tax credits before 2020 would limit how changes in age 
rating rules affected the number of people who would enroll in 
health insurance coverage in the nongroup market. People 
eligible for subsidies in the nongroup market are now largely 
insulated from changes in premiums: A person receiving a 
premium tax credit pays a certain percentage of his or her 
income toward the reference premium, and the tax credit covers 
the difference between the premium and that percentage of 
income. Consequently, despite the changes in premiums for 
younger and older people, the person's out-of-pocket payments 
would not be affected much. Therefore, CBO and JCT estimate 
that the increase in the number of people enrolled in coverage 
through the nongroup market as a result of changes in age 
rating rules would be less than 500,000 in 2019 and would be 
the net result of higher enrollment among younger people and 
lower enrollment among older people. The small increase would 
mostly stem from net changes in enrollment among people who had 
income high enough to be ineligible for subsidies and who would 
face substantial changes in out-of-pocket payments for 
premiums.

    Changes to Subsidies and Market Rules for Nongroup Health 
Insurance Beginning in 2020. Beginning in 2020, the current 
premium tax credits and cost-sharing subsidies would both be 
repealed. That same year, the legislation would create new 
refundable tax credits for insurance purchased in the nongroup 
market. In addition to making the market changes discussed thus 
far (eliminating mandate penalties, providing grants to states 
to help stabilize the nongroup market, establishing a 
requirement for continuous coverage, and changing the age 
rating rules), the legislation would relax the current 
requirements about the share of benefits that must be covered 
by a health insurance plan.
    Many rules governing the nongroup market would remain in 
effect as under current law. For example, insurers would be 
required to accept all applicants during specified open-
enrollment periods, could not vary people's premiums on the 
basis of their health, and could not restrict coverage of 
enrollees' preexisting health conditions. Insurers would also 
still be required to cover specified categories of health care 
services, and the amount of costs for covered services that 
enrollees have to pay out of pocket would remain limited to a 
specified threshold. Prohibitions on annual and lifetime 
maximum benefits would still apply. Also, the risk adjustment 
program--which transfers funds from plans that attract a 
relatively small proportion of high-risk enrollees (people with 
serious chronic conditions, for example) to plans that attract 
a relatively large proportion of such people--would remain in 
place.
    Because the new tax credits are designed primarily to be 
paid in advance on behalf of enrollees to insurers, procedures 
would need to be in place to enable the Internal Revenue 
Service and the Department of Health and Human Services to 
verify that the credits were being paid to eligible insurers 
who were offering qualified insurance as defined under federal 
and state law on behalf of eligible enrollees. CBO and JCT's 
estimates reflect an assumption that adequate resources would 
be made available through future appropriations to those 
executive branch agencies to ensure that such systems were put 
in place in a timely manner. To the extent that they were not, 
enrollment and compliance could be negatively affected.

    Changes to Actuarial Value Requirements. Actuarial value is 
the percentage of total costs for covered benefits that the 
plan pays when covering a standard population. Under current 
law, most plans in the nongroup and small-group markets must 
have an actuarial value that is in one of four tiers: about 60 
percent, 70 percent, 80 percent, or 90 percent. Beginning in 
2020, the legislation would repeal those requirements, 
potentially allowing plans to have an actuarial value below 60 
percent. However, plans would still be required to cover 10 
categories of health benefits that are defined as ``essential'' 
under current law, and the total annual out-of-pocket costs for 
an enrollee would remain capped. In CBO and JCT's estimation, 
complying with those two requirements would significantly limit 
the ability of insurers to design plans with an actuarial value 
much below 60 percent.
    Nevertheless, CBO and JCT estimate that repealing the 
actuarial value requirements would lower the actuarial value of 
plans in the nongroup market on average. The requirement that 
insurers offer both a plan with an actuarial value of 70 
percent and one with an actuarial value of 80 percent in order 
to participate in the marketplace would no longer apply under 
the legislation. As a result, an insurer could choose to sell 
only plans with lower actuarial values. Many insurers would 
find that option attractive because they could offer a plan 
priced closer to the amount of the premium tax credit so that a 
younger person would have low out-of-pocket costs for premiums 
and would be more likely to enroll. Insurers might be less 
likely to offer plans with high actuarial values out of a fear 
of attracting a greater proportion of less healthy enrollees to 
those plans, although the availability of the Patient and State 
Stability Fund grants in most states would reduce that risk. 
The continuation of the risk adjustment program could also help 
limit insurers' costs from high-risk enrollees.
    Because of plans' lower average actuarial values, CBO and 
JCT expect that individuals' cost-sharing payments, including 
deductibles, in the nongroup market would tend to be higher 
than those anticipated under current law. In addition, cost-
sharing subsidies would be repealed in 2020, significantly 
increasing out-of-pocket costs for nongroup insurance for many 
lower-income enrollees. The higher costs would make the plans 
less attractive than those available under current law to many 
potential enrollees, especially people who are eligible for the 
largest subsidies under current law.

    Changes in the Ways the Nongroup Market Would Function. 
Under the legislation, some of the ways that the nongroup 
market functions would change for consumers. The current 
actuarial value requirements help people compare different 
insurance plans, because all plans in a tier cover the same 
share of costs, on average. CBO and JCT expect that, under the 
legislation, plans would be harder to compare, making shopping 
for a plan on the basis of price more difficult.
    Another feature of the nongroup market under current law is 
that there is one central website through the state or federal 
marketplace where people can shop for all the plans in their 
area that are eligible for subsidies. Under the legislation, 
insurers participating in the nongroup market would no longer 
have to offer plans through the marketplaces in order for 
people to receive subsidies toward those plans; therefore, CBO 
and JCT estimate that fewer would do so. With more plans that 
are eligible for subsidies offered directly from insurers or 
directly through agents and brokers and not through the 
marketplaces' central websites, shopping for and comparing 
plans could be harder, depending on insurers' decisions about 
how to market their plans.

    Changes in Nongroup Market Subsidies. With the repeal in 
2020 of the current premium tax credits and the cost-sharing 
subsidies, different refundable tax credits for insurance 
purchased in the nongroup market would become available.\5\ The 
new tax credits would vary on the basis of age by a factor of 2 
to 1: Someone age 60 or older would be eligible for a tax 
credit of $4,000, while someone younger than age 30 would be 
eligible for a tax credit of $2,000. People would generally be 
eligible for the full amount of the tax credit if their 
adjusted gross income was below $75,000 for a single tax filer 
and below $150,000 for joint filers and if they were not 
eligible for certain other types of insurance coverage.\6\ The 
credits would phase out for people with income above those 
thresholds. The tax credits would be refundable if the size of 
the credit exceeded a person's tax liability. They could also 
be advanced to insurers on a monthly basis throughout the year 
on behalf of an enrollee. Finally, tax credits could be used 
for most health insurance plans purchased through a marketplace 
or directly from an insurer.
---------------------------------------------------------------------------
    \5\People would also be able to use the new tax credits toward 
unsubsidized of continuation coverage under the Consolidated Omnibus 
Budget Reconciliation Act of 1985 (COBRA).
    \6\The tax credits and the income thresholds would both be indexed 
each year by the consumer price index for all urban consumers plus 1 
percentage point.
---------------------------------------------------------------------------
    Under current law, the size of the premium tax credit 
depends on household income and the reference premium in an 
enrollee's rating area. The enrollee pays a certain percentage 
of his or her income toward the reference premium, and the size 
of the subsidy varies by geography and age for a given income 
level. In that way, the enrollee is insulated from variations 
in premiums by geography and is also largely insulated from 
increases in the reference premium. An enrollee would pay the 
difference between the reference premium and the premium for 
the plan he or she chose, providing some incentive to choose 
lower-priced insurance. Beginning in 2020, under the 
legislation, the size of a premium tax credit would vary with 
age, rather than with income (except for people with income in 
the phase-out range) or the amount of the premium. The enrollee 
would be responsible for any premium above the credit amount. 
That structure would provide greater incentives for enrollees 
to choose lower-priced insurance and would mean that people 
living in high-cost areas would be responsible for a larger 
share of the premium.
    Under the legislation, some people would be eligible for 
smaller subsidies than those under current law, and others 
would be eligible for larger ones. As a result, by CBO and 
JCT's estimates, the composition of the population purchasing 
health insurance in the nongroup market under the legislation 
would differ significantly from that under current law, 
particularly by income and age.
    For many lower-income people, the new tax credits under the 
legislation would tend to be smaller than the premium tax 
credits under current law.\7\ In an illustrative example, CBO 
and JCT estimate that a 21-year-old with income at 175 percent 
of the FPL in 2026 would be eligible for a premium tax credit 
of about $3,400 under current law; the tax credit would fall to 
about $2,450 under the legislation (see Table 4). In addition, 
because cost-sharing subsidies would be eliminated under the 
legislation, lower-income people's share of medical services 
paid in the form of deductibles and other cost sharing would 
increase. As a result, CBO and JCT estimate, fewer lower-income 
people would obtain coverage through the nongroup market under 
the legislation than under current law.
---------------------------------------------------------------------------
    \7\People with income below 100 percent of the FPL who are 
ineligible for Medicaid and meet other eligibility criteria would 
become newly eligible for a premium tax credit under the legislation.
---------------------------------------------------------------------------
    Conversely, the tax credits under the legislation would 
tend to be larger than current-law premium tax credits for many 
people with higher income--particularly for those with income 
above 400 percent of the FPL but below the income cap for a 
full credit, which is set by the legislation at $75,000 for a 
single tax filer and $150,000 for joint filers in 2020. For 
example, CBO and JCT estimate that a 21-year-old with income at 
450 percent of the FPL in 2026 would be ineligible for a credit 
under current law but newly eligible for a tax credit of about 
$2,450 under the legislation. Lower out-of-pocket payments 
toward premiums would tend to increase enrollment in the 
nongroup market among higher-income people.
    Enacting the legislation would also result in significant 
changes in the size of subsidies in the nongroup market 
according to people's age. For example, CBO and JCT estimate 
that a 21-year-old, 40-year-old, and 64-year-old with income at 
175 percent of the FPL in 2026 would all pay roughly $1,700 
toward their reference premium under current law, even though 
the reference premium for a 64-year-old is three times larger 
than that for a 21-year-old in most states. Under the 
legislation, premiums for older people could be five times 
larger than those for younger people in many states, but the 
size of the tax credits for older people would only be twice 
the size of the credits for younger people. Because of that 
difference in how much the tax credits would cover, CBO and JCT 
estimate that, under the legislation, a larger share of 
enrollees in the nongroup market would be younger people and a 
smaller share would be older people.
    According to CBO and JCT's estimates, total federal 
subsidies for nongroup health insurance would be significantly 
smaller under the legislation than under current law for two 
reasons. First, by the agencies' projections, fewer people, on 
net, would obtain coverage in the nongroup health insurance 
market under the legislation. Second, the average subsidy per 
subsidized enrollee under the legislation would be 
significantly lower than the average subsidy under current law. 
In 2020, CBO and JCT estimate, the average subsidy under the 
legislation would be about 60 percent of the average subsidy 
under current law. In addition, the average subsidy would grow 
more slowly under the legislation than under current law. That 
difference results from the fact that subsidies under current 
law tend to grow with insurance premiums, whereas subsidies 
under the legislation would grow more slowly, with the consumer 
price index for all urban consumers plus 1 percentage point. By 
2026, CBO and JCT estimate that the average subsidy under the 
legislation would be about 50 percent of the average subsidy 
under current law.

    Patient and State Stability Fund Grants. As a condition of 
the grants, beginning in 2020, states would be required to 
provide matching funds, which would generally increase from 7 
percent of the federal funds provided in 2020 to 50 percent of 
the federal funds provided in 2026. The agencies expect that 
the grants' effects on premiums after 2020 would be limited by 
the share of states that took action and decided to pay the 
required matching funds in order to receive federal money and 
by the extent to which states chose to use the money for 
purposes that did not directly help to lower premiums in the 
nongroup market. Nevertheless, CBO and JCT estimate that the 
grants would exert substantial downward pressure on premiums in 
the nongroup market in 2020 and later years and would help 
encourage participation in the market by insurers.

    Effects of Changes in the Nongroup Market on Employers' 
Decisions to Offer Coverage. CBO and JCT estimate that, over 
time, fewer employers would offer health insurance because the 
legislation would change their incentives to do so. First, the 
mandate penalties would be eliminated. Second, the tax credits 
under the legislation, for which people would be ineligible if 
they had any offer of employment-based insurance, would be 
available to people with a broader range of incomes than the 
current tax credits are. That change could make nongroup 
coverage more attractive to a larger share of employees. 
Consequently, in CBO and JCT's estimation, some employers would 
choose not to offer coverage and instead increase other forms 
of compensation in the belief that nongroup insurance was a 
close substitute for employment-based coverage for their 
employees.
    However, two factors would partially offset employers' 
incentives not to offer insurance. First, the average subsidy 
for those who are eligible would be smaller under the 
legislation than under current law and would grow more slowly 
than health care costs over time. Second, CBO and JCT 
anticipate, nongroup insurance under the legislation would be 
less attractive to many people with employment-based coverage 
than under current law because nongroup insurance under the 
legislation would cover a smaller share of enrollees' expenses, 
on average, and because shopping for and comparing plans would 
probably be more difficult. In general, CBO and JCT expect that 
businesses that decided not to offer insurance coverage under 
the legislation would have, on average, younger and higher-
income workforces than businesses that choose not to offer 
insurance under current law.
    CBO and JCT expect that employers would adapt slowly to the 
legislation. Some employers would probably delay making 
decisions because of uncertainty about the viability of and 
regulations for the nongroup market and about implementation of 
the new law.

    Market Stability. CBO and JCT anticipate that, under the 
legislation, the combination of subsidies to purchase nongroup 
insurance and rules regulating the market would result in a 
relatively stable nongroup market. That is, most areas of the 
country would have insurers participating in the nongroup 
market, and the market would not be subject to an unsustainable 
spiral of rising premiums. First and most important, a 
substantial number of relatively healthy (mostly young) people 
would continue to purchase insurance in the nongroup market 
because of the availability of government subsidies. Second, 
grants from the Patient and State Stability Fund would help 
stabilize premiums and reduce potential losses to insurers from 
enrollees with very large claims. Finally, in CBO and JCT's 
judgment, the risk adjustment program would help protect 
insurers from losses arising from high-risk enrollees. The 
agencies expect that all of those factors would encourage 
insurers to continue to participate in the nongroup market.
    However, significant changes in nongroup subsidies and 
market rules would occur each year for the first three years 
following enactment, which might cause uncertainty for insurers 
in setting premiums. As a result of the elimination of the 
individual mandate penalties, CBO and JCT project that nongroup 
enrollment in 2018 would be smaller than that in 2017 and that 
the average health status of enrollees would worsen. A small 
share of that decline in enrollment would be offset by the 
onetime effect of the continuous coverage provisions, which 
would somewhat increase enrollment in the nongroup market in 
2018 as people anticipated potential surcharges in 2019. Grants 
from the Patient and State Stability Fund would begin to take 
effect in 2018 to help mitigate losses and encourage 
participation by insurers.
    The mix of enrollees in 2019 would differ from that in 
2018, because the change to age-rating rules would allow older 
adults to be charged five times as much as younger adults in 
many states. In addition, there would be a one-year change to 
the premium tax credits, which CBO and JCT expect would 
somewhat increase enrollment among younger adults and decrease 
enrollment among older adults. Although the combined effect of 
those two changes would reduce the average age and improve the 
average health of enrollees in the nongroup market, it might be 
difficult for insurers to set premiums for 2019 using their 
prior experience in the market.
    In 2020, CBO estimates, grants to states from the Patient 
and State Stability Fund, once fully implemented, would 
significantly reduce premiums in the nongroup market and 
encourage participation by insurers. The grants would help to 
reduce the risk to insurers of offering nongroup insurance. As 
a result, CBO expects that those grants would contribute 
substantially to the stability of the nongroup market.
    That effect would occur despite the fact that more major 
changes taking effect in that year would make it difficult for 
insurers to predict the mix of enrollees on the basis of their 
recent experience. The new age-based tax credits would be 
introduced in 2020 and actuarial value requirements would be 
eliminated. In response, insurers would have the flexibility to 
sell different types of plans than they do under current law. 
The nongroup market is expected to be smaller in 2020 than in 
2019 but then is expected to grow somewhat over the 2020-2026 
period.

    Other Budgetary Effects of Health Insurance Coverage 
Provisions. Because the insurance coverage provisions of the 
legislation would increase the number of uninsured people and 
decrease the number of people with Medicaid coverage relative 
to the numbers under current law, CBO estimates that Medicare 
spending would increase by $43 billion over the 2018-2026 
period.
    Medicare makes additional ``disproportionate share 
hospital'' payments to facilities that serve a higher 
percentage of uninsured patients. Those payments have two 
components: an increase to the payment rate for each inpatient 
case and a lump-sum allocation of a pool of funds based on each 
qualifying hospital's share of the days of care provided to 
beneficiaries of Supplemental Security Income and Medicaid.
    Under the legislation, the decreased enrollment in Medicaid 
would slightly reduce the amounts paid to hospitals, CBO 
estimates. However, the increase in the number of uninsured 
people would substantially boost the amounts distributed on a 
lump-sum basis.

                Net Effects on Health Insurance Coverage

    CBO and JCT expect that under the legislation, the number 
of people without health insurance coverage would increase but 
that the increase would be limited initially, because insurers 
have already set their premiums for the current year and many 
people have already made their enrollment decisions for the 
year. However, in 2017, the elimination of the individual 
mandate penalties would result in about 4 million additional 
people becoming uninsured (see Table 5).
    In 2018, by CBO and JCT's estimates, about 14 million more 
people would be uninsured, relative to the number under current 
law. That increase would consist of about 6 million fewer 
people with coverage obtained in the nongroup market, roughly 5 
million fewer people with coverage under Medicaid, and about 2 
million fewer people with employment-based coverage. In 2019, 
the number of uninsured would grow to 16 million people because 
of further reductions in Medicaid and nongroup coverage. Most 
of the reductions in coverage in 2018 and 2019 would stem from 
repealing the penalties associated with the individual mandate. 
Some of those people would choose not to have insurance because 
they choose to be covered by insurance under current law only 
to avoid paying the penalties. And some people would forgo 
insurance in response to higher premiums. CBO and JCT estimate 
that, in total, 41 million people under age 65 would be 
uninsured in 2018 and 43 million people under age 65 would be 
uninsured in 2019.
    In 2020, according to CBO and JCT's estimates, as a result 
of the insurance coverage provisions of the legislation, 21 
million more nonelderly people in the United States would be 
without health insurance than under current law. By 2026, that 
number would total 24 million, CBO and JCT estimate. 
Specifically:

     LRoughly 9 million fewer people would enroll in 
Medicaid in 2020; that figure would rise to 14 million in 2026, 
as states that expanded eligibility for Medicaid discontinued 
doing so, as states projected to expand Medicaid in the future 
chose not to do so, and as the cap on per-enrollee spending 
took effect.

     LRoughly 9 million fewer people, on net, would 
obtain coverage through the nongroup market in 2020; that 
number would fall to 2 million in 2026. The reduction in 
enrollment in the nongroup market would shrink over the 2020-
2026 period because people would gain experience with the new 
structure of the tax credits and some employers would respond 
to those tax credits by declining to offer insurance to their 
employees.

     LRoughly 2 million fewer people, on net, would 
enroll in employment-based coverage in 2020, and that number 
would grow to roughly 7 million in 2026. Part of that net 
reduction in employment-based coverage would occur because 
fewer employees would take up the offer of such coverage in the 
absence of the individual mandate penalties. In addition, CBO 
and JCT expect that, over time, fewer employers would offer 
health insurance to their workers.

    CBO and JCT estimate that 48 million people under age 65, 
or roughly 17 percent of the nonelderly population, would be 
uninsured in 2020 if the legislation was enacted. That figure 
would grow to 52 million, or roughly 19 percent of the 
nonelderly population, in 2026. (That figure is currently about 
10 percent and is projected to remain at that level in each 
year through 2026 under current law.) Although the agencies 
expect that the legislation would increase the number of 
uninsured broadly, the increase would be disproportionately 
larger among older people with lower income; in particular, 
people between 50 and 64 years old with income of less than 200 
percent of the FPL would make up a larger share of the 
uninsured (see Figure 2).

                Net Effects on Health Insurance Premiums

    The legislation would tend to increase average premiums in 
the nongroup market prior to 2020 and lower average premiums 
thereafter, relative to the outcomes under current law. (This 
discussion is focused on premiums before any applicable tax 
credits and before any surcharges for not maintaining 
continuous coverage.)
    In 2018 and 2019, according to CBO and JCT's estimates, 
average premiums for single policyholders in the nongroup 
market would be 15 percent to 20 percent higher than under 
current law mainly because of the elimination of the individual 
mandate penalties. Eliminating those penalties would markedly 
reduce enrollment in the nongroup market and increase the share 
of enrollees who would be less healthy. CBO and JCT expect that 
grants from the Patient and State Stability Fund would largely 
be used for reinsurance programs, particularly in 2018 and 
2019, when many states would rely on the federal default before 
establishing their own programs and, as explained earlier, that 
those payments would help lower premiums in the nongroup 
market. The agencies estimate that program would have a 
relatively small effect on premiums in 2018 because there would 
not be much time between enactment of the legislation and 
insurers' deadlines for setting premiums for 2018. By 2019, 
however, in CBO and JCT's judgment, the Patient and State 
Stability Fund would have the effect of somewhat moderating the 
increases in average premiums in the nongroup market resulting 
from the legislation.
    Starting in 2020, the increase in average premiums from 
repealing the individual mandate penalties would be more than 
offset by the combination of three main factors. First, the mix 
of people enrolled in coverage obtained in the nongroup market 
is anticipated to be younger, on average, than the mix under 
current law. Second, premiums, on average, are estimated to 
fall because of the elimination of actuarial value 
requirements, which would result in plans that cover a lower 
share of health care costs, on average. Third, reinsurance 
programs supported by the Patient and State Stability Fund are 
estimated to reduce premiums. If those funds were devoted to 
other purposes, then premium reductions would be smaller. By 
2026, average premiums for single policyholders in the nongroup 
market under the legislation would be roughly 10 percent lower 
than the estimates under current law.
    The changes in premiums would vary for people of different 
ages. The change in age-rating rules, effective in 2019, would 
directly change the premiums faced by different age groups, 
substantially reducing premiums for young adults and raising 
premiums for older people. By 2026, CBO and JCT project, 
premiums in the nongroup market would be 20 percent to 25 
percent lower for a 21-year-old and 8 percent to 10 percent 
lower for a 40-year-old--but 20 percent to 25 percent higher 
for a 64-year-old.

                  Revenue Effects of Other Provisions

    JCT estimates that the legislation would reduce revenues by 
$592 billion over the 2017-2026 period as a result of 
provisions that would repeal many of the revenue-related 
provisions of the ACA (apart from provisions related to health 
insurance coverage discussed above). Those with the most 
significant budgetary effects include an increase in the 
Hospital Insurance payroll tax rate for high-income taxpayers, 
a surtax on those taxpayers' net investment income, and annual 
fees imposed on health insurers.\8\
---------------------------------------------------------------------------
    \8\JCT published 10 documents (JCX-7-17 through JCX-16-17) on March 
7, 2017, relating to the legislation. For more information, see 
www.jct.gov/publications.html.
---------------------------------------------------------------------------

              Direct Spending Effects of Other Provisions

    The legislation would also make changes to spending for 
other federal health care programs. CBO and JCT estimate that 
those provisions would increase direct spending by about $7 
billion over the 2017-2026 period.

    Prevention and Public Health Fund. The legislation would, 
beginning in fiscal year 2019, repeal the provision that 
established the Prevention and Public Health Fund and rescind 
all unobligated balances. The Department of Health and Human 
Services awards grants through the fund to public and private 
entities to carry out prevention, wellness, and public health 
activities. Funding under current law is projected to be $1 
billion in 2017 and to rise to $2 billion in 2025 and each year 
thereafter. CBO estimates that eliminating that funding would 
reduce direct spending by $9 billion over the 2017-2026 period.

    Community Health Center Program. The legislation would 
increase the funds available to the Community Health Center 
Program, which provides grant funds to health centers that 
offer primary and preventive care to patients regardless of 
their ability to pay. Under current law, the program will 
receive about $4 billion in fiscal year 2017. The legislation 
would increase funding for the program by $422 million in 
fiscal year 2017. CBO estimates that implementing the provision 
would increase direct spending by $422 million over the 2017-
2026 period.

    Provision Affecting Planned Parenthood. For a one-year 
period following enactment, the legislation would prevent 
federal funds from being made available to an entity (including 
its affiliates, subsidiaries, successors, and clinics) if it 
is:

     LA nonprofit organization described in section 
501(c)(3) of the Internal Revenue Code and exempt from tax 
under section 501(a) of the code;

     LAn essential community provider that is primarily 
engaged in providing family planning and reproductive health 
services and related medical care;

     LAn entity that provides abortions--except in 
instances in which the pregnancy is the result of an act of 
rape or incest or the woman's life is in danger; and

     LAn entity that had expenditures under the 
Medicaid program that exceeded $350 million in fiscal year 
2014.

    CBO expects that, according to those criteria, only Planned 
Parenthood Federation of America and its affiliates and clinics 
would be affected. Most federal funds received by such entities 
come from payments for services provided to enrollees in 
states' Medicaid programs. CBO estimates that the prohibition 
would reduce direct spending by $178 million in 2017 and by 
$234 million over the 2017-2026 period. Those savings would be 
partially offset by increased spending for other Medicaid 
services, as discussed below.
    To the extent that there would be reductions in access to 
care under the legislation, they would affect services that 
help women avert pregnancies. The people most likely to 
experience reduced access to care would probably reside in 
areas without other health care clinics or medical 
practitioners who serve low-income populations. CBO projects 
that about 15 percent of those people would lose access to 
care.
    The government would incur some costs for Medicaid 
beneficiaries currently served by affected entities because the 
costs of about 45 percent of all births are paid for by the 
Medicaid program. CBO estimates that the additional births 
stemming from the reduced access under the legislation would 
add to federal spending for Medicaid. In addition, some of 
those children would themselves qualify for Medicaid and 
possibly for other federal programs. By CBO's estimates, in the 
one-year period in which federal funds for Planned Parenthood 
would be prohibited under the legislation, the number of births 
in the Medicaid program would increase by several thousand, 
increasing direct spending for Medicaid by $21 million in 2017 
and by $77 million over the 2017-2026 period. Overall, with 
those costs netted against the savings estimated above, 
implementing the provision would reduce direct spending by $156 
million over the 2017-2026 period, CBO estimates.

    Repeal of Medicaid Provisions. Under current law, states 
can elect the Community First Choice option, allowing them to 
receive a 6 percentage-point increase in their federal matching 
rate for some services provided by home and community-based 
attendants to certain Medicaid recipients. The legislation 
would terminate the increase in the federal matching funds 
beginning in calendar year 2020, which would decrease direct 
spending by about $12 billion over the next 10 years.

    Repeal of Reductions to Allotments for Disproportionate 
Share Hospitals. Under current law, Medicaid allotments to 
states for payments to hospitals that treat a disproportionate 
share of uninsured and Medicaid patients are to be cut 
significantly in each year from 2018 to 2025. The cuts are 
currently scheduled to be $2 billion in 2018 and to increase 
each year until they reach $8 billion in 2024 and 2025. The 
legislation would eliminate those cuts for states that have not 
expanded Medicaid under the ACA starting in 2018 and for the 
remaining states starting in 2020, boosting outlays by $31 
billion over the next 10 years.

    Safety Net Funding for States That Did Not Expand Medicaid. 
The legislation would provide $2 billion in funding in each 
year from 2018 to 2021 to states that did not expand Medicaid 
eligibility under the ACA. Those states could use the funding, 
within limits, to supplement payments to providers that treat 
Medicaid enrollees. Such payments to providers would not be 
subject to the per capita caps also established by the proposed 
legislation. Any states that chose to expand Medicaid coverage 
as of July 1 of each year from 2017 through 2020 would lose 
access to the funding available under this provision in the 
following year and thereafter. CBO estimates that this 
provision would increase direct spending by $8 billion over the 
2017-2026 period.

    Reductions to States' Medicaid Costs. The legislation would 
make a number of additional changes to the Medicaid program, 
including these:

     LRequiring states to treat lottery winnings and 
certain other income as income for purposes of determining 
eligibility;

     LDecreasing the period when Medicaid benefits may 
be covered retroactively from up to three months before a 
recipient's application to the first of the month in which a 
recipient makes an application;

     LEliminating federal payments to states for 
Medicaid services provided to applicants who did not provide 
satisfactory evidence of citizenship or nationality during a 
reasonable opportunity period; and

     LEliminating states' option to increase the amount 
of allowable home equity from $500,000 to $750,000 for 
individuals applying for Medicaid coverage of long-term 
services and supports.

    Together, CBO estimates, those changes would decrease 
direct spending by about $7 billion over the 2017-2026 period.

              Changes in Spending Subject to Appropriation

    CBO has not completed an estimate of the potential impact 
of the legislation on discretionary spending, which would be 
subject to future appropriation action.

                 UNCERTAINTY SURROUNDING THE ESTIMATES

    CBO and JCT considered the potential responses of many 
parties that would be affected by the legislation, including 
these:

     LFederal agencies--which would need to implement 
major changes in the regulation of the health care system and 
administration of new subsidy structures and eligibility 
verification systems in a short time frame;

     LStates--which would need to decide how to use 
Patient and State Stability Fund grants, whether to pass new 
laws affecting the nongroup market, how to respond to the 
reduction in the federal matching rate for certain Medicaid 
enrollees, how to respond to constraints from the cap on 
Medicaid payments, and how to provide information to the 
federal government about insurers and enrollees;

     LInsurers--who would need to decide about the 
extent of their participation in the insurance market and what 
types of plans to sell in the face of different market rules 
and federal subsidies;

     LEmployers--who would need to decide whether to 
offer insurance given the different federal subsidies and 
insurance products available to their employees;

     LIndividuals--who would make decisions about 
health insurance in the context of different premiums, 
subsidies, and penalties than those under current law; and

     LDoctors and hospitals--who would need to 
negotiate contracts with insurers in a new regulatory 
environment.

    Each of those responses is difficult to predict. Moreover, 
the responses would depend upon how the provisions in the 
legislation were implemented, such as whether advance payments 
of the new tax credits were made reliably. And flaws in the 
determination of eligibility, for instance, could keep 
subsidies from people who were eligible or provide them to 
people who were not.
    In addition, CBO and JCT's projections under current law 
itself are inexact, which could also affect the estimated 
effects. For example, enrollment in the marketplaces under 
current law could be lower than is projected, which would tend 
to decrease the budgetary savings of the legislation. 
Alternatively, the average subsidy per enrollee under current 
law could be higher than is projected, which would tend to 
increase the budgetary savings of the legislation.
    CBO and JCT have endeavored to develop estimates that are 
in the middle of the distribution of potential outcomes. One 
way to assess the range of uncertainty around the estimated 
effects of the legislation is to compare previous projections 
with actual results. For example, some aspects of CBO and JCT's 
projections of health insurance coverage and related spending 
made in July 2012 (after the Supreme Court issued a decision 
that essentially made the expansion of the Medicaid program 
under the ACA an option for states) can be compared with actual 
results for 2016. Projected spending on people made eligible 
for Medicaid because of the ACA was about 60 percent of the 
actual amount. The number of people predicted in 2012 to 
purchase insurance through the marketplaces in 2016 was more 
than twice the actual number. The decline in the number of 
insured people from 2012 to 2016 was projected to be 23 
million, and the decline measured in the National Health 
Interview Survey turned out to be 20 million. CBO and JCT have 
continued to learn from experience with the ACA and have 
endeavored to use that experience to improve their modeling.
    That comparison of projections with actual results and the 
great uncertainties surrounding the actions of the many parties 
that would be affected by the legislation suggest that outcomes 
of the legislation could differ substantially from some of the 
estimates provided here. Nevertheless, CBO and JCT are 
confident about the direction of certain effects of the 
legislation. For example, spending on Medicaid would almost 
surely be lower than under current law. The cost of the new tax 
credit would probably be lower than the cost of the subsidies 
for coverage through marketplaces under current law. And the 
number of uninsured people under the legislation would almost 
surely be greater than under current law.

                      INCREASE IN LONG-TERM DIRECT
                         SPENDING AND DEFICITS

    CBO estimates that enacting the legislation would not 
increase net direct spending or on-budget deficits by more than 
$5 billion in any of the four consecutive 10-year periods 
beginning in 2027.

                       MANDATES ON STATE, LOCAL,
                         AND TRIBAL GOVERNMENTS

    JCT and CBO reviewed the provisions of the legislation and 
determined that they would impose no intergovernmental mandates 
as defined in the Unfunded Mandates Reform Act. For large 
entitlement programs like Medicaid, UMRA defines an increase in 
the stringency of conditions or a cap on federal funding as an 
intergovernmental mandate if the affected governments lack 
authority to offset those costs while continuing to provide 
required services. As discussed earlier in this estimate, the 
legislation would eliminate the enhanced federal matching rate 
for some future enrollees, establish new per capita caps in the 
Medicaid program, and make other changes that would affect 
Medicaid spending--some of which would provide additional 
assistance to states.
    On net, CBO estimates that states would see an overall 
decrease in federal assistance, as reflected in estimates of 
federal savings in the Medicaid program. In response to the 
caps and other changes, CBO anticipates that states could use 
existing flexibility allowed in the Medicaid program and 
additional authorities provided by the legislation to cut 
payments to health care providers and health plans, eliminate 
optional services, restrict eligibility for enrollment, or (to 
the extent feasible) change the way services are delivered to 
save costs. Because flexibility in the program would allow 
states to make such changes and still provide statutorily 
required services, the per capita caps and other changes in 
Medicaid would not impose intergovernmental mandates as defined 
in UMRA.

                     MANDATES ON THE PRIVATE SECTOR

    JCT and CBO have determined that the legislation would 
impose private-sector mandates as defined in UMRA. On the basis 
of information from JCT, CBO estimates that the aggregate 
direct cost of the mandates imposed by the legislation would 
exceed the annual threshold established in UMRA for private-
sector mandates ($156 million in 2017, adjusted annually for 
inflation).
    The tax provisions of the legislation contain two mandates. 
Specifically, the legislation would recapture excess advance 
payments of premium tax credits (so that the full amount of 
excess advance payments is treated as an additional tax 
liability for the individual) and repeal the small business 
(health insurance) tax credit.
    The nontax provisions of the legislation would impose a 
private-sector mandate as defined in UMRA on insurers that 
offer health insurance coverage in the individual or small-
group market. The legislation would require those insurers to 
charge a penalty equal to 30 percent of the monthly premium for 
a period of 12 months to individuals who enroll in insurance in 
a given year after having allowed their health insurance to 
lapse for more than 63 days during the previous year. CBO 
estimates that the costs of complying with the mandate would be 
largely offset by the penalties insurers would collect.

                         ESTIMATE PREPARED BY:

Federal Spending
Kate Fritzsche, Sarah Masi, Daniel Hoople, Robert Stewart, Lisa 
        Ramirez-Branum, Andrea Noda, Allison Percy, Sean Lyons, 
        Alexandra Minicozzi, Eamon Molloy, Ben Hopkins, Susan Yeh 
        Beyer, Jared Maeda, Christopher Zogby, Romain Parsad, Ezra 
        Porter, Lori Housman, Kevin McNellis, Jamease Kowalczyk, Noah 
        Meyerson, T.J. McGrath, Rebecca Verreau, Alissa Ardito, and the 
        staff of the Joint Committee on Taxation
Federal Revenues
Staff of the Joint Committee on Taxation
Impact on State, Local, and Tribal Governments
Leo Lex, Zachary Byrum, and the staff of the Joint Committee on 
        Taxation
Impact on the Private Sector
Amy Petz and the staff of the Joint Committee on Taxation

                    ESTIMATE REVIEWED AND EDITED BY:

Mark Hadley, Theresa Gullo, Jeffrey Kling, Robert Sunshine, David 
        Weaver, John Skeen, Kate Kelly, Jorge Salazar, and Darren Young

                         ESTIMATE APPROVED BY:

Holly Harvey, Deputy Assistant Director for Budget Analysis; Jessica 
        Banthin, Deputy Assistant Director for Health, Retirement, and 
        Long-Term Analysts; Chad Chirico, Chief, Low-Income Health 
        Programs and Prescription Drugs Cost Estimates Unit

 TABLE 1.--SUMMARY OF THE DIRECT SPENDING AND REVENUE EFFECTS OF THE AHCA, THE BUDGET RECONCILIATION RECOMMENDATIONS OF THE HOUSE COMMITTEES ON WAYS AND
                                                      MEANS AND ENERGY AND COMMERCE, MARCH 9, 2017
                                                          [Billions of dollars, by fiscal year]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    2017     2018     2019     2020     2021      2022      2023      2024      2025      2026     2017-2021   2017-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              CHANGES IN DIRECT SPENDING\a\
Coverage Provisions:
  Estimated Budget Authority....     -6.6    -12.5    -22.9    -97.6    -139.1    -157.4    -173.8    -186.9    -199.4    -210.5      -278.6    -1,206.7
  Estimated Outlays.............     -6.6    -27.5    -25.6    -92.5    -138.6    -158.5    -175.2    -188.5    -201.3    -212.0      -290.7    -1,226.2
Non Coverage Provisions:
  Estimated Budget Authority....      0.3     -0.5     -0.7      0.6       1.7      -0.2       1.0       1.1       0.7       0.0         1.3         3.8
  Estimated Outlays.............     -0.1      0.3     -0.1      0.8       1.8       0.5       0.8       1.5       1.3       0.3         2.7         7.1
Total Changes in Direct
 Spending:
  Estimated Budget Authority....     -6.3    -13.0    -23.6    -97.1    -137.4    -157.6    -172.8    -185.8    -198.7    -210.5      -277.4    -1,202.8
  Estimated Outlays.............     -6.7    -27.2    -25.7    -91.7    -136.9    -158.0    -174.3    -187.0    -200.0    -211.7      -288.1    -1,219.1
 
                                                                 CHANGES IN REVENUES\b\
 
Coverage Provisions.............     -3.8    -13.7    -16.8    -25.5     -33.6     -36.4     -38.9     -40.4     -41.0     -40.7       -93.5      -290.9
Non Coverage Provisions.........     -2.1    -37.5    -41.8    -57.6     -65.1     -70.2     -76.0     -83.1     -79.7     -78.7      -204.2      -591.9
                                 -----------------------------------------------------------------------------------------------------------------------
      Total Changes in Revenues.     -5.9    -51.2    -58.6    -83.1     -98.7    -106.6    -114.9    -123.5    -120.6    -119.4      -297.6      -882.8
 
                                   INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING OR REVENUES
 
Net Increase or Decrease (-) in      -0.8     24.0     33.0     -8.6     -38.2     -51.3     -59.4     -63.5     -79.4     -92.4         9.4      -336.5
 the Deficit....................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
 
Notes: The costs of this legislation fall within budget function 550 (health), 570 (Medicare), 600 (Income Security), and 650 (Social Security).
AHCA = American Health Care Act; numbers may not add up to totals because of rounding.
 
\a\For outlays, a positive number indicates an increase (adding to the deficit) and a negative number indicates a decrease (reducing the deficit).
\b\For revenues, a negative number indicates a decrease (adding to the deficit).


 TABLE 2.--ESTIMATE OF THE DIRECT SPENDING AND REVENUE EFFECTS OF THE AHCA, THE BUDGET RECONCILIATION RECOMMENDATIONS OF THE  HOUSE COMMITTEES ON WAYS AND MEANS AND ENERGY AND COMMERCE, MARCH
                                                                                             9, 2017
                                                                              [Billions of dollars, by fiscal year]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            2017     2018     2019     2020     2021      2022      2023      2024      2025      2026     2017-2021   2017-2026
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  CHANGES IN DIRECT SPENDING\a\
Coverage Provisions:
  Estimated Budget Authority............................................     -6.6    -12.5    -22.9    -97.6    -139.1    -157.4    -173.8    -186.9    -199.4    -210.5      -278.6    -1,206.7
  Estimated Outlays.....................................................     -6.6    -27.5    -25.6    -92.5    -138.6    -158.5    -175.2    -188.5    -201.3    -212.0      -290.7    -1,226.2
    On-Budget...........................................................     -6.6    -27.5    -25.6    -92.5    -138.6    -158.2    -174.7    -187.9    -200.7    -211.4      -290.7    -1,223.6
    Off-Budget..........................................................        0      (*)      (*)      (*)      -0.1      -0.2      -0.4      -0.6      -0.6      -0.6         (*)        -2.5
Prevention and Public Health Fund:
  Estimated Budget Authority............................................        0     -0.9     -0.9     -1.0      -1.0      -1.5      -1.0      -1.7      -2.0      -2.0        -3.8       -12.0
  Estimated Outlays.....................................................        0     -0.1     -0.4     -0.7      -0.9      -1.0      -1.1      -1.3      -1.4      -1.7        -2.2        -8.8
Community Health Center Program:
  Estimated Budget Authority............................................      0.4      0.0        0        0         0         0         0         0         0         0         0.4         0.4
  Estimated Outlays.....................................................      0.1      0.3      0.1        0         0         0         0         0         0         0         0.4         0.4
Provision Affecting Planned Parenthood:
  Estimated Budget Authority............................................     -0.2      (*)      (*)      (*)       (*)       (*)       (*)       (*)       (*)       (*)        -0.2        -0.2
  Estimated Outlays.....................................................     -0.2      (*)      (*)      (*)       (*)       (*)       (*)       (*)       (*)       (*)        -0.2        -0.2
Repeal of Medicaid Provisions:\b\
  Estimated Budget Authority............................................        0        0        0     -0.8      -1.3      -1.6      -1.9      -2.0      -2.1      -2.2        -2.1       -11.7
  Estimated Outlays.....................................................        0        0        0     -0.8      -1.3      -1.6      -1.9      -2.0      -2.1      -2.2        -2.1       -11.7
Repeal of Medicaid Expansion:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Repeal of Reductions to Allotments for DSH:
  Estimated Budget Authority............................................        0      0.6      1.0      1.9       2.8       3.7       4.7       5.7       5.7       5.1         6.3        31.2
  Estimated Outlays.....................................................        0      0.6      1.0      1.9       2.8       3.7       4.7       5.7       5.7       5.1         6.3        31.2
Reductions to States' Medicaid Costs:\b\
  Estimated Budget Authority............................................        0     -0.3     -0.6     -0.8      -0.8      -0.8      -0.9      -0.9      -0.9      -1.0        -2.5        -7.1
  Estimated Outlays.....................................................        0     -0.3     -0.6     -0.8      -0.8      -0.8      -0.9      -0.9      -0.9      -1.0        -2.5        -7.1
Safety Net Funding for Non Expansion States:
  Estimated Budget Authority............................................        0      2.0      2.0      2.0       2.0       0.0       0.0       0.0       0.0       0.0         8.0         8.0
  Estimated Outlays.....................................................        0      1.8      2.0      2.0       2.0       0.2       0.0       0.0       0.0       0.0         7.8         8.0
Providing Incentives for Increased Frequency of Eligibility
 Redeterminations:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Per Capita Allotment for Medical Assistance:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Repeal of Cost-Sharing Subsidy:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Patient and State Stability Fund:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Continuous Health Insurance Coverage Incentive:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Increasing Levels of Coverage Options:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Change in Permissible Age Variation:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Recapture Excess Advance Payments of Premium Tax Credits:
  Estimated Budget Authority............................................        0     -2.0     -2.2     -0.7         0         0         0         0         0         0        -4.9        -4.9
  Estimated Outlays.....................................................        0     -2.0     -2.2     -0.7         0         0         0         0         0         0        -4.9        -4.9
Additional Modifications to Premium Tax Credit:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Premium Tax Credit:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Small Business Tax Credit:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Individual Mandate:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
Employer Mandate:
  Estimated Budget Authority............................................
                                                                                                           [Included in estimate of coverage provisions]
                                                                                                           [Included in estimate of coverage provisions]
  Estimated Outlays.....................................................
  Total Changes in Direct Spending:
    Estimated Budget Authority..........................................     -6.3    -13.0    -23.6    -97.1    -137.4    -157.6    -172.8    -185.8    -198.7    -210.5      -277.4    -1,202.8
    Estimated Outlays...................................................     -6.7    -27.2    -25.7    -91.7    -136.9    -158.0    -174.3    -187.0    -200.0    -211.7      -288.1    -1,219.1
      On-Budget.........................................................     -6.7    -27.2    -25.7    -91.7    -136.8    -157.7    -173.9    -186.4    -199.4    -211.1      -288.0    -1,216.6
      Off-Budget........................................................        0      (*)      (*)      (*)      -0.1      -0.2      -0.4      -0.6      -0.6      -0.6         (*)        -2.5
 
                                                                                     CHANGES IN REVENUES\c\
Coverage Provisions:
  Estimated Revenues....................................................     -3.8    -13.7    -16.8    -25.5     -33.6     -36.4     -38.9     -40.4     -41.0     -40.7       -93.5      -290.9
    On-Budget...........................................................     -4.5    -17.0    -19.9    -27.6     -35.5     -38.4     -41.7     -44.7     -46.7     -48.0      -104.5      -324.2
    Off-Budget..........................................................      0.7      3.3      3.1      2.0       1.9       2.0       2.8       4.3       5.8       7.3        11.1        33.3
Recapture Excess Advance Payments of Premium Tax Credits................        0      0.6      0.7      0.5         0         0         0         0         0         0         1.8         1.8
  Additional Modifications to Premium Tax Credit........................
                                                                                                           [Included in estimate of coverage provisions]
  Premium Tax Credit....................................................
                                                                                                           [Included in estimate of coverage provisions]
  Small Business Tax Credit.............................................
                                                                                                           [Included in estimate of coverage provisions]
  Individual Mandate....................................................
                                                                                                           [Included in estimate of coverage provisions]
  Employer Mandate......................................................
                                                                                                           [Included in estimate of coverage provisions]
Repeal of the Tax on Employee Health Insurance Premiums and Health Plan         0        0        0     -3.4      -6.9      -8.7     -10.7     -13.6      -5.5         0       -10.3       -48.7
 Benefits\d\............................................................
Repeal of Tax on Over-the-Counter Medications...........................        0     -0.4     -0.5     -0.6      -0.6      -0.6      -0.6      -0.7      -0.7      -0.7        -2.1        -5.5
Repeal of Increase of Tax on Health Savings.............................        0      (*)      (*)      (*)       (*)       (*)       (*)       (*)       (*)       (*)         (*)        -0.1
Repeal of Limitations on Contributions to Flexible Spending Accounts....        0     -0.3     -1.2     -1.6      -1.7      -1.8      -2.2      -2.6      -3.3      -4.1        -4.7       -18.6
Repeal of Tax on Prescription Medications...............................        0     -3.1     -2.7     -2.7      -2.7      -2.7      -2.7      -2.7      -2.7      -2.7       -11.2       -24.8
Repeal of Medical Device Excise Tax.....................................        0     -1.4     -1.9     -2.0      -2.1      -2.2      -2.3      -2.4      -2.6      -2.7        -7.4       -19.6
Repeal of Health Insurance Tax..........................................        0    -12.8    -13.5    -14.3     -15.1     -15.9     -16.8     -17.8     -18.7     -19.7       -55.7      -144.7
Repeal of Elimination of Deduction for Expenses Allocable to Medicare           0     -0.1     -0.2     -0.2      -0.2      -0.2      -0.2      -0.2      -0.2      -0.2        -0.6        -1.7
 Part D Subsidy.........................................................
Repeal of Increase in Income Threshold for Determining Medical Care          -0.2     -2.0     -3.2     -3.4      -3.6      -3.9      -4.2      -4.5      -4.8      -5.1       -12.4       -34.9
 Deduction..............................................................
Repeal of Medicare Tax Increase.........................................     -0.4     -6.5    -10.1    -11.4     -12.3     -13.2     -14.1     -15.2     -16.5     -17.6       -40.8      -117.3
Refundable Tax Credit for Health Insurance..............................
                                                                                                           [Included in estimate of coverage provisions]
Maximum Contribution Limit to Health Savings............................        0     -1.0     -1.6     -1.7      -1.9      -2.1      -2.3      -2.5      -2.7      -2.9        -6.2       -18.6
Allow Both Spouses to Make Catch-up Contributions to the Same Health            0      (*)      (*)      (*)       (*)       (*)       (*)       (*)      -0.1      -0.1        -0.1        -0.4
 Savings Account........................................................
Special Rule for Certain Medical Expenses Incurred Before Establishment         0      (*)      (*)      (*)       (*)       (*)       (*)       (*)       (*)       (*)        -0.1        -0.2
 of Health Savings......................................................
Repeal of Tanning Tax...................................................        0      (*)     -0.1     -0.1      -0.1      -0.1      -0.1      -0.1      -0.1      -0.1        -0.2        -0.6
Repeal of Net Investment Tax............................................     -1.5    -10.5     -7.5    -16.7     -17.8     -18.7     -19.7     -20.7     -21.7     -22.7       -54.1      -157.6
Remuneration............................................................        0      (*)      (*)      (*)      -0.1      -0.1      -0.1      -0.1      -0.1      -0.1        -0.1        -0.4
  Total Changes in Revenues.............................................     -5.9    -51.2    -58.6    -83.1     -98.7    -106.6    -114.9    -123.5    -120.6    -119.4      -297.6      -882.8
    On-Budget...........................................................     -6.6    -53.8    -60.8    -83.3     -98.0    -105.5    -114.0    -123.2    -123.3    -124.7      -302.7      -893.5
    Off-Budget..........................................................      0.7      2.6      2.2      0.2      -0.7      -1.2      -1.0      -0.3       2.7       5.3         5.0        10.7
 
                                                       INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING OR REVENUES
 
Net Increase or Decrease (-) in the Deficit.............................     -0.8     24.0     33.0     -8.6     -38.2     -51.3     -59.4     -63.5     -79.4     -92.4         9.4      -336.5
  On-Budget.............................................................      (*)     26.6     35.1     -8.4     -38.8     -52.3     -59.9     -63.2     -76.0     -86.4        14.5      -323.3
  Off-Budget............................................................     -0.7     -2.6     -2.2     -0.2       0.6       0.9       0.5      -0.3      -3.3      -5.9        -5.1       -13.2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
 
Notes: The costs of this legislation fall within budget function 550 (health), 570 (Medicare), 600 (Income Security), and 650 (Social Security).
Numbers may not add up to totals because of rounding; DSH = Disproportionate Share Hospital; AHCA = American Health Care Act;
* = an increase or decrease between zero and $50 million.
 
\a\For outlays, a positive number indicates an increase (adding to the deficit) and a negative number indicates a decrease (reducing the deficit).
\b\Estimate interacts with the provision related to the Per Capita Allotment for Medical Assistance.
\c\For revenues, a positive number indicates an increase (reducing the deficit) and a negative number indicates a decrease (adding to the deficit).
\d\This estimate does not include effects of interactions with other subsidies; those effects are included in estimates of other relevant provisions.


                                    TABLE 3.--NET BUDGETARY EFFECTS OF THE INSURANCE COVERAGE PROVISIONS OF THE AHCA
                                                          [Billions of dollars, by fiscal year]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                              Total 2017-
                                                2017     2018     2019     2020     2021      2022      2023      2024      2025      2026       2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
Medicaid Outlays............................       -3      -18      -26      -68       -94      -111      -124      -135      -146      -155        -880
Subsidies for Coverage Through Marketplaces        -5      -11      -16      -62       -87       -91       -95       -99      -102      -106        -673
 and Related Spending and Revenues\a,b\.....
Small-Employer Tax Credits\b,c\.............      (*)      (*)      (*)      (*)        -1        -1        -1        -1        -1        -1          -6
Tax Credits for Nongroup Insurance\b,d\.....        0        0        0       30        44        47        52        58        63        68         361
Penalty Payments by Employers\c\............        2       16       20       15        16        18        19        20        22        23         171
Penalty Payments by Uninsured People........        3        3        3        3         4         4         4         4         4         5          38
Patient and State Stability Fund Grants.....        0        0       12       15        10         9         9         8         8         8          80
Medicare\e\.................................        0        1        3        4         6         6         6         6         6         6          43
Other Effects on Revenues and Outlays\d,f\..       -1       -5       -5       -4        -4        -4        -6       -10       -14       -18         -70
                                             -----------------------------------------------------------------------------------------------------------
  Total Effect on the Deficit...............       -3      -14       -9      -67      -105      -122      -136      -148      -160      -171        -935
Memorandum:
Decreases in Mandatory Spending.............       -7      -27      -26      -93      -139      -158      -175      -188      -201      -212      -1,226
Decreases in Revenues.......................       -4      -14      -17      -26       -34       -36       -39       -40       -41       -41        -291
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
 
Except in the memorandum lines, positive numbers indicate an increase in the deficit, and negative numbers indicate a decrease in the deficit.
 
Numbers may not add up to totals because of rounding; AHCA = American Health Care Act; * = between -$500 million and zero.
 
\a\Related spending and revenues include spending for the Basic Health Program and net spending and revenues for risk adjustment.
\b\Includes effects on outlays and on revenues.
\c\Effects on the deficit include the associated effects of changes in taxable compensation on revenues.
\d\Includes costs for a new tax credit for continuation of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).
\e\Effects arise mostly from changes in Disproportionate Share Hospital payments.
\f\Consists mainly of the effects of changes in taxable compensation on revenues. CBO also estimates that outlays for Social Security benefits would
  decrease by about $3 billion over the 2017-2026 period.


 TABLE 4.--ILLUSTRATIVE EXAMPLE OF SUBSIDIES FOR NONGROUP HEALTH INSURANCE UNDER CURRENT LAW AND THE AHCA, 2026
                                                    [Dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                     Actuarial
                                                                                                   value of plan
                                                                    Premium tax     Net premium     after cost-
                                                    Premium\a\       credit\b\         paid           sharing
                                                                                                     subsidies
                                                                                                   (percent)\c\
----------------------------------------------------------------------------------------------------------------
                     SINGLE INDIVIDUAL WITH ANNUAL INCOME OF $26,500 (175 PERCENT OF FPL)\d\
Current Law:
  21 years old..................................           5,100           3,400           1,700
  40 years old..................................           6,500           4,800           1,700        87
  64 years old..................................          15,300          13,600           1,700
                                                 ---------------------------------------------------------------
AHCA:
  21 years old..................................           3,900           2,450           1,450
  40 years old..................................           6,050           3,650           2,400        65
  64 years old..................................          19,500           4,900          14,600
----------------------------------------------------------------------------------------------------------------
                     SINGLE INDIVIDUAL WITH ANNUAL INCOME OF $68,200 (450 PERCENT OF FPL)\d\
Current Law:
  21 years old..................................           5,100               0           5,100
  40 years old..................................           6,500               0           6,500        70
  64 years old..................................          15,300               0          15,300
                                                 ---------------------------------------------------------------
AHCA:
  21 years old..................................           3,900           2,450           1,450
  40 years old..................................           6,050           3,650           2,400        65
  64 years old..................................          19,500           4,900          14,600
----------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
 
All dollar figures have been rounded to the nearest $50; AHCA = American Health Care Act; FPL = federal poverty
  level.
 
\a\For this illustration, CBO projected the average national premiums for a 21-year-old in the nongroup health
  insurance market in 2026 both under current law and under the AHCA. On the basis of those amounts, CBO
  calculated premiums for a 40-year-old and a 64-year-old, assuming that the person lives in a state that uses
  the federal default age-rating methodology, which limits variation of premiums to a ratio of 3 to 1 for adults
  under current law and 5 to 1 for adults under the AHCA. CBO projects that, under current law, most states will
  use the default 3-to-1 age-rating curve; under the AHCA, CBO projects, most would use an age-rating curve with
  a maximum ratio of 5 to 1.
\b\Under current law, premium tax credits are calculated as the difference between the reference premium and a
  specified percentage of income for a person with income at a given percentage of the FPL. The reference
  premium is the premium for the second-lowest-cost silver plan available in the marketplace in the area in
  which the person resides. A silver plan covers about 70 percent of the costs of covered benefits. CBO's
  projection of the maximum percentage of income for calculating premium tax credits in 2026 for someone with
  income at 175 percent of the FPL takes into account the probability, estimated in CBO's March 2016 baseline,
  that additional indexing may apply. Under the AHCA, the premium tax credits offered for nongroup coverage
  would be indexed to the consumer price index for all urban consumers plus 1 percentage point. In 2026, CBO
  projects, those tax credits would be about 22 percent higher than the amounts specified in 2020.
\c\The actuarial value of a plan is the percentage of costs for covered services that the plan pays. Cost-
  sharing subsidies are payments made by the federal government to insurers that reduce the cost-sharing amounts
  (out-of-pocket payments required under insurance policies) for covered people whose income is generally
  between 100 percent and 250 percent of the FPL. The cost-sharing subsidy amounts in this example would range
  from $1,100 for a 21-year-old with income at 175 percent of the FPL to $3,350 for a 64-year-old at the same
  income level. Under current law, cost-sharing subsidies have the effect of increasing the actuarial value of
  the plan from 70 percent for a typical silver plan to 94 percent for people whose income is between 100
  percent and 149 percent of the FPL; 87 percent for people between 150 percent and 199 percent of the FPL; and
  73 percent for people between 200 percent and 249 percent of the FPL. People whose income is 250 percent of
  the FPL or more would receive a standard 70 percent actuarial value when purchasing a silver plan. CBO
  projects that, under the AHCA, the elimination of required actuarial values and the structure of new tax
  credits would, by 2026, result in a reduction to about 65 percent in the average actuarial value of plans
  purchased in the nongroup market.
\d\Income levels reflect modified adjusted gross income, which equals adjusted gross income plus untaxed Social
  Security benefits, foreign earned income that is excluded from adjusted gross income, tax-exempt interest, and
  income of dependent filers. CBO projects that in 2026, a modified adjusted gross income of $26,500 would equal
  175 percent of the FPL and an income of $68,200 would equal 450 percent of the FPL.


               TABLE 5.--EFFECTS OF THE AHCA ON HEALTH INSURANCE COVERAGE FOR PEOPLE UNDER AGE 65
                                     [Millions of people, by calendar year]
----------------------------------------------------------------------------------------------------------------
                                       2017   2018   2019   2020   2021    2022    2023    2024    2025    2026
----------------------------------------------------------------------------------------------------------------
Total Population Under Age 65.......    273    274    275    276     276     277     278     279     279     280
Uninsured Under Current Law.........     26     26     27     27      27      27      27      28      28      28
Change in Coverage Under the AHCA:
  Medicaid\a\.......................     -1     -5     -6     -9     -12     -13     -13     -14     -14     -14
  Nongroup coverage, including           -2     -6     -7     -9      -8      -8      -6      -5      -4      -2
   marketplaces\b\..................
  Employment-based coverage.........     -1     -2     -2     -2      -2      -2      -3      -5      -5      -7
  Other coverage\c\.................    (*)    (*)    (*)     -1      -1      -1      -1      -1      -1      -1
  Uninsured.........................      4     14     16     21      23      23      23      24      24      24
Uninsured Under the AHCA............     31     41     43     48      50      50      51      51      51      52
Percentage of the Population Under
 Age 65 With Insurance Under the
 AHCA:
  Including all U.S. residents......     89     85     84     83      82      82      82      82      82      81
  Excluding unauthorized immigrants.     91     87     87     85      84      84      84      84      84      84
----------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
 
Estimates are based on CBO's March 2016 baseline, adjusted for subsequent legislation. They reflect average
  enrollment over the course of a year among noninstitutionalized civilian residents of the 50 states and the
  District of Columbia who are under the age of 65, and they include spouses and dependents covered under family
  policies.
 
AHCA = American Health Care Act; * = a reduction that falls between zero and 500,000 people.
 
\a\Includes noninstitutionalized enrollees with full Medicaid benefits.
\b\Under current law, many people can purchase subsidized health insurance coverage through the marketplaces
  (sometimes called exchanges) operated by the federal government, by state governments, or as partnerships
  between federal and state governments. People also can purchase unsubsidized coverage in the nongroup market
  outside of those marketplaces. Under the AHCA, people could receive subsidies for coverage purchased either
  inside or outside of the marketplaces.
\c\Includes coverage under the Basic Health Program, which allows states to establish a coverage program
  primarily for people whose income is between 138 percent and 200 percent of the federal poverty level. To
  subsidize that coverage, the federal government provides states with funding that is equal to 95 percent of
  the subsidies for which those people would otherwise have been eligible by purchasing health insurance through
  a marketplace. Payments for that program would be rescinded by the AHCA in 2020.

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


          A. Committee Oversight Findings and Recommendations

    Pursuant to 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 
description portions of this report.

        B. 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 recommendations contain no 
measure that authorizes funding, so no statement of general 
performance goals and objectives for which any measure 
authorizing funding is required.

              C. 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 recommendations do not contain any private sector 
mandates. The Committee has determined that the budget 
reconciliation legislative recommendations do not impose any 
Federal intergovernmental mandates on State, local, or tribal 
governments.

                D. 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 recommendations and states that the provisions of 
the legislative recommendations do not involve any Federal 
income tax rate increases within the meaning of the rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 (``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 recommendations contain 
no provisions that amend the Code and that have ``widespread 
applicability'' to individuals or small businesses, within the 
meaning of the rule.

  F. 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 
recommendations and states that the provisions of the 
legislative recommendations do not contain any congressional 
earmarks, limited tax benefits, or limited tariff benefits 
within the meaning of the rule.

                   G. Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that none 
of the budget reconciliation legislative recommendations 
establishes or reauthorizes: (1) a program of the Federal 
Government known to be duplicative of another Federal program, 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139, or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to section 6104 of title 31, 
United States Code.

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), 
the following statement is made concerning directed rule 
makings: The Committee advises that the budget reconciliation 
legislative recommendations require no directed rule makings 
within the meaning of such section.
     VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION 
              LEGISLATIVE RECOMMENDATIONS, AS TRANSMITTED

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes to existing law made by 
the recommendations, as transmitted, are shown as follows 
(existing law proposed to be omitted is enclosed in black 
brackets, new matter is printed in italic, and 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 C--Refundable Credits


Sec. 31. Tax withheld on wages.
     * * * * * * *
Sec. 36C. Health insurance coverage.

           *       *       *       *       *       *       *


SEC. 35. HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS.

  (a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by subtitle A an 
amount equal to 72.5 percent of the amount paid by the taxpayer 
for coverage of the taxpayer and qualifying family members 
under qualified health insurance for eligible coverage months 
beginning in the taxable year.
  (b) Eligible Coverage Month.--For purposes of this section--
          (1) In general.--The term ``eligible coverage month'' 
        means any month if--
                  (A) as of the first day of such month, the 
                taxpayer--
                          (i) is an eligible individual,
                          (ii) is covered by qualified health 
                        insurance, the premium for which is 
                        paid by the taxpayer,
                          (iii) does not have other specified 
                        coverage, and
                          (iv) is not imprisoned under Federal, 
                        State, or local authority, and
                  (B) such month begins more than 90 days after 
                the date of the enactment of the Trade Act of 
                2002, and before January 1, 2020.
          (2) Joint returns.--In the case of a joint return, 
        the requirements of paragraph (1)(A) shall be treated 
        as met with respect to any month if at least 1 spouse 
        satisfies such requirements.
  (c) Eligible Individual.--For purposes of this section--
          (1) In general.--The term ``eligible individual'' 
        means--
                  (A) an eligible TAA recipient,
                  (B) an eligible alternative TAA recipient, 
                and
                  (C) an eligible PBGC pension recipient.
          (2) Eligible TAA recipient.--
                  (A) In general.--Except as provided in 
                subparagraph (B), the term ``eligible TAA 
                recipient'' means, with respect to any month, 
                any individual who is receiving for any day of 
                such month a trade readjustment allowance under 
                chapter 2 of title II of the Trade Act of 1974 
                or who would be eligible to receive such 
                allowance if section 231 of such Act were 
                applied without regard to subsection (a)(3)(B) 
                of such section. An individual shall continue 
                to be treated as an eligible TAA recipient 
                during the first month that such individual 
                would otherwise cease to be an eligible TAA 
                recipient by reason of the preceding sentence.
                  (B) Special rule.--In the case of any 
                eligible coverage month beginning after the 
                date of the enactment of this paragraph, the 
                term ``eligible TAA recipient'' means, with 
                respect to any month, any individual who--
                          (i) is receiving for any day of such 
                        month a trade readjustment allowance 
                        under chapter 2 of title II of the 
                        Trade Act of 1974,
                          (ii) would be eligible to receive 
                        such allowance except that such 
                        individual is in a break in training 
                        provided under a training program 
                        approved under section 236 of such Act 
                        that exceeds the period specified in 
                        section 233(e) of such Act, but is 
                        within the period for receiving such 
                        allowances provided under section 
                        233(a) of such Act, or
                          (iii) is receiving unemployment 
                        compensation (as defined in section 
                        85(b)) for any day of such month and 
                        who would be eligible to receive such 
                        allowance for such month if section 231 
                        of such Act were applied without regard 
                        to subsections (a)(3)(B) and (a)(5) 
                        thereof.
                An individual shall continue to be treated as 
                an eligible TAA recipient during the first 
                month that such individual would otherwise 
                cease to be an eligible TAA recipient by reason 
                of the preceding sentence.
          (3) Eligible alternative TAA recipient.--The term 
        ``eligible alternative TAA recipient'' means, with 
        respect to any month, any individual who--
                  (A) is a worker described in section 
                246(a)(3)(B) of the Trade Act of 1974 who is 
                participating in the program established under 
                section 246(a)(1) of such Act, and
                  (B) is receiving a benefit for such month 
                under section 246(a)(2) of such Act.
        An individual shall continue to be treated as an 
        eligible alternative TAA recipient during the first 
        month that such individual would otherwise cease to be 
        an eligible alternative TAA recipient by reason of the 
        preceding sentence.
          (4) Eligible PBGC pension recipient.--The term 
        ``eligible PBGC pension recipient'' means, with respect 
        to any month, any individual who--
                  (A) has attained age 55 as of the first day 
                of such month, and
                  (B) is receiving a benefit for such month any 
                portion of which is paid by the Pension Benefit 
                Guaranty Corporation under title IV of the 
                Employee Retirement Income Security Act of 
                1974.
  (d) Qualifying Family Member.--For purposes of this section--
          (1) In general.--The term ``qualifying family 
        member'' means--
                  (A) the taxpayer's spouse, and
                  (B) any dependent of the taxpayer with 
                respect to whom the taxpayer is entitled to a 
                deduction under section 151(c).
        Such term does not include any individual who has other 
        specified coverage.
          (2) Special dependency test in case of divorced 
        parents, etc..--If section 152(e) applies to any child 
        with respect to any calendar year, in the case of any 
        taxable year beginning in such calendar year, such 
        child shall be treated as described in paragraph (1)(B) 
        with respect to the custodial parent (as defined in 
        section 152(e)(4)(A)) and not with respect to the 
        noncustodial parent.
  (e) Qualified Health Insurance.--For purposes of this 
section--
          (1) In general.--The term ``qualified health 
        insurance'' means any of the following:
                  (A) Coverage under a COBRA continuation 
                provision (as defined in section 9832(d)(1)).
                  (B) State-based continuation coverage 
                provided by the State under a State law that 
                requires such coverage.
                  (C) Coverage offered through a qualified 
                State high risk pool (as defined in section 
                2744(c)(2) of the Public Health Service Act).
                  (D) Coverage under a health insurance program 
                offered for State employees.
                  (E) Coverage under a State-based health 
                insurance program that is comparable to the 
                health insurance program offered for State 
                employees.
                  (F) Coverage through an arrangement entered 
                into by a State and--
                          (i) a group health plan (including 
                        such a plan which is a multiemployer 
                        plan as defined in section 3(37) of the 
                        Employee Retirement Income Security Act 
                        of 1974),
                          (ii) an issuer of health insurance 
                        coverage,
                          (iii) an administrator, or
                          (iv) an employer.
                  (G) Coverage offered through a State 
                arrangement with a private sector health care 
                coverage purchasing pool.
                  (H) Coverage under a State-operated health 
                plan that does not receive any Federal 
                financial participation.
                  (I) Coverage under a group health plan that 
                is available through the employment of the 
                eligible individual's spouse.
                  (J) In the case of any eligible individual 
                and such individual's qualifying family 
                members, coverage under individual health 
                insurance (other than coverage enrolled in 
                through an Exchange established under the 
                Patient Protection and Affordable Care Act). 
                For purposes of this subparagraph, the term 
                ``individual health insurance'' means any 
                insurance which constitutes medical care 
                offered to individuals other than in connection 
                with a group health plan and does not include 
                Federal- or State-based health insurance 
                coverage.
                  (K) Coverage under an employee benefit plan 
                funded by a voluntary employees' beneficiary 
                association (as defined in section 501(c)(9)) 
                established pursuant to an order of a 
                bankruptcy court, or by agreement with an 
                authorized representative, as provided in 
                section 1114 of title 11, United States Code.
          (2) Requirements for State-based coverage.--
                  (A) In general.--The term ``qualified health 
                insurance'' does not include any coverage 
                described in subparagraphs (B) through (H) of 
                paragraph (1) unless the State involved has 
                elected to have such coverage treated as 
                qualified health insurance under this section 
                and such coverage meets the following 
                requirements:
                          (i) Guaranteed issue.--Each 
                        qualifying individual is guaranteed 
                        enrollment if the individual pays the 
                        premium for enrollment or provides a 
                        qualified health insurance costs credit 
                        eligibility certificate described in 
                        section 7527 and pays the remainder of 
                        such premium.
                          (ii) No imposition of preexisting 
                        condition exclusion.--No pre-existing 
                        condition limitations are imposed with 
                        respect to any qualifying individual.
                          (iii) Nondiscriminatory premium.--The 
                        total premium (as determined without 
                        regard to any subsidies) with respect 
                        to a qualifying individual may not be 
                        greater than the total premium (as so 
                        determined) for a similarly situated 
                        individual who is not a qualifying 
                        individual.
                          (iv) Same benefits.--Benefits under 
                        the coverage are the same as (or 
                        substantially similar to) the benefits 
                        provided to similarly situated 
                        individuals who are not qualifying 
                        individuals.
                  (B) Qualifying individual.--For purposes of 
                this paragraph, the term ``qualifying 
                individual'' means--
                          (i) an eligible individual for whom, 
                        as of the date on which the individual 
                        seeks to enroll in the coverage 
                        described in subparagraphs (B) through 
                        (H) of paragraph (1), the aggregate of 
                        the periods of creditable coverage (as 
                        defined in section 9801(c)) is 3 months 
                        or longer and who, with respect to any 
                        month, meets the requirements of 
                        clauses (iii) and (iv) of subsection 
                        (b)(1)(A); and
                          (ii) the qualifying family members of 
                        such eligible individual.
          (3) Exception.--The term ``qualified health 
        insurance'' shall not include--
                  (A) a flexible spending or similar 
                arrangement, and
                  (B) any insurance if substantially all of its 
                coverage is of excepted benefits described in 
                section 9832(c).
  (f) Other Specified Coverage.--For purposes of this section, 
an individual has other specified coverage for any month if, as 
of the first day of such month--
          (1) Subsidized coverage.--
                  (A) In general.--Such individual is covered 
                under any insurance which constitutes medical 
                care (except insurance substantially all of the 
                coverage of which is of excepted benefits 
                described in section 9832(c)) under any health 
                plan maintained by any employer (or former 
                employer) of the taxpayer or the taxpayer's 
                spouse and at least 50 percent of the cost of 
                such coverage (determined under section 4980B) 
                is paid or incurred by the employer.
                  (B) Eligible alternative TAA recipients.--In 
                the case of an eligible alternative TAA 
                recipient, such individual is either--
                          (i) eligible for coverage under any 
                        qualified health insurance (other than 
                        insurance described in subparagraph 
                        (A), (B), or (F) of subsection (e)(1)) 
                        under which at least 50 percent of the 
                        cost of coverage (determined under 
                        section 4980B(f)(4)) is paid or 
                        incurred by an employer (or former 
                        employer) of the taxpayer or the 
                        taxpayer's spouse, or
                          (ii) covered under any such qualified 
                        health insurance under which any 
                        portion of the cost of coverage (as so 
                        determined) is paid or incurred by an 
                        employer (or former employer) of the 
                        taxpayer or the taxpayer's spouse.
                  (C) Treatment of cafeteria plans.--For 
                purposes of subparagraphs (A) and (B), the cost 
                of coverage shall be treated as paid or 
                incurred by an employer to the extent the 
                coverage is in lieu of a right to receive cash 
                or other qualified benefits under a cafeteria 
                plan (as defined in section 125(d)).
          (2) Coverage under medicare, medicaid, or SCHIP.--
        Such individual--
                  (A) is entitled to benefits under part A of 
                title XVIII of the Social Security Act or is 
                enrolled under part B of such title, or
                  (B) is enrolled in the program under title 
                XIX or XXI of such Act (other than under 
                section 1928 of such Act).
          (3) Certain other coverage.--Such individual--
                  (A) is enrolled in a health benefits plan 
                under chapter 89 of title 5, United States 
                Code, or
                  (B) is entitled to receive benefits under 
                chapter 55 of title 10, United States Code.
  (g) Special Rules.--
          (1) Coordination with advance payments of credit.--
        With respect to any taxable year, the amount which 
        would (but for this subsection) be allowed as a credit 
        to the taxpayer under subsection (a) shall be reduced 
        (but not below zero) by the aggregate amount paid on 
        behalf of such taxpayer under section 7527 for months 
        beginning in such taxable year.
          (2) Coordination with other deductions.--Amounts 
        taken into account under subsection (a) shall not be 
        taken into account in determining any deduction allowed 
        under section 162(l) or 213.
          (3) Medical and health savings accounts.--Amounts 
        distributed from an Archer MSA (as defined in section 
        220(d)) or from a health savings account (as defined in 
        section 223(d)) shall not be taken into account under 
        subsection (a).
          (4) Denial of credit to dependents.--No credit shall 
        be allowed under this section to any individual with 
        respect to whom a deduction under section 151 is 
        allowable to another taxpayer for a taxable year 
        beginning in the calendar year in which such 
        individual's taxable year begins.
          (5) Both spouses eligible individuals.--The spouse of 
        the taxpayer shall not be treated as a qualifying 
        family member for purposes of subsection (a), if--
                  (A) the taxpayer is married at the close of 
                the taxable year,
                  (B) the taxpayer and the taxpayer's spouse 
                are both eligible individuals during the 
                taxable year, and
                  (C) the taxpayer files a separate return for 
                the taxable year.
          (6) Marital status; certain married individuals 
        living apart.--Rules similar to the rules of paragraphs 
        (3) and (4) of section 21(e) shall apply for purposes 
        of this section.
          (7) Insurance which covers other individuals.--For 
        purposes of this section, rules similar to the rules of 
        section 213(d)(6) shall apply with respect to any 
        contract for qualified health insurance under which 
        amounts are payable for coverage of an individual other 
        than the taxpayer and qualifying family members.
          (8) Treatment of payments.--For purposes of this 
        section--
                  (A) Payments by Secretary.--Payments made by 
                the Secretary on behalf of any individual under 
                section 7527 (relating to advance payment of 
                credit for health insurance costs of eligible 
                individuals) shall be treated as having been 
                made by the taxpayer on the first day of the 
                month for which such payment was made.
                  (B) Payments by taxpayer.--Payments made by 
                the taxpayer for eligible coverage months shall 
                be treated as having been made by the taxpayer 
                on the first day of the month for which such 
                payment was made.
          (9) COBRA premium assistance.--In the case of an 
        assistance eligible individual who receives premium 
        reduction for COBRA continuation coverage under section 
        3001(a) of title III of division B of the American 
        Recovery and Reinvestment Act of 2009 for any month 
        during the taxable year, such individual shall not be 
        treated as an eligible individual, a certified 
        individual, or a qualifying family member for purposes 
        of this section or section 7527 with respect to such 
        month.
          (10) Continued qualification of family members after 
        certain events.--
                  (A) Medicare eligibility.--In the case of any 
                month which would be an eligible coverage month 
                with respect to an eligible individual but for 
                subsection (f)(2)(A), such month shall be 
                treated as an eligible coverage month with 
                respect to such eligible individual solely for 
                purposes of determining the amount of the 
                credit under this section with respect to any 
                qualifying family members of such individual 
                (and any advance payment of such credit under 
                section 7527). This subparagraph shall only 
                apply with respect to the first 24 months after 
                such eligible individual is first entitled to 
                the benefits described in subsection (f)(2)(A).
                  (B) Divorce.--In the case of the finalization 
                of a divorce between an eligible individual and 
                such individual's spouse, such spouse shall be 
                treated as an eligible individual for purposes 
                of this section and section 7527 for a period 
                of 24 months beginning with the date of such 
                finalization, except that the only qualifying 
                family members who may be taken into account 
                with respect to such spouse are those 
                individuals who were qualifying family members 
                immediately before such finalization.
                  (C) Death.--In the case of the death of an 
                eligible individual--
                          (i) any spouse of such individual 
                        (determined at the time of such death) 
                        shall be treated as an eligible 
                        individual for purposes of this section 
                        and section 7527 for a period of 24 
                        months beginning with the date of such 
                        death, except that the only qualifying 
                        family members who may be taken into 
                        account with respect to such spouse are 
                        those individuals who were qualifying 
                        family members immediately before such 
                        death, and
                          (ii) any individual who was a 
                        qualifying family member of the 
                        decedent immediately before such death 
                        (or, in the case of an individual to 
                        whom paragraph (4) applies, the 
                        taxpayer to whom the deduction under 
                        section 151 is allowable) shall be 
                        treated as an eligible individual for 
                        purposes of this section and section 
                        7527 for a period of 24 months 
                        beginning with the date of such death, 
                        except that in determining the amount 
                        of such credit only such qualifying 
                        family member may be taken into 
                        account.
          (11) Election.--
                  (A) In general.--This section shall not apply 
                to any taxpayer for any eligible coverage month 
                unless such taxpayer elects the application of 
                this section for such month.
                  (B) Timing and applicability of election.--
                Except as the Secretary may provide--
                          (i) an election to have this section 
                        apply for any eligible coverage month 
                        in a taxable year shall be made not 
                        later than the due date (including 
                        extensions) for the return of tax for 
                        the taxable year; and
                          (ii) any election for this section to 
                        apply for an eligible coverage month 
                        shall apply for all subsequent eligible 
                        coverage months in the taxable year 
                        and, once made, shall be irrevocable 
                        with respect to such months.
          (12) Coordination with premium tax credit.--
                  (A) In general.--An eligible coverage month 
                to which the election under paragraph (11) 
                applies shall not be treated as a coverage 
                month (as defined in section 36B(c)(2)) for 
                purposes of section 36B with respect to the 
                taxpayer.
                  (B) Coordination with advance payments of 
                premium tax credit.--In the case of a taxpayer 
                who makes the election under paragraph (11) 
                with respect to any eligible coverage month in 
                a taxable year or on behalf of whom any advance 
                payment is made under section 7527 with respect 
                to any month in such taxable year--
                          (i) the tax imposed by this chapter 
                        for the taxable year shall be increased 
                        by the excess, if any, of--
                                  (I) the sum of any advance 
                                payments made on behalf of the 
                                taxpayer under section 1412 of 
                                the Patient Protection and 
                                Affordable Care Act and section 
                                7527 for months during such 
                                taxable year, over
                                  (II) the sum of the credits 
                                allowed under this section 
                                (determined without regard to 
                                paragraph (1)) and section 36B 
                                (determined without regard to 
                                subsection (f)(1) thereof) for 
                                such taxable year; and
                          (ii) section 36B(f)(2) shall not 
                        apply with respect to such taxpayer for 
                        such taxable year, except that if such 
                        taxpayer received any advance payments 
                        under section 7527 for any month in 
                        such taxable year and is later allowed 
                        a credit under section 36B for such 
                        taxable year, then section 36B(f)(2)(B) 
                        shall be applied by substituting the 
                        amount determined under clause (i) for 
                        the amount determined under section 
                        36B(f)(2)(A).
          (13) Regulations.--The Secretary may prescribe such 
        regulations and other guidance as may be necessary or 
        appropriate to carry out this section, section 6050T, 
        and section 7527.
          (14) Coordination with health insurance coverage 
        credit.--
                  (A) In general.--An eligible coverage month 
                to which the election under paragraph (11) 
                applies shall not be treated as an eligible 
                coverage month (as defined in section 36C(d)) 
                for purposes of section 36C with respect to the 
                taxpayer or any of the taxpayer's qualifying 
                family members (as defined in section 36C(e)).
                  (B) Coordination with advance payments of 
                health insurance coverage credit.--In the case 
                of a taxpayer who makes the election under 
                paragraph (11) with respect to any eligible 
                coverage month in a taxable year or on behalf 
                of whom any advance payment is made under 
                section 7527 with respect to any month in such 
                taxable year--
                          (i) the tax imposed by this chapter 
                        for the taxable year shall be increased 
                        by the excess, if any, of--
                                  (I) the sum of any advance 
                                payments made on behalf of the 
                                taxpayer under sections 7527 
                                and 7529 for months during such 
                                taxable year, over
                                  (II) the sum of the credits 
                                allowed under this section 
                                (determined without regard to 
                                paragraph (1)) and section 36C 
                                (determined without regard to 
                                subsection (i)(5)(A) thereof) 
                                for such taxable year, and
                          (ii) section 36C(i)(5)(B) shall not 
                        apply with respect to such taxpayer for 
                        such taxable year.

           *       *       *       *       *       *       *


SEC. 36B. REFUNDABLE CREDIT FOR COVERAGE UNDER A QUALIFIED HEALTH PLAN.

  (a) In General.--In the case of an applicable taxpayer, there 
shall be allowed as a credit against the tax imposed by this 
subtitle for any taxable year an amount equal to the premium 
assistance credit amount of the taxpayer for the taxable year.
  (b) Premium Assistance Credit Amount.--For purposes of this 
section--
          (1) In general.--The term ``premium assistance credit 
        amount'' means, with respect to any taxable year, the 
        sum of the premium assistance amounts determined under 
        paragraph (2) with respect to all coverage months of 
        the taxpayer occurring during the taxable year.
          (2) Premium assistance amount.--The premium 
        assistance amount determined under this subsection with 
        respect to any coverage month is the amount equal to 
        the lesser of--
                  (A) the monthly premiums for such month for 1 
                or more qualified health plans offered in the 
                individual market within a State which cover 
                the taxpayer, the taxpayer's spouse, or any 
                dependent (as defined in section 152) of the 
                taxpayer [and which were enrolled in through an 
                Exchange established by the State under 1311 of 
                the Patient Protection and Affordable Care Act, 
                or], or
                  (B) the excess (if any) of--
                          (i) the adjusted monthly premium for 
                        such month for the applicable second 
                        lowest cost silver plan with respect to 
                        the taxpayer, over
                          (ii) an amount equal to 1/12 of the 
                        product of the applicable percentage 
                        and the taxpayer's household income for 
                        the taxable year.
          (3) Other terms and rules relating to premium 
        assistance amounts.--For purposes of paragraph (2)--
                  [(A) Applicable percentage.--
                          [(i) In general.--Except as provided 
                        in clause (ii), the applicable 
                        percentage for any taxable year shall 
                        be the percentage such that the 
                        applicable percentage for any taxpayer 
                        whose household income is within an 
                        income tier specified in the following 
                        table shall increase, on a sliding 
                        scale in a linear manner, from the 
                        initial premium percentage to the final 
                        premium percentage specified in such 
                        table for such income tier:


 
------------------------------------------------------------------------
    [In the case of
    household income
(expressed as a percent    The initial premium       The final premium
of poverty line) within      percentage is--          percentage is--
  the following income
         tier:
------------------------------------------------------------------------
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%
------------------------------------------------------------------------

                          [(ii) Indexing.--
                                  [(I) In general.--Subject to 
                                subclause (II), in the case of 
                                taxable years beginning in any 
                                calendar year after 2014, the 
                                initial and final applicable 
                                percentages under clause (i) 
                                (as in effect for the preceding 
                                calendar year after application 
                                of this clause) shall be 
                                adjusted to reflect the excess 
                                of the rate of premium growth 
                                for the preceding calendar year 
                                over the rate of income growth 
                                for the preceding calendar 
                                year.
                                  [(II) Additional 
                                adjustment.--Except as provided 
                                in subclause (III), in the case 
                                of any calendar year after 
                                2018, the percentages described 
                                in subclause (I) shall, in 
                                addition to the adjustment 
                                under subclause (I), be 
                                adjusted to reflect the excess 
                                (if any) of the rate of premium 
                                growth estimated under 
                                subclause (I) for the preceding 
                                calendar year over the rate of 
                                growth in the consumer price 
                                index for the preceding 
                                calendar year.
                                  [(III) Failsafe.--Subclause 
                                (II) shall apply for any 
                                calendar year only if the 
                                aggregate amount of premium tax 
                                credits under this section and 
                                cost-sharing reductions under 
                                section 1402 of the Patient 
                                Protection and Affordable Care 
                                Act for the preceding calendar 
                                year exceeds an amount equal to 
                                0.504 percent of the gross 
                                domestic product for the 
                                preceding calendar year.]
                  (A) Applicable percentage.--
                          (i) In general.--The applicable 
                        percentage for any taxable year shall 
                        be the percentage such that the 
                        applicable percentage for any taxpayer 
                        whose household income is within an 
                        income tier specified in the following 
                        table shall increase, on a sliding 
                        scale in a linear manner, from the 
                        initial percentage to the final 
                        percentage specified in such table for 
                        such income tier with respect to a 
                        taxpayer of the age involved:


 
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   In the case of                                                                                                                                                   Over Age 59
  household income                                                                               ------------------------------------------------------------------------------------------------------------------------------------------------
   (expressed as a
   percent of the        Up to Age 29        Age 30-39          Age 40-49          Age 50-59
    poverty line)                                                                                     Initial %           Final %           Initial %           Final %           Initial %          Final %      Initial  Final  Initial
within the following                                                                                                                                                                                                 %       %       %
    income tier:
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------
Up to 133%            2................  2................  2................  2................  2................  2................  2................  2................  2...............  2
133%-150%             3................  4................  3................  4................  3................  4................  3................  4................  3...............  4
150%-200%             4................  4.3..............  4................  5.3..............  4................  6.3..............  4................  7.3..............  4...............  8.3
200%-250%             4.3..............  4.3..............  5.3..............  5.9..............  6.3..............  8.05.............  7.3..............  9................  8.3.............  10
250%-300%             4.3..............  4.3..............  5.9..............  5.9..............  8.05.............  8.35.............  9................  10.5.............  10..............  11.5
300%-400%             4.3..............  4.3..............  5.9..............  5.9..............  8.35.............  8.35.............  10.5.............  10.5.............  11.5............  11.5
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                          (ii) Age determinations.--
                                  (I) In general.--For purposes 
                                of clause (i), the age of the 
                                taxpayer taken into account 
                                under clause (i) with respect 
                                to any taxable year is the age 
                                attained by such taxpayer 
                                before the close of such 
                                taxable year.
                                  (II) Joint returns.--In the 
                                case of a joint return, the age 
                                of the older spouse shall be 
                                taken into account under clause 
                                (i).
                          (iii) Indexing.--In the case of any 
                        taxable year beginning in calendar year 
                        2019, the initial and final percentages 
                        contained in clause (i) shall be 
                        adjusted to reflect--
                                  (I) the excess (if any) of 
                                the rate of premium growth for 
                                the period beginning with 
                                calendar year 2013 and ending 
                                with calendar year 2018, over 
                                the rate of income growth for 
                                such period, and
                                  (II) in addition to any 
                                adjustment under subclause (I), 
                                the excess (if any) of the rate 
                                of premium growth for calendar 
                                year 2018, over the rate of 
                                growth in the consumer price 
                                index for calendar year 2018.
                          (iv) Failsafe.--Clause (iii)(II) 
                        shall apply only if the aggregate 
                        amount of premium tax credits under 
                        this section and cost-sharing 
                        reductions under section 1402 of the 
                        Patient Protection and Affordable Care 
                        Act for calendar year 2018 exceeds an 
                        amount equal to 0.504 percent of the 
                        gross domestic product for such 
                        calendar year.
                  (B) Applicable second lowest cost silver 
                plan.--The applicable second lowest cost silver 
                plan with respect to any applicable taxpayer is 
                the second lowest cost silver plan of the 
                individual market in the rating area in which 
                the taxpayer resides which--
                          (i) is offered through [the same 
                        Exchange through which the qualified 
                        health plans taken into account under 
                        paragraph (2)(A) were offered, and] the 
                        Exchange through which such taxpayer is 
                        permitted to obtain coverage, and
                          (ii) provides--
                                  (I) self-only coverage in the 
                                case of an applicable 
                                taxpayer--
                                          (aa) whose tax for 
                                        the taxable year is 
                                        determined under 
                                        section 1(c) (relating 
                                        to unmarried 
                                        individuals other than 
                                        surviving spouses and 
                                        heads of households) 
                                        and who is not allowed 
                                        a deduction under 
                                        section 151 for the 
                                        taxable year with 
                                        respect to a dependent, 
                                        or
                                          (bb) who is not 
                                        described in item (aa) 
                                        but who purchases only 
                                        self-only coverage, and
                                  (II) family coverage in the 
                                case of any other applicable 
                                taxpayer.
                If a taxpayer files a joint return and no 
                credit is allowed under this section with 
                respect to 1 of the spouses by reason of 
                subsection (e), the taxpayer shall be treated 
                as described in clause (ii)(I) unless a 
                deduction is allowed under section 151 for the 
                taxable year with respect to a dependent other 
                than either spouse and subsection (e) does not 
                apply to the dependent.
                  (C) Adjusted monthly premium.--The adjusted 
                monthly premium for an applicable second lowest 
                cost silver plan is the monthly premium which 
                would have been charged (for the rating area 
                with respect to which the premiums under 
                paragraph (2)(A) were determined) for the plan 
                if each individual covered under a qualified 
                health plan taken into account under paragraph 
                (2)(A) were covered by such silver plan and the 
                premium was adjusted only for the age of each 
                such individual in the manner allowed under 
                section 2701 of the Public Health Service Act. 
                In the case of a State participating in the 
                wellness discount demonstration project under 
                section 2705(d) of the Public Health Service 
                Act, the adjusted monthly premium shall be 
                determined without regard to any premium 
                discount or rebate under such project.
                  (D) Additional benefits.--If--
                          (i) a qualified health plan under 
                        section 1302(b)(5) of the Patient 
                        Protection and Affordable Care Act 
                        offers benefits in addition to the 
                        essential health benefits required to 
                        be provided by the plan, or
                          (ii) a State requires a qualified 
                        health plan under section 1311(d)(3)(B) 
                        of such Act to cover benefits in 
                        addition to the essential health 
                        benefits required to be provided by the 
                        plan,
                the portion of the premium for the plan 
                properly allocable (under rules prescribed by 
                the Secretary of Health and Human Services) to 
                such additional benefits shall not be taken 
                into account in determining either the monthly 
                premium or the adjusted monthly premium under 
                paragraph (2).
                  (E) Special rule for pediatric dental 
                coverage.--For purposes of determining the 
                amount of any monthly premium, if an individual 
                enrolls in both a qualified health plan and a 
                plan described in section 1311(d)(2)(B)(ii) (I) 
                of the Patient Protection and Affordable Care 
                Act for any plan year, the portion of the 
                premium for the plan described in such section 
                that (under regulations prescribed by the 
                Secretary) is properly allocable to pediatric 
                dental benefits which are included in the 
                essential health benefits required to be 
                provided by a qualified health plan under 
                section 1302(b)(1)(J) of such Act shall be 
                treated as a premium payable for a qualified 
                health plan.
  (c) Definition and Rules Relating to Applicable Taxpayers, 
Coverage Months, and Qualified Health Plan.--For purposes of 
this section--
          (1) Applicable taxpayer.--
                  (A) In general.--The term ``applicable 
                taxpayer'' means, with respect to any taxable 
                year, a taxpayer whose household income for the 
                taxable year equals or exceeds 100 percent but 
                does not exceed 400 percent of an amount equal 
                to the poverty line for a family of the size 
                involved.
                  (B) Special rule for certain individuals 
                lawfully present in the United States.--If--
                          (i) a taxpayer has a household income 
                        which is not greater than 100 percent 
                        of an amount equal to the poverty line 
                        for a family of the size involved, and
                          (ii) the taxpayer is an alien 
                        lawfully present in the United States, 
                        but is not eligible for the medicaid 
                        program under title XIX of the Social 
                        Security Act by reason of such alien 
                        status,
                the taxpayer shall, for purposes of the credit 
                under this section, be treated as an applicable 
                taxpayer with a household income which is equal 
                to 100 percent of the poverty line for a family 
                of the size involved.
                  (C) Married couples must file joint return.--
                If the taxpayer is married (within the meaning 
                of section 7703) at the close of the taxable 
                year, the taxpayer shall be treated as an 
                applicable taxpayer only if the taxpayer and 
                the taxpayer's spouse file a joint return for 
                the taxable year.
                  (D) Denial of credit to dependents.--No 
                credit shall be allowed under this section to 
                any individual with respect to whom a deduction 
                under section 151 is allowable to another 
                taxpayer for a taxable year beginning in the 
                calendar year in which such individual's 
                taxable year begins.
          (2) Coverage month.--For purposes of this 
        subsection--
                  (A) In general.--The term ``coverage month'' 
                means, with respect to an applicable taxpayer, 
                any month if--
                          (i) as of the first day of such month 
                        the taxpayer, the taxpayer's spouse, or 
                        any dependent of the taxpayer is 
                        covered by a qualified health plan 
                        described in subsection (b)(2)(A) that 
                        was enrolled in through an Exchange 
                        established by the State under section 
                        1311 of the Patient Protection and 
                        Affordable Care Act, and
                          (ii) the premium for coverage under 
                        such plan for such month is paid by the 
                        taxpayer (or through advance payment of 
                        the credit under subsection (a) under 
                        section 1412 of the Patient Protection 
                        and Affordable Care Act).
                  (B) Exception for minimum essential 
                coverage.--
                          (i) In general.--The term ``coverage 
                        month'' shall not include any month 
                        with respect to an individual if for 
                        such month the individual is eligible 
                        for minimum essential coverage other 
                        than eligibility for coverage described 
                        in section 5000A(f)(1)(C) (relating to 
                        coverage in the individual market).
                          (ii) Minimum essential coverage.--The 
                        term ``minimum essential coverage'' has 
                        the meaning given such term by section 
                        5000A(f).
                  (C) Special rule for employer-sponsored 
                minimum essential coverage.--For purposes of 
                subparagraph (B)--
                          (i) Coverage must be affordable.--
                        Except as provided in clause (iii), an 
                        employee shall not be treated as 
                        eligible for minimum essential coverage 
                        if such coverage--
                                  (I) consists of an eligible 
                                employer-sponsored plan (as 
                                defined in section 
                                5000A(f)(2)), and
                                  (II) the employee's required 
                                contribution (within the 
                                meaning of section 
                                5000A(e)(1)(B)) with respect to 
                                the plan exceeds 9.5 percent of 
                                the applicable taxpayer's 
                                household income.
                        This clause shall also apply to an 
                        individual who is eligible to enroll in 
                        the plan by reason of a relationship 
                        the individual bears to the employee.
                          (ii) Coverage must provide minimum 
                        value.--Except as provided in clause 
                        (iii), an employee shall not be treated 
                        as eligible for minimum essential 
                        coverage if such coverage consists of 
                        an eligible employer-sponsored plan (as 
                        defined in section 5000A(f)(2)) and the 
                        plan's share of the total allowed costs 
                        of benefits provided under the plan is 
                        less than 60 percent of such costs.
                          (iii) Employee or family must not be 
                        covered under employer plan.--Clauses 
                        (i) and (ii) shall not apply if the 
                        employee (or any individual described 
                        in the last sentence of clause (i)) is 
                        covered under the eligible employer-
                        sponsored plan or the grandfathered 
                        health plan.
                          (iv) Indexing.--In the case of plan 
                        years beginning in any calendar year 
                        after 2014, the Secretary shall adjust 
                        the 9.5 percent under clause (i)(II) in 
                        the same manner as the percentages are 
                        adjusted under subsection 
                        (b)(3)(A)(ii).
          (3) Definitions and other rules.--
                  (A) Qualified health plan.--The term 
                ``qualified health plan'' has the meaning given 
                such term by section 1301(a) of the Patient 
                Protection and Affordable Care Act (determined 
                without regard to subparagraphs (A), (C)(ii), 
                and (C)(iv) of paragraph (1) thereof and 
                without regard to whether the plan is offered 
                on an Exchange), except that such term [shall 
                not include a qualified health plan which is a 
                catastrophic plan described in section 1302(e) 
                of such Act.] shall not include any health plan 
                that--
                          (i) is a grandfathered health plan or 
                        a grandmothered health plan, or
                          (ii) includes coverage for abortions 
                        (other than any abortion necessary to 
                        save the life of the mother or any 
                        abortion with respect to a pregnancy 
                        that is the result of an act of rape or 
                        incest).
                  (B) Grandfathered health plan.--The term 
                ``grandfathered health plan'' has the meaning 
                given such term by section 1251 of the Patient 
                Protection and Affordable Care Act.
                  (C) Grandmothered health plan.--
                          (i) In general.--The term 
                        ``grandmothered health plan'' means 
                        health insurance coverage which is 
                        offered in the individual health 
                        insurance market as of October 1, 2013, 
                        and is permitted to be offered in such 
                        market after January 1, 2014, as a 
                        result of CCIIO guidance.
                          (ii) CCIIO guidance defined.--The 
                        term ``CCIIO guidance'' means the 
                        letter issued by the Centers for 
                        Medicare & Medicaid Services on 
                        November 14, 2013, to the State 
                        Insurance Commissioners outlining a 
                        transitional policy for non-
                        grandfathered coverage in the 
                        individual health insurance market, as 
                        subsequently extended and modified 
                        (including by a communication entitled 
                        ``Insurance Standards Bulletin Series--
                        INFORMATION--Extension of Transitional 
                        Policy through Calendar Year 2017'' 
                        issued on February 29, 2016, by the 
                        Director of the Center for Consumer 
                        Information & Insurance Oversight of 
                        such Centers).
                          (iii) Individual health insurance 
                        market.--The term ``individual health 
                        insurance market'' means the market for 
                        health insurance coverage (as defined 
                        in section 9832(b)) offered to 
                        individuals other than in connection 
                        with a group health plan (within the 
                        meaning of section 5000(b)(1)).
                  (D) Certain rules related to abortion.--
                          (i) Option to purchase separate 
                        coverage or plan.--Nothing in 
                        subparagraph (A) shall be construed as 
                        prohibiting any individual from 
                        purchasing separate coverage for 
                        abortions described in such 
                        subparagraph, or a health plan that 
                        includes such abortions, so long as no 
                        credit is allowed under this section 
                        with respect to the premiums for such 
                        coverage or plan.
                          (ii) Option to offer coverage or 
                        plan.--Nothing in subparagraph (A) 
                        shall restrict any health insurance 
                        issuer offering a health plan from 
                        offering separate coverage for 
                        abortions described in such 
                        subparagraph, or a plan that includes 
                        such abortions, so long as premiums for 
                        such separate coverage or plan are not 
                        paid for with any amount attributable 
                        to the credit allowed under this 
                        section (or the amount of any advance 
                        payment of the credit under section 
                        1412 of the Patient Protection and 
                        Affordable Care Act).
                          (iii) Other treatments.--The 
                        treatment of any infection, injury, 
                        disease, or disorder that has been 
                        caused by or exacerbated by the 
                        performance of an abortion shall not be 
                        treated as an abortion for purposes of 
                        subparagraph (A).
          (4) Special rules for qualified small employer health 
        reimbursement arrangements.--
                  (A) In general.--The term ``coverage month'' 
                shall not include any month with respect to an 
                employee (or any spouse or dependent of such 
                employee) if for such month the employee is 
                provided a qualified small employer health 
                reimbursement arrangement which constitutes 
                affordable coverage.
                  (B) Denial of double benefit.--In the case of 
                any employee who is provided a qualified small 
                employer health reimbursement arrangement for 
                any coverage month (determined without regard 
                to subparagraph (A)), the credit otherwise 
                allowable under subsection (a) to the taxpayer 
                for such month shall be reduced (but not below 
                zero) by the amount described in subparagraph 
                (C)(i)(II) for such month.
                  (C) Affordable coverage.--For purposes of 
                subparagraph (A), a qualified small employer 
                health reimbursement arrangement shall be 
                treated as constituting affordable coverage for 
                a month if--
                          (i) the excess of--
                                  (I) the amount that would be 
                                paid by the employee as the 
                                premium for such month for 
                                self-only coverage under the 
                                second lowest cost silver plan 
                                offered in the relevant 
                                individual health insurance 
                                market, over
                                  (II) \1/12\ of the employee's 
                                permitted benefit (as defined 
                                in section 9831(d)(3)(C)) under 
                                such arrangement, does not 
                                exceed--
                          (ii) \1/12\ of 9.5 percent of the 
                        employee's household income.
                  (D) Qualified small employer health 
                reimbursement arrangement.--For purposes of 
                this paragraph, the term ``qualified small 
                employer health reimbursement arrangement'' has 
                the meaning given such term by section 
                9831(d)(2).
                  (E) Coverage for less than entire year.--In 
                the case of an employee who is provided a 
                qualified small employer health reimbursement 
                arrangement for less than an entire year, 
                subparagraph (C)(i)(II) shall be applied by 
                substituting "the number of months during the 
                year for which such arrangement was provided" 
                for "12'.
                  (F) Indexing.--In the case of plan years 
                beginning in any calendar year after 2014, the 
                Secretary shall adjust the 9.5 percent amount 
                under subparagraph (C)(ii) in the same manner 
                as the percentages are adjusted under 
                subsection (b)(3)(A)(ii).
  (d) Terms Relating to Income and Families.--For purposes of 
this section--
          (1) Family size.--The family size involved with 
        respect to any taxpayer shall be equal to the number of 
        individuals for whom the taxpayer is allowed a 
        deduction under section 151 (relating to allowance of 
        deduction for personal exemptions) for the taxable 
        year.
          (2) Household income.--
                  (A) Household income.--The term ``household 
                income'' means, with respect to any taxpayer, 
                an amount equal to the sum of--
                          (i) the modified adjusted gross 
                        income of the taxpayer, plus
                          (ii) the aggregate modified adjusted 
                        gross incomes of all other individuals 
                        who--
                                  (I) were taken into account 
                                in determining the taxpayer's 
                                family size under paragraph 
                                (1), and
                                  (II) were required to file a 
                                return of tax imposed by 
                                section 1 for the taxable year.
                  (B) Modified adjusted gross income.--The term 
                ``modified adjusted gross income'' means 
                adjusted gross income increased by--
                          (i) any amount excluded from gross 
                        income under section 911,
                          (ii) any amount of interest received 
                        or accrued by the taxpayer during the 
                        taxable year which is exempt from tax, 
                        and
                          (iii) an amount equal to the portion 
                        of the taxpayer's social security 
                        benefits (as defined in section 86(d)) 
                        which is not included in gross income 
                        under section 86 for the taxable year.
          (3) Poverty line.--
                  (A) In general.--The term ``poverty line'' 
                has the meaning given that term in section 
                2110(c)(5) of the Social Security Act (42 
                U.S.C. 1397jj(c)(5)).
                  (B) Poverty line used.--In the case of any 
                qualified health plan offered through an 
                Exchange for coverage during a taxable year 
                beginning in a calendar year, the poverty line 
                used shall be the most recently published 
                poverty line as of the 1st day of the regular 
                enrollment period for coverage during such 
                calendar year.
  (e) Rules for Individuals Not Lawfully Present.--
          (1) In general.--If 1 or more individuals for whom a 
        taxpayer is allowed a deduction under section 151 
        (relating to allowance of deduction for personal 
        exemptions) for the taxable year (including the 
        taxpayer or his spouse) are individuals who are not 
        lawfully present--
                  (A) the aggregate amount of premiums 
                otherwise taken into account under clauses (i) 
                and (ii) of subsection (b)(2)(A) shall be 
                reduced by the portion (if any) of such 
                premiums which is attributable to such 
                individuals, and
                  (B) for purposes of applying this section, 
                the determination as to what percentage a 
                taxpayer's household income bears to the 
                poverty level for a family of the size involved 
                shall be made under one of the following 
                methods:
                          (i) A method under which--
                                  (I) the taxpayer's family 
                                size is determined by not 
                                taking such individuals into 
                                account, and
                                  (II) the taxpayer's household 
                                income is equal to the product 
                                of the taxpayer's household 
                                income (determined without 
                                regard to this subsection) and 
                                a fraction--
                                          (aa) the numerator of 
                                        which is the poverty 
                                        line for the taxpayer's 
                                        family size determined 
                                        after application of 
                                        subclause (I), and
                                          (bb) the denominator 
                                        of which is the poverty 
                                        line for the taxpayer's 
                                        family size determined 
                                        without regard to 
                                        subclause (I).
                          (ii) A comparable method reaching the 
                        same result as the method under clause 
                        (i).
          (2) Lawfully present.--For purposes of this section, 
        an individual shall be treated as lawfully present only 
        if the individual is, and is reasonably expected to be 
        for the entire period of enrollment for which the 
        credit under this section is being claimed, a citizen 
        or national of the United States or an alien lawfully 
        present in the United States.
          (3) Secretarial authority.--The Secretary of Health 
        and Human Services, in consultation with the Secretary, 
        shall prescribe rules setting forth the methods by 
        which calculations of family size and household income 
        are made for purposes of this subsection. Such rules 
        shall be designed to ensure that the least burden is 
        placed on individuals enrolling in qualified health 
        plans through an Exchange and taxpayers eligible for 
        the credit allowable under this section.
  (f) Reconciliation of Credit and Advance Credit.--
          (1) In general.--The amount of the credit allowed 
        under this section for any taxable year shall be 
        reduced (but not below zero) by the amount of any 
        advance payment of such credit under section 1412 of 
        the Patient Protection and Affordable Care Act.
          (2) Excess advance payments.--
                  (A) In general.--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.
                          (iii) Nonapplicability of 
                        limitation.--This subparagraph shall 
                        not apply to taxable years beginning 
                        after December 31, 2017, and before 
                        January 1, 2020.
          (3) Information requirement.--Each Exchange (or any 
        person carrying out 1 or more responsibilities of an 
        Exchange under section 1311(f)(3) or 1321(c) of the 
        Patient Protection and Affordable Care Act) shall 
        provide the following information to the Secretary and 
        to the taxpayer with respect to any health plan 
        provided through the Exchange:
                  (A) The level of coverage described in 
                section 1302(d) of the Patient Protection and 
                Affordable Care Act and the period such 
                coverage was in effect.
                  (B) The total premium for the coverage 
                without regard to the credit under this section 
                or cost-sharing reductions under section 1402 
                of such Act.
                  (C) The aggregate amount of any advance 
                payment of such credit or reductions under 
                section 1412 of such Act.
                  (D) The name, address, and TIN of the primary 
                insured and the name and TIN of each other 
                individual obtaining coverage under the policy.
                  (E) Any information provided to the Exchange, 
                including any change of circumstances, 
                necessary to determine eligibility for, and the 
                amount of, such credit.
                  (F) Information necessary to determine 
                whether a taxpayer has received excess advance 
                payments.
  (g) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary to carry out the provisions of 
this section, including regulations which provide for--
          (1) the coordination of the credit allowed under this 
        section with the program for advance payment of the 
        credit under section 1412 of the Patient Protection and 
        Affordable Care Act, and
          (2) the application of subsection (f) where the 
        filing status of the taxpayer for a taxable year is 
        different from such status used for determining the 
        advance payment of the credit.
  (h) Termination.--No credit shall be allowed under this 
section with respect to any coverage month which begins after 
December 31, 2019.

SEC. 36C. HEALTH INSURANCE COVERAGE.

  (a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this subtitle 
for the taxable year the sum of the monthly credit amounts with 
respect to such taxpayer for calendar months during such 
taxable year.
  (b) Monthly Credit Amounts.--
          (1) In general.--The monthly credit amount with 
        respect to any taxpayer for any calendar month is the 
        lesser of--
                  (A) the sum of the monthly limitation amounts 
                determined under subsection (c) with respect to 
                the taxpayer and the taxpayer's qualifying 
                family members for such month, or
                  (B) the amount paid for eligible health 
                insurance for the taxpayer and the taxpayer's 
                qualifying family members for such month.
          (2) Eligible coverage month requirement.--No amount 
        shall be taken into account under subparagraph (A) or 
        (B) of paragraph (1) with respect to any individual for 
        any month unless such month is an eligible coverage 
        month with respect to such individual.
  (c) Monthly Limitation Amounts.--
          (1) In general.--The monthly limitation amount with 
        respect to any individual for any eligible coverage 
        month during any taxable year is \1/12\ of--
                  (A) $2,000 in the case of an individual who 
                has not attained age 30 as of the beginning of 
                such taxable year,
                  (B) $2,500 in the case of an individual who 
                has attained age 30 but who has not attained 
                age 40 as of such time,
                  (C) $3,000 in the case of an individual who 
                has attained age 40 but who has not attained 
                age 50 as of such time,
                  (D) $3,500 in the case of an individual who 
                has attained age 50 but who has not attained 
                age 60 as of such time, and
                  (E) $4,000 in the case of an individual who 
                has attained age 60 as of such time.
          (2) Limitation based on modified adjusted gross 
        income.--
                  (A) In general.--The amount otherwise 
                determined under subsection (b)(1)(A) (without 
                regard to this subparagraph but after any other 
                adjustment of such amount under this section) 
                for the taxable year shall be reduced (but not 
                below zero) by 10 percent of the excess (if 
                any) of--
                          (i) the taxpayer's modified adjusted 
                        gross income for such taxable year, 
                        over
                          (ii) $75,000 (twice such amount in 
                        the case of a joint return).
                  (B) Modified adjusted gross income.--For 
                purposes of this paragraph, the term ``modified 
                adjusted gross income'' means adjusted gross 
                income increased by--
                          (i) any amount excluded from gross 
                        income under section 911,
                          (ii) any amount of interest received 
                        or accrued by the taxpayer during the 
                        taxable year which is exempt from tax, 
                        and
                          (iii) an amount equal to the portion 
                        of the taxpayer's social security 
                        benefits (as defined in section 86(d)) 
                        which is not included in gross income 
                        under section 86 for the taxable year.
          (3) Other limitations.--
                  (A) Aggregate dollar limitation.--The sum of 
                the monthly limitation amounts taken into 
                account under this section with respect to any 
                taxpayer for any taxable year shall not exceed 
                $14,000.
                  (B) Maximum number of individuals taken into 
                account.--With respect to any taxpayer for any 
                month, monthly limitation amounts shall be 
                taken into account under this section only with 
                respect to the 5 oldest individuals with 
                respect to whom monthly limitation amounts 
                could (without regard to this subparagraph) 
                otherwise be so taken into account.
  (d) Eligible Coverage Month.--For purposes of this section, 
the term ``eligible coverage month'' means, with respect to any 
individual, any month if, as of the first day of such month, 
the individual--
          (1) is covered by eligible health insurance,
          (2) is not eligible for other specified coverage,
          (3) is either--
                  (A) a citizen or national of the United 
                States, or
                  (B) a qualified alien (within the meaning of 
                section 431 of the Personal Responsibility and 
                Work Opportunity Reconciliation Act of 1996 (8 
                U.S.C. 1641)), and
          (4) is not incarcerated, other than incarceration 
        pending the disposition of charges.
  (e) Qualifying Family Member.--For purposes of this section, 
the term ``qualifying family member'' means--
          (1) in the case of a joint return, the taxpayer's 
        spouse,
          (2) any dependent of the taxpayer, and
          (3) with respect to any eligible coverage month, any 
        child (as defined in section 152(f)(1)) of the taxpayer 
        who as of the end of the taxable year has not attained 
        age 27 if such child is covered for such month under 
        eligible health insurance which also covers the 
        taxpayer (in the case of a joint return, either 
        spouse).
  (f) Eligible Health Insurance.--For purposes of this 
section--
          (1) In general The term ``eligible health insurance'' 
        means any health insurance coverage (as defined in 
        section 9832(b)) if--
                  (A) such coverage is either--
                          (i) offered in the individual health 
                        insurance market within a State, or
                          (ii) is unsubsidized COBRA 
                        continuation coverage,
                  (B) such coverage is not a grandfathered 
                health plan (as defined in section 1251 of the 
                Patient Protection and Affordable Care Act) or 
                a grandmothered health plan,
                  (C) substantially all of such coverage is not 
                of excepted benefits described in section 
                9832(c),
                  (D) such coverage does not include coverage 
                for abortions (other than any abortion 
                necessary to save the life of the mother or any 
                abortion with respect to a pregnancy that is 
                the result of an act of rape or incest),
                  (E) such coverage does not consist of short-
                term limited duration insurance (as defined by 
                the Secretary), and
                  (F) the State in which such insurance is 
                offered certifies that such coverage meets the 
                requirements of this paragraph.
          (2) Rules related to state certification.--
                  (A) Certification made available to public.--
                A certification shall not be taken into account 
                under paragraph (1)(E) unless such 
                certification is made available to the public 
                and meets such other requirements as the 
                Secretary may provide.
                  (B) Special rule for unsubsidized cobra 
                continuation coverage.--In the case of 
                unsubsidized COBRA continuation coverage--
                          (i) paragraph (1)(E) shall be applied 
                        by substituting ``the plan 
                        administrator (as defined in section 
                        414(g)) of the health plan'' for ``the 
                        State in which such insurance is 
                        offered'', and
                          (ii) the requirements of subparagraph 
                        (A) shall be treated as satisfied if 
                        the certification meets such 
                        requirements as the Secretary may 
                        provide.
          (3) Grandmothered health plan.--
                  (A) In general.--The term ``grandmothered 
                health plan'' means health insurance coverage 
                which is offered in the individual health 
                insurance market as of January 1, 2013, and is 
                permitted to be offered in such market after 
                January 1, 2014, as a result of CCIIO guidance.
                  (B) CCIIO guidance defined.--The term ``CCIIO 
                guidance'' means the letter issued by the 
                Centers for Medicare & Medicaid Services on 
                November 14, 2013, to the State Insurance 
                Commissioners outlining a transitional policy 
                for non-grandfathered coverage in the 
                individual health insurance market, as 
                subsequently extended and modified (including 
                by a communication entitled ``Insurance 
                Standards Bulletin Series--INFORMATION--
                Extension of Transitional Policy through 
                Calendar Year 2017'' issued on February 29, 
                2016, by the Director of the Center for 
                Consumer Information & Insurance Oversight of 
                such Centers).
          (4) Individual health insurance market.--The term 
        ``individual health insurance market'' means the market 
        for health insurance coverage (as defined in section 
        9832(b)) offered to individuals other than in 
        connection with a group health plan (within the meaning 
        of section 5000(b)(1)).
  (g) Other Specified Coverage.--For purposes of this section--
          (1) In general.--The term ``other specified 
        coverage'' means any of the following:
                  (A) Coverage under a group health plan 
                (within the meaning of section 5000(b)(1)) 
                other than--
                          (i) coverage under a plan 
                        substantially all of the coverage of 
                        which is of excepted benefits described 
                        in section 9832(c), and
                          (ii) COBRA continuation coverage.
                  (B) Coverage under the Medicare program under 
                part A of title XVIII of the Social Security 
                Act.
                  (C) Coverage under the Medicaid program under 
                title XIX of the Social Security Act.
                  (D) Coverage under the CHIP program under 
                title XXI of the Social Security Act.
                  (E) Medical coverage under chapter 55 of 
                title 10, United States Code, including 
                coverage under the TRICARE program.
                  (F) Coverage under a health care program 
                under chapter 17 or 18 of title 38, United 
                States Code, as determined by the Secretary of 
                Veterans Affairs, in coordination with the 
                Secretary of Health and Human Services and the 
                Secretary of the Treasury.
                  (G) Coverage under a health plan under 
                section 2504(e) of title 22, United States Code 
                (relating to Peace Corps volunteers).
                  (H) Coverage under the Nonappropriated Fund 
                Health Benefits Program of the Department of 
                Defense, established under section 349 of the 
                National Defense Authorization Act for Fiscal 
                Year 1995 (Public Law 103-337; 10 U.S.C. 1587 
                note).
          (2) Special rule with respect to veterans health 
        programs.--In the case of other specified coverage 
        described in paragraph (1)(F), an individual shall not 
        be treated as eligible for such coverage unless such 
        individual is enrolled in such coverage.
  (h) Unsubsidized COBRA Continuation Coverage.--For purposes 
of this section--
          (1) In general.--The term ``unsubsidized COBRA 
        continuation coverage'' means COBRA continuation 
        coverage no portion of the premiums for which are 
        subsidized by the employer.
          (2) COBRA continuation coverage.--The term ``COBRA 
        continuation coverage'' means continuation coverage 
        provided pursuant to part 6 of subtitle B of title I of 
        the Employee Retirement Income Security Act of 1974 
        (other than under section 609), title XXII of the 
        Public Health Service Act, section 4980B of the 
        Internal Revenue Code of 1986 (other than subsection 
        (f)(1) of such section insofar as it relates to 
        pediatric vaccines), or section 8905a of title 5, 
        United States Code, or under a State program that 
        provides comparable continuation coverage. Such term 
        shall not include coverage under a health flexible 
        spending arrangement.
  (i) Special Rules.--
          (1) Married couples must file joint return.--If the 
        taxpayer is married (within the meaning of section 
        7703) at the close of the taxable year, no credit shall 
        be allowed under this section to such taxpayer unless 
        such taxpayer and the taxpayer's spouse file a joint 
        return for such taxable year.
          (2) Denial of credit to dependents.--
                  (A) In general.--No credit shall be allowed 
                under this section to any individual who is a 
                dependent with respect to another taxpayer for 
                a taxable year beginning in the calendar year 
                in which such individual's taxable year begins.
                  (B) Coordination with rule for older 
                children.--In the case of any individual who is 
                a qualifying family member described in 
                subsection (e)(3) with respect to another 
                taxpayer for any month, in determining the 
                amount of any credit allowable to such 
                individual under this section for any taxable 
                year of such individual which includes such 
                month, the monthly limitation amount with 
                respect to such individual for such month shall 
                be zero and no amount paid for eligible health 
                insurance with respect to such individual for 
                such month shall be taken into account.
          (3) Coordination with medical expense deduction.--
        Amounts described in subsection (b)(1)(B) with respect 
        to any month shall not be taken into account in 
        determining the deduction allowed under section 213 
        except to the extent that such amounts exceed the 
        amount described in subsection (b)(1)(A) with respect 
        to such month.
          (4) Insurance which covers other individuals.--For 
        purposes of this section, rules similar to the rules of 
        section 213(d)(6) shall apply with respect to any 
        contract for eligible health insurance under which 
        amounts are payable for coverage of an individual other 
        than the taxpayer and the taxpayer's qualifying family 
        members.
          (5) Coordination with advance payments of credit.--
        With respect to any taxable year--
                  (A) the amount which would (but for this 
                subsection) be allowed as a credit to the 
                taxpayer under subsection (a) shall be reduced 
                (but not below zero) by the aggregate amount 
                paid on behalf of such taxpayer under section 
                7529 for months beginning in such taxable year, 
                and
                  (B) the tax imposed by section 1 for such 
                taxable year shall be increased by the excess 
                (if any) of--
                          (i) the aggregate amount paid on 
                        behalf of such taxpayer under section 
                        7529 for months beginning in such 
                        taxable year, over
                          (ii) the amount which would (but for 
                        this subsection) be allowed as a credit 
                        to the taxpayer under subsection (a).
          (6) Special rules for qualified small employer health 
        reimbursement arrangements.--
                  (A) In general.--If the taxpayer or any 
                qualifying family member of the taxpayer is 
                provided a qualified small employer health 
                reimbursement arrangement for any eligible 
                coverage month, the sum determined under 
                subsection (b)(1)(A) with respect to the 
                taxpayer for such month shall be reduced (but 
                not below zero) by \1/12\ of the permitted 
                benefit (as defined in section 9831(d)(3)(C)) 
                under such arrangement.
                  (B) Qualified small employer health 
                reimbursement arrangement.--For purposes of 
                this paragraph, the term ``qualified small 
                employer health reimbursement arrangement'' has 
                the meaning given such term by section 
                9831(d)(2).
                  (C) Coverage for less than entire year.--In 
                the case of an employee who is provided a 
                qualified small employer health reimbursement 
                arrangement for less than an entire year, 
                subparagraph (A) shall be applied by 
                substituting ``the number of months during the 
                year for which such arrangement was provided'' 
                for ``12''.
          (7) Certain rules related to abortion.--
                  (A) Option to purchase separate coverage or 
                plan.--Nothing in subsection (f)(1)(D) shall be 
                construed as prohibiting any individual from 
                purchasing separate coverage for abortions 
                described in such subparagraph, or a health 
                plan that includes such abortions, so long as 
                no credit is allowed under this section with 
                respect to the premiums for such coverage or 
                plan.
                  (B) Option to offer coverage or plan.--
                Nothing in subsection (f)(1)(D) shall restrict 
                any health insurance issuer offering a health 
                plan from offering separate coverage for 
                abortions described in such clause, or a plan 
                that includes such abortions, so long as 
                premiums for such separate coverage or plan are 
                not paid for with any amount attributable to 
                the credit allowed under this section.
                  (C) Other treatments.--The treatment of any 
                infection, injury, disease, or disorder that 
                has been caused by or exacerbated by the 
                performance of an abortion shall not be treated 
                as an abortion for purposes of subsection 
                (f)(1)(D).
          (8) Inflation adjustment.--
                  (A) In general.--In the case of any taxable 
                year beginning in a calendar year after 2020, 
                each dollar amount in subsection (c)(1), the 
                $75,000 amount in subsection (c)(2)(A)(ii), and 
                the dollar amount in subsection (c)(3)(A), 
                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 in which the taxable 
                        year begins, determined--
                                  (I) by substituting 
                                ``calendar year 2019'' for 
                                ``calendar year 1992'' in 
                                subparagraph (B) thereof, and
                                  (II) by substituting for the 
                                CPI referred to section 
                                1(f)(3)(A) the amount that such 
                                CPI would have been if the 
                                annual percentage increase in 
                                CPI with respect to each year 
                                after 2019 had been one 
                                percentage point greater.
                  (B) Terms related to cpi.--
                          (i) Annual percentage increase.--For 
                        purposes of subparagraph (A)(ii)(II), 
                        the term ``annual percentage increase'' 
                        means the percentage (if any) by which 
                        CPI for any year exceeds CPI for the 
                        prior year.
                          (ii) Other terms.--Terms used in this 
                        paragraph which are also used in 
                        section 1(f)(3) shall have the same 
                        meanings as when used in such section.
                  (C) Rounding.--Any increase determined under 
                subparagraph (A) shall be rounded to the 
                nearest multiple of $50.
          (9) Regulations.--The Secretary may prescribe such 
        regulations and other guidance as may be necessary or 
        appropriate to carry out this section, section 6050X, 
        and section 7529.

           *       *       *       *       *       *       *


Subpart D--Business Related Credits

           *       *       *       *       *       *       *


SEC. 45R. EMPLOYEE HEALTH INSURANCE EXPENSES OF SMALL EMPLOYERS.

  (a) General Rule.--For purposes of section 38, in the case of 
an eligible small employer, the small employer health insurance 
credit determined under this section for any taxable year in 
the credit period is the amount determined under subsection 
(b).
  (b) Health Insurance Credit Amount.--Subject to subsection 
(c), the amount determined under this subsection with respect 
to any eligible small employer is equal to 50 percent (35 
percent in the case of a tax-exempt eligible small employer) of 
the lesser of--
          (1) the aggregate amount of nonelective contributions 
        the employer made on behalf of its employees during the 
        taxable year under the arrangement described in 
        subsection (d)(4) for premiums for qualified health 
        plans offered by the employer to its employees through 
        an Exchange, or
          (2) the aggregate amount of nonelective contributions 
        which the employer would have made during the taxable 
        year under the arrangement if each employee taken into 
        account under paragraph (1) had enrolled in a qualified 
        health plan which had a premium equal to the average 
        premium (as determined by the Secretary of Health and 
        Human Services) for the small group market in the 
        rating area in which the employee enrolls for coverage.
  (c) Phaseout of Credit Amount Based on Number of Employees 
and Average Wages.--The amount of the credit determined under 
subsection (b) without regard to this subsection shall be 
reduced (but not below zero) by the sum of the following 
amounts:
          (1) Such amount multiplied by a fraction the 
        numerator of which is the total number of full-time 
        equivalent employees of the employer in excess of 10 
        and the denominator of which is 15.
          (2) Such amount multiplied by a fraction the 
        numerator of which is the average annual wages of the 
        employer in excess of the dollar amount in effect under 
        subsection (d)(3)(B) and the denominator of which is 
        such dollar amount.
  (d) Eligible Small Employer.--For purposes of this section--
          (1) In general.--The term ``eligible small employer'' 
        means, with respect to any taxable year, an employer--
                  (A) which has no more than 25 full-time 
                equivalent employees for the taxable year,
                  (B) the average annual wages of which do not 
                exceed an amount equal to twice the dollar 
                amount in effect under paragraph (3)(B) for the 
                taxable year, and
                  (C) which has in effect an arrangement 
                described in paragraph (4).
          (2) Full-time equivalent employees.--
                  (A) In general.--The term ``full-time 
                equivalent employees'' means a number of 
                employees equal to the number determined by 
                dividing--
                          (i) the total number of hours of 
                        service for which wages were paid by 
                        the employer to employees during the 
                        taxable year, by
                          (ii) 2,080.
                Such number shall be rounded to the next lowest 
                whole number if not otherwise a whole number.
                  (B) Excess hours not counted.--If an employee 
                works in excess of 2,080 hours of service 
                during any taxable year, such excess shall not 
                be taken into account under subparagraph (A).
                  (C) Hours of service.--The Secretary, in 
                consultation with the Secretary of Labor, shall 
                prescribe such regulations, rules, and guidance 
                as may be necessary to determine the hours of 
                service of an employee, including rules for the 
                application of this paragraph to employees who 
                are not compensated on an hourly basis.
          (3) Average annual wages.--
                  (A) In general.--The average annual wages of 
                an eligible small employer for any taxable year 
                is the amount determined by dividing--
                          (i) the aggregate amount of wages 
                        which were paid by the employer to 
                        employees during the taxable year, by
                          (ii) the number of full-time 
                        equivalent employees of the employee 
                        determined under paragraph (2) for the 
                        taxable year.
                Such amount shall be rounded to the next lowest 
                multiple of $1,000 if not otherwise such a 
                multiple.
                  (B) Dollar amount.--For purposes of paragraph 
                (1)(B) and subsection (c)(2)--
                          (i) 2010, 2011, 2012, and 2013.--The 
                        dollar amount in effect under this 
                        paragraph for taxable years beginning 
                        in 2010, 2011, 2012, or 2013 is 
                        $25,000.
                          (ii) Subsequent years.--In the case 
                        of a taxable year beginning in a 
                        calendar year after 2013, the dollar 
                        amount in effect under this paragraph 
                        shall be equal to $25,000, multiplied 
                        by the cost-of-living adjustment under 
                        section 1(f)(3) for the calendar year, 
                        determined by substituting ``calendar 
                        year 2012'' for ``calendar year 1992'' 
                        in subparagraph (B) thereof.
          (4) Contribution arrangement.--An arrangement is 
        described in this paragraph if it requires an eligible 
        small employer to make a nonelective contribution on 
        behalf of each employee who enrolls in a qualified 
        health plan offered to employees by the employer 
        through an exchange in an amount equal to a uniform 
        percentage (not less than 50 percent) of the premium 
        cost of the qualified health plan.
          (5) Seasonal worker hours and wages not counted.--For 
        purposes of this subsection--
                  (A) In general.--The number of hours of 
                service worked by, and wages paid to, a 
                seasonal worker of an employer shall not be 
                taken into account in determining the full-time 
                equivalent employees and average annual wages 
                of the employer unless the worker works for the 
                employer on more than 120 days during the 
                taxable year.
                  (B) Definition of seasonal worker.--The term 
                ``seasonal worker'' means a worker who performs 
                labor or services on a seasonal basis as 
                defined by the Secretary of Labor, including 
                workers covered by section 500.20(s)(1) of 
                title 29, Code of Federal Regulations and 
                retail workers employed exclusively during 
                holiday seasons.
  (e) Other Rules and Definitions.--For purposes of this 
section--
          (1) Employee.--
                  (A) Certain employees excluded.--The term 
                ``employee'' shall not include--
                          (i) an employee within the meaning of 
                        section 401(c)(1),
                          (ii) any 2-percent shareholder (as 
                        defined in section 1372(b)) of an 
                        eligible small business which is an S 
                        corporation,
                          (iii) any 5-percent owner (as defined 
                        in section 416(i)(1)(B)(i)) of an 
                        eligible small business, or
                          (iv) any individual who bears any of 
                        the relationships described in 
                        subparagraphs (A) through (G) of 
                        section 152(d)(2) to, or is a dependent 
                        described in section 152(d)(2)(H) of, 
                        an individual described in clause (i), 
                        (ii), or (iii).
                  (B) Leased employees.--The term ``employee'' 
                shall include a leased employee within the 
                meaning of section 414(n).
          (2) Credit period.--The term ``credit period'' means, 
        with respect to any eligible small employer, the 2-
        consecutive-taxable year period beginning with the 1st 
        taxable year in which the employer (or any predecessor) 
        offers 1 or more qualified health plans to its 
        employees through an Exchange.
          (3) Nonelective contribution.--The term ``nonelective 
        contribution'' means an employer contribution other 
        than an employer contribution pursuant to a salary 
        reduction arrangement.
          (4) Wages.--The term ``wages'' has the meaning given 
        such term by section 3121(a) (determined without regard 
        to any dollar limitation contained in such section).
          (5) Aggregation and other rules made applicable.--
                  (A) Aggregation rules.--All employers treated 
                as a single employer under subsection (b), (c), 
                (m), or (o) of section 414 shall be treated as 
                a single employer for purposes of this section.
                  (B) Other rules.--Rules similar to the rules 
                of subsections (c), (d), and (e) of section 52 
                shall apply.
  (f) Credit Made Available to Tax-Exempt Eligible Small 
Employers.--
          (1) In general.--In the case of a tax-exempt eligible 
        small employer, there shall be treated as a credit 
        allowable under subpart C (and not allowable under this 
        subpart) the lesser of--
                  (A) the amount of the credit determined under 
                this section with respect to such employer, or
                  (B) the amount of the payroll taxes of the 
                employer during the calendar year in which the 
                taxable year begins.
          (2) Tax-exempt eligible small employer.--For purposes 
        of this section, the term ``tax-exempt eligible small 
        employer'' means an eligible small employer which is 
        any organization described in section 501(c) which is 
        exempt from taxation under section 501(a).
          (3) Payroll taxes.--For purposes of this subsection--
                  (A) In general.--The term ``payroll taxes'' 
                means--
                          (i) amounts required to be withheld 
                        from the employees of the tax-exempt 
                        eligible small employer under section 
                        3401(a),
                          (ii) amounts required to be withheld 
                        from such employees under section 
                        3101(b), and
                          (iii) amounts of the taxes imposed on 
                        the tax-exempt eligible small employer 
                        under section 3111(b).
                  (B) Special rule.--A rule similar to the rule 
                of section 24(d)(2)(C) shall apply for purposes 
                of subparagraph (A).
  (g) Application of Section for Calendar Years 2010, 2011, 
2012, and 2013.--In the case of any taxable year beginning in 
2010, 2011, 2012, or 2013, the following modifications to this 
section shall apply in determining the amount of the credit 
under subsection (a):
          (1) No credit period required.--The credit shall be 
        determined without regard to whether the taxable year 
        is in a credit period and for purposes of applying this 
        section to taxable years beginning after 2013, no 
        credit period shall be treated as beginning with a 
        taxable year beginning before 2014.
          (2) Amount of credit.--The amount of the credit 
        determined under subsection (b) shall be determined--
                  (A) by substituting ``35 percent (25 percent 
                in the case of a tax-exempt eligible small 
                employer)'' for ``50 percent (35 percent in the 
                case of a tax-exempt eligible small 
                employer)'',
                  (B) by reference to an eligible small 
                employer's nonelective contributions for 
                premiums paid for health insurance coverage 
                (within the meaning of section 9832(b)(1)) of 
                an employee, and
                  (C) by substituting for the average premium 
                determined under subsection (b)(2) the amount 
                the Secretary of Health and Human Services 
                determines is the average premium for the small 
                group market in the State in which the employer 
                is offering health insurance coverage (or for 
                such area within the State as is specified by 
                the Secretary).
          (3) Contribution arrangement.--An arrangement shall 
        not fail to meet the requirements of subsection (d)(4) 
        solely because it provides for the offering of 
        insurance outside of an Exchange.
  (h) Insurance Definitions.--[Any term]
          (1) In general._Any term used in this section which 
        is also used in the Public Health Service Act or 
        subtitle A of title I of the Patient Protection and 
        Affordable Care Act shall have the meaning given such 
        term by such Act or subtitle.
          (2) Exclusion of health plans including coverage for 
        abortion.--
                  (A) In general.--The term ``qualified health 
                plan'' does not include any health plan that 
                includes coverage for abortions (other than any 
                abortion necessary to save the life of the 
                mother or any abortion with respect to a 
                pregnancy that is the result of an act of rape 
                or incest).
                  (B) Certain rules related to abortion.--
                          (i) Option to purchase separate 
                        coverage or plan.--Nothing in 
                        subparagraph (A) shall be construed as 
                        prohibiting any employer from 
                        purchasing for its employees separate 
                        coverage for abortions described in 
                        such subparagraph, or a health plan 
                        that includes such abortions, so long 
                        as no credit is allowed under this 
                        section with respect to the employer 
                        contributions for such coverage or 
                        plan.
                          (ii) Option to offer coverage or 
                        plan.--Nothing in subparagraph (A) 
                        shall restrict any health insurance 
                        issuer offering a health plan from 
                        offering separate coverage for 
                        abortions described in such 
                        subparagraph, or a plan that includes 
                        such abortions, so long as such 
                        separate coverage or plan is not paid 
                        for with any employer contribution 
                        eligible for the credit allowed under 
                        this section.
                          (iii) Other treatments.--The 
                        treatment of any infection, injury, 
                        disease, or disorder that has been 
                        caused by or exacerbated by the 
                        performance of an abortion shall not be 
                        treated as an abortion for purposes of 
                        subparagraph (A).
  (i) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary to carry out the provisions of 
this section, including regulations to prevent the avoidance of 
the 2-year limit on the credit period through the use of 
successor entities and the avoidance of the limitations under 
subsection (c) through the use of multiple entities.
  (j) Shall Not Apply.--This section shall not apply with 
respect to amounts paid or incurred in taxable years beginning 
after December 31, 2019.

           *       *       *       *       *       *       *


Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *


PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME

           *       *       *       *       *       *       *


SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH PLANS.

  (a) General Rule.--Except as otherwise provided in this 
section, gross income of an employee does not include employer-
provided coverage under an accident or health plan.
  (b) Contributions to Archer Msas.--
          (1) In general.--In the case of an employee who is an 
        eligible individual, amounts contributed by such 
        employee's employer to any Archer MSA of such employee 
        shall be treated as employer-provided coverage for 
        medical expenses under an accident or health plan to 
        the extent such amounts do not exceed the limitation 
        under section 220(b)(1) (determined without regard to 
        this subsection) which is applicable to such employee 
        for such taxable year.
          (2) No constructive receipt.--No amount shall be 
        included in the gross income of any employee solely 
        because the employee may choose between the 
        contributions referred to in paragraph (1) and employer 
        contributions to another health plan of the employer.
          (3) Special rule for deduction of employer 
        contributions.--Any employer contribution to an Archer 
        MSA, if otherwise allowable as a deduction under this 
        chapter, shall be allowed only for the taxable year in 
        which paid.
          (4) Employer MSA contributions required to be shown 
        on return.--Every individual required to file a return 
        under section 6012 for the taxable year shall include 
        on such return the aggregate amount contributed by 
        employers to the Archer MSAs of such individual or such 
        individual's spouse for such taxable year.
          (5) MSA contributions not part of COBRA coverage.--
        Paragraph (1) shall not apply for purposes of section 
        4980B.
          (6) Definitions.--For purposes of this subsection, 
        the terms ``eligible individual'' and ``Archer MSA'' 
        have the respective meanings given to such terms by 
        section 220.
          (7) Cross reference.--For penalty on failure by 
        employer to make comparable contributions to the Archer 
        MSAs of comparable employees, see section 4980E.
  (c) Inclusion of Long-Term Care Benefits Provided Through 
Flexible Spending Arrangements.--
          (1) In general.--Gross income of an employee shall 
        include employer-provided coverage for qualified long-
        term care services (as defined in section 7702B(c)) to 
        the extent that such coverage is provided through a 
        flexible spending or similar arrangement.
          (2) Flexible spending arrangement.--For purposes of 
        this subsection, a flexible spending arrangement is a 
        benefit program which provides employees with coverage 
        under which--
                  (A) specified incurred expenses may be 
                reimbursed (subject to reimbursement maximums 
                and other reasonable conditions), and
                  (B) the maximum amount of reimbursement which 
                is reasonably available to a participant for 
                such coverage is less than 500 percent of the 
                value of such coverage.
        In the case of an insured plan, the maximum amount 
        reasonably available shall be determined on the basis 
        of the underlying coverage.
  (d) Contributions to Health Savings Accounts.--
          (1) In general.--In the case of an employee who is an 
        eligible individual (as defined in section 223(c)(1)), 
        amounts contributed by such employee's employer to any 
        health savings account (as defined in section 223(d)) 
        of such employee shall be treated as employer-provided 
        coverage for medical expenses under an accident or 
        health plan to the extent such amounts do not exceed 
        the limitation under section 223(b) (determined without 
        regard to this subsection) which is applicable to such 
        employee for such taxable year.
          (2) Special rules.--Rules similar to the rules of 
        paragraphs (2), (3), (4), and (5) of subsection (b) 
        shall apply for purposes of this subsection.
          (3) Cross reference.--For penalty on failure by 
        employer to make comparable contributions to the health 
        savings accounts of comparable employees, see section 
        4980G.
  (e) Fsa and Hra Terminations to Fund Hsas.--
          (1) In general.--A plan shall not fail to be treated 
        as a health flexible spending arrangement or health 
        reimbursement arrangement under this section or section 
        105 merely because such plan provides for a qualified 
        HSA distribution.
          (2) Qualified HSA distribution.--The term ``qualified 
        HSA distribution'' means a distribution from a health 
        flexible spending arrangement or health reimbursement 
        arrangement to the extent that such distribution--
                  (A) does not exceed the lesser of the balance 
                in such arrangement on September 21, 2006, or 
                as of the date of such distribution, and
                  (B) is contributed by the employer directly 
                to the health savings account of the employee 
                before January 1, 2012.
        Such term shall not include more than 1 distribution 
        with respect to any arrangement.
          (3) Additional tax for failure to maintain high 
        deductible health plan coverage.--
                  (A) In general.--If, at any time during the 
                testing period, the employee is not an eligible 
                individual, then the amount of the qualified 
                HSA distribution--
                          (i) shall be includible in the gross 
                        income of the employee for the taxable 
                        year in which occurs the first month in 
                        the testing period for which such 
                        employee is not an eligible individual, 
                        and
                          (ii) the tax imposed by this chapter 
                        for such taxable year on the employee 
                        shall be increased by 10 percent of the 
                        amount which is so includible.
                  (B) Exception for disability or death.--
                Clauses (i) and (ii) of subparagraph (A) shall 
                not apply if the employee ceases to be an 
                eligible individual by reason of the death of 
                the employee or the employee becoming disabled 
                (within the meaning of section 72(m)(7)).
          (4) Definitions and special rules.--For purposes of 
        this subsection--
                  (A) Testing period.--The term ``testing 
                period'' means the period beginning with the 
                month in which the qualified HSA distribution 
                is contributed to the health savings account 
                and ending on the last day of the 12th month 
                following such month.
                  (B) Eligible individual.--The term ``eligible 
                individual'' has the meaning given such term by 
                section 223(c)(1).
                  (C) Treatment as rollover contribution.--A 
                qualified HSA distribution shall be treated as 
                a rollover contribution described in section 
                223(f)(5).
          (5) Tax treatment relating to distributions.--For 
        purposes of this title--
                  (A) In general.--A qualified HSA distribution 
                shall be treated as a payment described in 
                subsection (d).
                  (B) Comparability excise tax.--
                          (i) In general.--Except as provided 
                        in clause (ii), section 4980G shall not 
                        apply to qualified HSA distributions.
                          (ii) Failure to offer to all 
                        employees.--In the case of a qualified 
                        HSA distribution to any employee, the 
                        failure to offer such distribution to 
                        any eligible individual covered under a 
                        high deductible health plan of the 
                        employer shall (notwithstanding section 
                        4980G(d)) be treated for purposes of 
                        section 4980G as a failure to meet the 
                        requirements of section 4980G(b).
  [(f) Reimbursements for Medicine Restricted to Prescribed 
Drugs and Insulin.--For purposes of this section and section 
105, reimbursement for expenses incurred for a medicine or a 
drug shall be treated as a reimbursement for medical expenses 
only if such medicine or drug is a prescribed drug (determined 
without regard to whether such drug is available without a 
prescription) or is insulin.]
  [(g)] (f) Qualified Small Employer Health Reimbursement 
Arrangement.--For purposes of this section and section 105, 
payments or reimbursements from a qualified small employer 
health reimbursement arrangement (as defined in section 
9831(d)) of an individual for medical care (as defined in 
section 213(d)) shall not be treated as paid or reimbursed 
under employer-provided coverage for medical expenses under an 
accident or health plan if for the month in which such medical 
care is provided the individual does not have minimum essential 
coverage (within the meaning of section 5000A(f)).

           *       *       *       *       *       *       *


SEC. 125. CAFETERIA PLANS.

  (a) General Rule.--Except as provided in subsection (b), no 
amount shall be included in the gross income of a participant 
in a cafeteria plan solely because, under the plan, the 
participant may choose among the benefits of the plan.
  (b) Exception for Highly Compensated Participants and Key 
Employees.--
          (1) Highly compensated participants.--In the case of 
        a highly compensated participant, subsection (a) shall 
        not apply to any benefit attributable to a plan year 
        for which the plan discriminates in favor of--
                  (A) highly compensated individuals as to 
                eligibility to participate, or
                  (B) highly compensated participants as to 
                contributions and benefits.
          (2) Key employees.--In the case of a key employee 
        (within the meaning of section 416(i)(1)), subsection 
        (a) shall not apply to any benefit attributable to a 
        plan for which the qualified benefits provided to key 
        employees exceed 25 percent of the aggregate of such 
        benefits provided for all employees under the plan. For 
        purposes of the preceding sentence, qualified benefits 
        shall be determined without regard to the second 
        sentence of subsection (f).
          (3) Year of inclusion.--For purposes of determining 
        the taxable year of inclusion, any benefit described in 
        paragraph (1) or (2) shall be treated as received or 
        accrued in the taxable year of the participant or key 
        employee in which the plan year ends.
  (c) Discrimination as to Benefits or Contributions.--For 
purposes of subparagraph (B) of subsection (b)(1), a cafeteria 
plan does not discriminate where qualified benefits and total 
benefits (or employer contributions allocable to qualified 
benefits and employer contributions for total benefits) do not 
discriminate in favor of highly compensated participants.
  (d) Cafeteria Plan Defined.--For purposes of this section--
          (1) In general.--The term ``cafeteria plan'' means a 
        written plan under which--
                  (A) all participants are employees, and
                  (B) the participants may choose among 2 or 
                more benefits consisting of cash and qualified 
                benefits.
          (2) Deferred compensation plans excluded.--
                  (A) In general.--The term ``cafeteria plan'' 
                does not include any plan which provides for 
                deferred compensation.
                  (B) Exception for cash and deferred 
                arrangements.--Subparagraph (A) shall not apply 
                to a profit-sharing or stock bonus plan or 
                rural cooperative plan (within the meaning of 
                section 401(k)(7)) which includes a qualified 
                cash or deferred arrangement (as defined in 
                section 401(k)(2)) to the extent of amounts 
                which a covered employee may elect to have the 
                employer pay as contributions to a trust under 
                such plan on behalf of the employee.
                  (C) Exception for certain plans maintained by 
                educational institutions.--Subparagraph (A) 
                shall not apply to a plan maintained by an 
                educational organization described in section 
                170(b)(1)(A)(ii) to the extent of amounts which 
                a covered employee may elect to have the 
                employer pay as contributions for post-
                retirement group life insurance if--
                          (i) all contributions for such 
                        insurance must be made before 
                        retirement, and
                          (ii) such life insurance does not 
                        have a cash surrender value at any 
                        time.
                For purposes of section 79, any life insurance 
                described in the preceding sentence shall be 
                treated as group-term life insurance.
                  (D) Exception for health savings accounts.--
                Subparagraph (A) shall not apply to a plan to 
                the extent of amounts which a covered employee 
                may elect to have the employer pay as 
                contributions to a health savings account 
                established on behalf of the employee.
  (e) Highly Compensated Participant and Individual Defined.--
For purposes of this section--
          (1) Highly compensated participant.--The term 
        ``highly compensated participant'' means a participant 
        who is--
                  (A) an officer,
                  (B) a shareholder owning more than 5 percent 
                of the voting power or value of all classes of 
                stock of the employer,
                  (C) highly compensated, or
                  (D) a spouse or dependent (within the meaning 
                of section 152, determined without regard to 
                subsections (b)(1), (b)(2), and (d)(1)(B) 
                thereof) of an individual described in 
                subparagraph (A), (B), or (C).
          (2) Highly compensated individual.--The term ``highly 
        compensated individual'' means an individual who is 
        described in subparagraphs (A), (B), (C), or (D) of 
        paragraph (1).
  (f) Qualified Benefits Defined.--For purposes of this 
section--
          (1) In general.--The term ``qualified benefit'' means 
        any benefit which, with the application of subsection 
        (a), is not includible in the gross income of the 
        employee by reason of an express provision of this 
        chapter (other than section 106(b), 117, 127, or 132). 
        Such term includes any group term life insurance which 
        is includible in gross income only because it exceeds 
        the dollar limitation of section 79 and such term 
        includes any other benefit permitted under regulations.
          (2) Long-term care insurance not qualified.--The term 
        ``qualified benefit'' shall not include any product 
        which is advertised, marketed, or offered as long-term 
        care insurance.
          (3) Certain exchange-participating qualified health 
        plans not qualified.--
                  (A) In general.--The term ``qualified 
                benefit'' shall not include any qualified 
                health plan (as defined in section 1301(a) of 
                the Patient Protection and Affordable Care Act) 
                offered through an Exchange established under 
                section 1311 of such Act.
                  (B) Exception for exchange-eligible 
                employers.--Subparagraph (A) shall not apply 
                with respect to any employee if such employee's 
                employer is a qualified employer (as defined in 
                section 1312(f)(2) of the Patient Protection 
                and Affordable Care Act) offering the employee 
                the opportunity to enroll through such an 
                Exchange in a qualified health plan in a group 
                market.
  (g) Special Rules.--
          (1) Collectively bargained plan not considered 
        discriminatory.--For purposes of this section, a plan 
        shall not be treated as discriminatory if the plan is 
        maintained under an agreement which the Secretary finds 
        to be a collective bargaining agreement between 
        employee representatives and one or more employers.
          (2) Health benefits.--For purposes of subparagraph 
        (B) of subsection (b)(1), a cafeteria plan which 
        provides health benefits shall not be treated as 
        discriminatory if--
                  (A) contributions under the plan on behalf of 
                each participant include an amount which--
                          (i) equals 100 percent of the cost of 
                        the health benefit coverage under the 
                        plan of the majority of the highly 
                        compensated participants similarly 
                        situated, or
                          (ii) equals or exceeds 75 percent of 
                        the cost of the health benefit coverage 
                        of the participant (similarly situated) 
                        having the highest cost health benefit 
                        coverage under the plan, and
                  (B) contributions or benefits under the plan 
                in excess of those described in subparagraph 
                (A) bear a uniform relationship to 
                compensation.
          (3) Certain participation eligibility rules not 
        treated as discriminatory.--For purposes of 
        subparagraph (A) of subsection (b)(1), a classification 
        shall not be treated as discriminatory if the plan--
                  (A) benefits a group of employees described 
                in section 410(b)(2)(A)(i), and
                  (B) meets the requirements of clauses (i) and 
                (ii):
                          (i) No employee is required to 
                        complete more than 3 years of 
                        employment with the employer or 
                        employers maintaining the plan as a 
                        condition of participation in the plan, 
                        and the employment requirement for each 
                        employee is the same.
                          (ii) Any employee who has satisfied 
                        the employment requirement of clause 
                        (i) and who is otherwise entitled to 
                        participate in the plan commences 
                        participation no later than the first 
                        day of the first plan year beginning 
                        after the date the employment 
                        requirement was satisfied unless the 
                        employee was separated from service 
                        before the first day of that plan year.
          (4) Certain controlled groups, etc..--All employees 
        who are treated as employed by a single employer under 
        subsection (b), (c), or (m) of section 414 shall be 
        treated as employed by a single employer for purposes 
        of this section.
  (h) Special Rule for Unused Benefits in Health Flexible 
Spending Arrangements of Individuals Called to Active Duty.--
          (1) In general.--For purposes of this title, a plan 
        or other arrangement shall not fail to be treated as a 
        cafeteria plan or health flexible spending arrangement 
        (and shall not fail to be treated as an accident or 
        health plan) merely because such arrangement provides 
        for qualified reservist distributions.
          (2) Qualified reservist distribution.--For purposes 
        of this subsection, the term ``qualified reservist 
        distribution'' means any distribution to an individual 
        of all or a portion of the balance in the employee's 
        account under such arrangement if--
                  (A) such individual was (by reason of being a 
                member of a reserve component (as defined in 
                section 101 of title 37, United States Code)) 
                ordered or called to active duty for a period 
                in excess of 179 days or for an indefinite 
                period, and
                  (B) such distribution is made during the 
                period beginning on the date of such order or 
                call and ending on the last date that 
                reimbursements could otherwise be made under 
                such arrangement for the plan year which 
                includes the date of such order or call.
  [(i) Limitation on Health Flexible Spending Arrangements.--
          [(1) In general.--For purposes of this section, if a 
        benefit is provided under a cafeteria plan through 
        employer contributions to a health flexible spending 
        arrangement, such benefit shall not be treated as a 
        qualified benefit unless the cafeteria plan provides 
        that an employee may not elect for any taxable year to 
        have salary reduction contributions in excess of $2,500 
        made to such arrangement.
          [(2) Adjustment for inflation.--In the case of any 
        taxable year beginning after December 31, 2013, the 
        dollar amount in paragraph (1) shall be increased by an 
        amount equal to--
                  [(A) such amount, multiplied by
                  [(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in 
                which such taxable year begins by substituting 
                ``calendar year 2012'' for ``calendar year 
                1992'' in subparagraph (B) thereof.
        If any increase determined under this paragraph is not 
        a multiple of $50, such increase shall be rounded to 
        the next lowest multiple of $50.]
  (j) Simple Cafeteria Plans for Small Businesses.--
          (1) In general.--An eligible employer maintaining a 
        simple cafeteria plan with respect to which the 
        requirements of this subsection are met for any year 
        shall be treated as meeting any applicable 
        nondiscrimination requirement during such year.
          (2) Simple cafeteria plan.--For purposes of this 
        subsection, the term ``simple cafeteria plan'' means a 
        cafeteria plan--
                  (A) which is established and maintained by an 
                eligible employer, and
                  (B) with respect to which the contribution 
                requirements of paragraph (3), and the 
                eligibility and participation requirements of 
                paragraph (4), are met.
          (3) Contribution requirements.--
                  (A) In general.--The requirements of this 
                paragraph are met if, under the plan the 
                employer is required, without regard to whether 
                a qualified employee makes any salary reduction 
                contribution, to make a contribution to provide 
                qualified benefits under the plan on behalf of 
                each qualified employee in an amount equal to--
                          (i) a uniform percentage (not less 
                        than 2 percent) of the employee's 
                        compensation for the plan year, or
                          (ii) an amount which is not less than 
                        the lesser of--
                                  (I) 6 percent of the 
                                employee's compensation for the 
                                plan year, or
                                  (II) twice the amount of the 
                                salary reduction contributions 
                                of each qualified employee.
                  (B) Matching contributions on behalf of 
                highly compensated and key employees.--The 
                requirements of subparagraph (A)(ii) shall not 
                be treated as met if, under the plan, the rate 
                of contributions with respect to any salary 
                reduction contribution of a highly compensated 
                or key employee at any rate of contribution is 
                greater than that with respect to an employee 
                who is not a highly compensated or key 
                employee.
                  (C) Additional contributions.--Subject to 
                subparagraph (B), nothing in this paragraph 
                shall be treated as prohibiting an employer 
                from making contributions to provide qualified 
                benefits under the plan in addition to 
                contributions required under subparagraph (A).
                  (D) Definitions.--For purposes of this 
                paragraph--
                          (i) Salary reduction contribution.--
                        The term ``salary reduction 
                        contribution'' means, with respect to a 
                        cafeteria plan, any amount which is 
                        contributed to the plan at the election 
                        of the employee and which is not 
                        includible in gross income by reason of 
                        this section.
                          (ii) Qualified employee.--The term 
                        ``qualified employee'' means, with 
                        respect to a cafeteria plan, any 
                        employee who is not a highly 
                        compensated or key employee and who is 
                        eligible to participate in the plan.
                          (iii) Highly compensated employee.--
                        The term ``highly compensated 
                        employee'' has the meaning given such 
                        term by section 414(q).
                          (iv) Key employee.--The term ``key 
                        employee'' has the meaning given such 
                        term by section 416(i).
          (4) Minimum eligibility and participation 
        requirements.--
                  (A) In general.--The requirements of this 
                paragraph shall be treated as met with respect 
                to any year if, under the plan--
                          (i) all employees who had at least 
                        1,000 hours of service for the 
                        preceding plan year are eligible to 
                        participate, and
                          (ii) each employee eligible to 
                        participate in the plan may, subject to 
                        terms and conditions applicable to all 
                        participants, elect any benefit 
                        available under the plan.
                  (B) Certain employees may be excluded.--For 
                purposes of subparagraph (A)(i), an employer 
                may elect to exclude under the plan employees--
                          (i) who have not attained the age of 
                        21 before the close of a plan year,
                          (ii) who have less than 1 year of 
                        service with the employer as of any day 
                        during the plan year,
                          (iii) who are covered under an 
                        agreement which the Secretary of Labor 
                        finds to be a collective bargaining 
                        agreement if there is evidence that the 
                        benefits covered under the cafeteria 
                        plan were the subject of good faith 
                        bargaining between employee 
                        representatives and the employer, or
                          (iv) who are described in section 
                        410(b)(3)(C) (relating to nonresident 
                        aliens working outside the United 
                        States).
                A plan may provide a shorter period of service 
                or younger age for purposes of clause (i) or 
                (ii).
          (5) Eligible employer.--For purposes of this 
        subsection--
                  (A) In general.--The term ``eligible 
                employer'' means, with respect to any year, any 
                employer if such employer employed an average 
                of 100 or fewer employees on business days 
                during either of the 2 preceding years. For 
                purposes of this subparagraph, a year may only 
                be taken into account if the employer was in 
                existence throughout the year.
                  (B) Employers not in existence during 
                preceding year.--If an employer was not in 
                existence throughout the preceding year, the 
                determination under subparagraph (A) shall be 
                based on the average number of employees that 
                it is reasonably expected such employer will 
                employ on business days in the current year.
                  (C) Growing employers retain treatment as 
                small employer.--
                          (i) In general.--If--
                                  (I) an employer was an 
                                eligible employer for any year 
                                (a ``qualified year''), and
                                  (II) such employer 
                                establishes a simple cafeteria 
                                plan for its employees for such 
                                year,
                        then, notwithstanding the fact the 
                        employer fails to meet the requirements 
                        of subparagraph (A) for any subsequent 
                        year, such employer shall be treated as 
                        an eligible employer for such 
                        subsequent year with respect to 
                        employees (whether or not employees 
                        during a qualified year) of any trade 
                        or business which was covered by the 
                        plan during any qualified year.
                          (ii) Exception.--This subparagraph 
                        shall cease to apply if the employer 
                        employs an average of 200 or more 
                        employees on business days during any 
                        year preceding any such subsequent 
                        year.
                  (D) Special rules.--
                          (i) Predecessors.--Any reference in 
                        this paragraph to an employer shall 
                        include a reference to any predecessor 
                        of such employer.
                          (ii) Aggregation rules.--All persons 
                        treated as a single employer under 
                        subsection (a) or (b) of section 52, or 
                        subsection (n) or (o) of section 414, 
                        shall be treated as one person.
          (6) Applicable nondiscrimination requirement.--For 
        purposes of this subsection, the term ``applicable 
        nondiscrimination requirement'' means any requirement 
        under subsection (b) of this section, section 79(d), 
        section 105(h), or paragraph (2), (3), (4), or (8) of 
        section 129(d).
          (7) Compensation.--The term ``compensation'' has the 
        meaning given such term by section 414(s).
  (k) Cross Reference.--For reporting and recordkeeping 
requirements, see section 6039D.
  (l) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary to carry out the provisions of 
this section.

           *       *       *       *       *       *       *


SEC. 139A. FEDERAL SUBSIDIES FOR PRESCRIPTION DRUG PLANS.

  Gross income shall not include any special subsidy payment 
received under section 1860D-22 of the Social Security Act. 
This section shall not be taken into account for purposes of 
determining whether any deduction is allowable with respect to 
any cost taken into account in determining such payment.

           *       *       *       *       *       *       *


PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS

           *       *       *       *       *       *       *


SEC. 162. TRADE OR BUSINESS EXPENSES.

  (a) In General.--There shall be allowed as a deduction all 
the ordinary and necessary expenses paid or incurred during the 
taxable year in carrying on any trade or business, including--
          (1) a reasonable allowance for salaries or other 
        compensation for personal services actually rendered;
          (2) traveling expenses (including amounts expended 
        for meals and lodging other than amounts which are 
        lavish or extravagant under the circumstances) while 
        away from home in the pursuit of a trade or business; 
        and
          (3) rentals or other payments required to be made as 
        a condition to the continued use or possession, for 
        purposes of the trade or business, of property to which 
        the taxpayer has not taken or is not taking title or in 
        which he has no equity.
For purposes of the preceding sentence, the place of residence 
of a Member of Congress (including any Delegate and Resident 
Commissioner) within the State, congressional district, or 
possession which he represents in Congress shall be considered 
his home, but amounts expended by such Members within each 
taxable year for living expenses shall not be deductible for 
income tax purposes in excess of $3,000. For purposes of 
paragraph (2), the taxpayer shall not be treated as being 
temporarily away from home during any period of employment if 
such period exceeds 1 year. The preceding sentence shall not 
apply to any Federal employee during any period for which such 
employee is certified by the Attorney General (or the designee 
thereof) as traveling on behalf of the United States in 
temporary duty status to investigate or prosecute, or provide 
support services for the investigation or prosecution of, a 
Federal crime.
  (b) Charitable Contributions and Gifts Excepted.--No 
deduction shall be allowed under subsection (a) for any 
contribution or gift which would be allowable as a deduction 
under section 170 were it not for the percentage limitations, 
the dollar limitations, or the requirements as to the time of 
payment, set forth in such section.
  (c) Illegal Bribes, Kickbacks, and Other Payments.--
          (1) Illegal payments to government officials or 
        employees.--No deduction shall be allowed under 
        subsection (a) for any payment made, directly or 
        indirectly, to an official or employee of any 
        government, or of any agency or instrumentality of any 
        government, if the payment constitutes an illegal bribe 
        or kickback or, if the payment is to an official or 
        employee of a foreign government, the payment is 
        unlawful under the Foreign Corrupt Practices Act of 
        1977. The burden of proof in respect of the issue, for 
        the purposes of this paragraph, as to whether a payment 
        constitutes an illegal bribe or kickback (or is 
        unlawful under the Foreign Corrupt Practices Act of 
        1977) shall be upon the Secretary to the same extent as 
        he bears the burden of proof under section 7454 
        (concerning the burden of proof when the issue relates 
        to fraud).
          (2) Other illegal payments.--No deduction shall be 
        allowed under subsection (a) for any payment (other 
        than a payment described in paragraph (1)) made, 
        directly or indirectly, to any person, if the payment 
        constitutes an illegal bribe, illegal kickback, or 
        other illegal payment under any law of the United 
        States, or under any law of a State (but only if such 
        State law is generally enforced), which subjects the 
        payor to a criminal penalty or the loss of license or 
        privilege to engage in a trade or business. For 
        purposes of this paragraph, a kickback includes a 
        payment in consideration of the referral of a client, 
        patient, or customer. The burden of proof in respect of 
        the issue, for purposes of this paragraph, as to 
        whether a payment constitutes an illegal bribe, illegal 
        kickback, or other illegal payment shall be upon the 
        Secretary to the same extent as he bears the burden of 
        proof under section 7454 (concerning the burden of 
        proof when the issue relates to fraud).
          (3) Kickbacks, rebates, and bribes under medicare and 
        medicaid.--No deduction shall be allowed under 
        subsection (a) for any kickback, rebate, or bribe made 
        by any provider of services, supplier, physician, or 
        other person who furnishes items or services for which 
        payment is or may be made under the Social Security 
        Act, or in whole or in part out of Federal funds under 
        a State plan approved under such Act, if such kickback, 
        rebate, or bribe is made in connection with the 
        furnishing of such items or services or the making or 
        receipt of such payments. For purposes of this 
        paragraph, a kickback includes a payment in 
        consideration of the referral of a client, patient, or 
        customer.
  (d) Capital Contributions to Federal National Mortgage 
Association.--For purposes of this subtitle, whenever the 
amount of capital contributions evidenced by a share of stock 
issued pursuant to section 303(c) of the Federal National 
Mortgage Association Charter Act (12 U.S.C., sec. 1718) exceeds 
the fair market value of the stock as of the issue date of such 
stock, the initial holder of the stock shall treat the excess 
as ordinary and necessary expenses paid or incurred during the 
taxable year in carrying on a trade or business.
  (e) Denial of Deduction for Certain Lobbying and Political 
Expenditures.--
          (1) In general.--No deduction shall be allowed under 
        subsection (a) for any amount paid or incurred in 
        connection with--
                  (A) influencing legislation,
                  (B) participation in, or intervention in, any 
                political campaign on behalf of (or in 
                opposition to) any candidate for public office,
                  (C) any attempt to influence the general 
                public, or segments thereof, with respect to 
                elections, legislative matters, or referendums, 
                or
                  (D) any direct communication with a covered 
                executive branch official in an attempt to 
                influence the official actions or positions of 
                such official.
          (2) Exception for local legislation.--In the case of 
        any legislation of any local council or similar 
        governing body--
                  (A) paragraph (1)(A) shall not apply, and
                  (B) the deduction allowed by subsection (a) 
                shall include all ordinary and necessary 
                expenses (including, but not limited to, 
                traveling expenses described in subsection 
                (a)(2) and the cost of preparing testimony) 
                paid or incurred during the taxable year in 
                carrying on any trade or business--
                          (i) in direct connection with 
                        appearances before, submission of 
                        statements to, or sending 
                        communications to the committees, or 
                        individual members, of such council or 
                        body with respect to legislation or 
                        proposed legislation of direct interest 
                        to the taxpayer, or
                          (ii) in direct connection with 
                        communication of information between 
                        the taxpayer and an organization of 
                        which the taxpayer is a member with 
                        respect to any such legislation or 
                        proposed legislation which is of direct 
                        interest to the taxpayer and to such 
                        organization,
                and that portion of the dues so paid or 
                incurred with respect to any organization of 
                which the taxpayer is a member which is 
                attributable to the expenses of the activities 
                described in clauses (i) and (ii) carried on by 
                such organization.
          (3) Application to dues of tax-exempt 
        organizations.--No deduction shall be allowed under 
        subsection (a) for the portion of dues or other similar 
        amounts paid by the taxpayer to an organization which 
        is exempt from tax under this subtitle which the 
        organization notifies the taxpayer under section 
        6033(e)(1)(A)(ii) is allocable to expenditures to which 
        paragraph (1) applies.
          (4) Influencing legislation.--For purposes of this 
        subsection--
                  (A) In general.--The term ``influencing 
                legislation'' means any attempt to influence 
                any legislation through communication with any 
                member or employee of a legislative body, or 
                with any government official or employee who 
                may participate in the formulation of 
                legislation.
                  (B) Legislation.--The term ``legislation'' 
                has the meaning given such term by section 
                4911(e)(2).
          (5) Other special rules.--
                  (A) Exception for certain taxpayers.--In the 
                case of any taxpayer engaged in the trade or 
                business of conducting activities described in 
                paragraph (1), paragraph (1) shall not apply to 
                expenditures of the taxpayer in conducting such 
                activities directly on behalf of another person 
                (but shall apply to payments by such other 
                person to the taxpayer for conducting such 
                activities).
                  (B) De minimis exception.--
                          (i) In general.--Paragraph (1) shall 
                        not apply to any in-house expenditures 
                        for any taxable year if such 
                        expenditures do not exceed $2,000. In 
                        determining whether a taxpayer exceeds 
                        the $2,000 limit under this clause, 
                        there shall not be taken into account 
                        overhead costs otherwise allocable to 
                        activities described in paragraphs 
                        (1)(A) and (D).
                          (ii) In-house expenditures.--For 
                        purposes of clause (i), the term ``in-
                        house expenditures'' means expenditures 
                        described in paragraphs (1)(A) and (D) 
                        other than--
                                  (I) payments by the taxpayer 
                                to a person engaged in the 
                                trade or business of conducting 
                                activities described in 
                                paragraph (1) for the conduct 
                                of such activities on behalf of 
                                the taxpayer, or
                                  (II) dues or other similar 
                                amounts paid or incurred by the 
                                taxpayer which are allocable to 
                                activities described in 
                                paragraph (1).
                  (C) Expenses incurred in connection with 
                lobbying and political activities.--Any amount 
                paid or incurred for research for, or 
                preparation, planning, or coordination of, any 
                activity described in paragraph (1) shall be 
                treated as paid or incurred in connection with 
                such activity.
          (6) Covered executive branch official.--For purposes 
        of this subsection, the term ``covered executive branch 
        official'' means--
                  (A) the President,
                  (B) the Vice President,
                  (C) any officer or employee of the White 
                House Office of the Executive Office of the 
                President, and the 2 most senior level officers 
                of each of the other agencies in such Executive 
                Office, and
                  (D)(i) any individual serving in a position 
                in level I of the Executive Schedule under 
                section 5312 of title 5, United States Code, 
                (ii) any other individual designated by the 
                President as having Cabinet level status, and 
                (iii) any immediate deputy of an individual 
                described in clause (i) or (ii).
          (7) Special rule for Indian tribal governments.--For 
        purposes of this subsection, an Indian tribal 
        government shall be treated in the same manner as a 
        local council or similar governing body.
          (8) Cross reference.--For reporting requirements and 
        alternative taxes related to this subsection, see 
        section 6033(e).
  (f) Fines and Penalties.--No deduction shall be allowed under 
subsection (a) for any fine or similar penalty paid to a 
government for the violation of any law.
  (g) Treble Damage Payments Under the Antitrust Laws.--If in a 
criminal proceeding a taxpayer is convicted of a violation of 
the antitrust laws, or his plea of guilty or nolo contendere to 
an indictment or information charging such a violation is 
entered or accepted in such a proceeding, no deduction shall be 
allowed under subsection (a) for two-thirds of any amount paid 
or incurred--
          (1) on any judgment for damages entered against the 
        taxpayer under section 4 of the Act entitled ``An Act 
        to supplement existing laws against unlawful restraints 
        and monopolies, and for other purposes'', approved 
        October 15, 1914 (commonly known as the Clayton Act), 
        on account of such violation or any related violation 
        of the antitrust laws which occurred prior to the date 
        of the final judgment of such conviction, or
          (2) in settlement of any action brought under such 
        section 4 on account of such violation or related 
        violation.
  (h) State Legislators' Travel Expenses Away from Home.--
          (1) In general.--For purposes of subsection (a), in 
        the case of any individual who is a State legislator at 
        any time during the taxable year and who makes an 
        election under this subsection for the taxable year--
                  (A) the place of residence of such individual 
                within the legislative district which he 
                represented shall be considered his home,
                  (B) he shall be deemed to have expended for 
                living expenses (in connection with his trade 
                or business as a legislator) an amount equal to 
                the sum of the amounts determined by 
                multiplying each legislative day of such 
                individual during the taxable year by the 
                greater of--
                          (i) the amount generally allowable 
                        with respect to such day to employees 
                        of the State of which he is a 
                        legislator for per diem while away from 
                        home, to the extent such amount does 
                        not exceed 110 percent of the amount 
                        described in clause (ii) with respect 
                        to such day, or
                          (ii) the amount generally allowable 
                        with respect to such day to employees 
                        of the executive branch of the Federal 
                        Government for per diem while away from 
                        home but serving in the United States, 
                        and
                  (C) he shall be deemed to be away from home 
                in the pursuit of a trade or business on each 
                legislative day.
          (2) Legislative days.--For purposes of paragraph (1), 
        a legislative day during any taxable year for any 
        individual shall be any day during such year on which--
                  (A) the legislature was in session (including 
                any day in which the legislature was not in 
                session for a period of 4 consecutive days or 
                less), or
                  (B) the legislature was not in session but 
                the physical presence of the individual was 
                formally recorded at a meeting of a committee 
                of such legislature.
          (3) Election.--An election under this subsection for 
        any taxable year shall be made at such time and in such 
        manner as the Secretary shall by regulations prescribe.
          (4) Section not to apply to legislators who reside 
        near capitol.--This subsection shall not apply to any 
        legislator whose place of residence within the 
        legislative district which he represents is 50 or fewer 
        miles from the capitol building of the State.
  (j) Certain Foreign Advertising Expenses.--
          (1) In general.--No deduction shall be allowed under 
        subsection (a) for any expenses of an advertisement 
        carried by a foreign broadcast undertaking and directed 
        primarily to a market in the United States. This 
        paragraph shall apply only to foreign broadcast 
        undertakings located in a country which denies a 
        similar deduction for the cost of advertising directed 
        primarily to a market in the foreign country when 
        placed with a United States broadcast undertaking.
          (2) Broadcast undertaking.--For purposes of paragraph 
        (1), the term ``broadcast undertaking'' includes (but 
        is not limited to) radio and television stations.
  (k) Stock Reacquisition Expenses.--
          (1) In general.--Except as provided in paragraph (2), 
        no deduction otherwise allowable shall be allowed under 
        this chapter for any amount paid or incurred by a 
        corporation in connection with the reacquisition of its 
        stock or of the stock of any related person (as defined 
        in section 465(b)(3)(C)).
          (2) Exceptions.--Paragraph (1) shall not apply to--
                  (A) Certain specific deductions.--Any--
                          (i) deduction allowable under section 
                        163 (relating to interest),
                          (ii) deduction for amounts which are 
                        properly allocable to indebtedness and 
                        amortized over the term of such 
                        indebtedness, or
                          (iii) deduction for dividends paid 
                        (within the meaning of section 561).
                  (B) Stock of certain regulated investment 
                companies.--Any amount paid or incurred in 
                connection with the redemption of any stock in 
                a regulated investment company which issues 
                only stock which is redeemable upon the demand 
                of the shareholder.
  (l) Special Rules for Health Insurance Costs of Self-Employed 
Individuals.--
          (1) Allowance of deduction.--In the case of a 
        taxpayer who is an employee within the meaning of 
        section 401(c)(1), there shall be allowed as a 
        deduction under this section an amount equal to the 
        amount paid during the taxable year for insurance which 
        constitutes medical care for--
                  (A) the taxpayer,
                  (B) the taxpayer's spouse,
                  (C) the taxpayer's dependents, and
                  (D) any child (as defined in section 
                152(f)(1)) of the taxpayer who as of the end of 
                the taxable year has not attained age 27.
          (2) Limitations.--
                  (A) Dollar amount.--No deduction shall be 
                allowed under paragraph (1) to the extent that 
                the amount of such deduction exceeds the 
                taxpayer's earned income (within the meaning of 
                section 401(c)) derived by the taxpayer from 
                the trade or business with respect to which the 
                plan providing the medical care coverage is 
                established.
                  (B) Other coverage.--Paragraph (1) shall not 
                apply to any taxpayer for any calendar month 
                for which the taxpayer is eligible to 
                participate in any subsidized health plan 
                maintained by any employer of the taxpayer or 
                of the spouse of, or any dependent, or 
                individual described in subparagraph (D) of 
                paragraph (1) with respect to, the taxpayer. 
                The preceding sentence shall be applied 
                separately with respect to--
                          (i) plans which include coverage for 
                        qualified long-term care services (as 
                        defined in section 7702B(c)) or are 
                        qualified long-term care insurance 
                        contracts (as defined in section 
                        7702B(b)), and
                          (ii) plans which do not include such 
                        coverage and are not such contracts.
                  (C) Long-term care premiums.--In the case of 
                a qualified long-term care insurance contract 
                (as defined in section 7702B(b)), only eligible 
                long-term care premiums (as defined in section 
                213(d)(10)) shall be taken into account under 
                paragraph (1).
          (3) Coordination with medical deduction.--Any amount 
        paid by a taxpayer for insurance to which paragraph (1) 
        applies shall not be taken into account in computing 
        the amount allowable to the taxpayer as a deduction 
        under section 213(a).
          (4) Deduction not allowed for self-employment tax 
        purposes.--The deduction allowable by reason of this 
        subsection shall not be taken into account in 
        determining an individual's net earnings from self-
        employment (within the meaning of section 1402(a)) for 
        purposes of chapter 2 for taxable years beginning 
        before January 1, 2010, or after December 31, 2010.
          (5) Treatment of certain S corporation 
        shareholders.--This subsection shall apply in the case 
        of any individual treated as a partner under section 
        1372(a), except that--
                  (A) for purposes of this subsection, such 
                individual's wages (as defined in section 3121) 
                from the S corporation shall be treated as such 
                individual's earned income (within the meaning 
                of section 401(c)(1)), and
                  (B) there shall be such adjustments in the 
                application of this subsection as the Secretary 
                may by regulations prescribe.
          (6) Coordination with health insurance coverage 
        credit.--The deduction otherwise allowable to a 
        taxpayer under paragraph (1) for any taxable year shall 
        be reduced (but not below zero) by the sum of--
                  (A) the amount of the credit allowable to 
                such taxpayer under section 36C (determined 
                without regard to subsection (i)(5)(A) thereof) 
                for such taxable year, plus
                  (B) the aggregate payments made with respect 
                to the taxpayer under section 7530 for months 
                during such taxable year.
  (m) Certain Excessive Employee Remuneration.--
          (1) In general.--In the case of any publicly held 
        corporation, no deduction shall be allowed under this 
        chapter for applicable employee remuneration with 
        respect to any covered employee to the extent that the 
        amount of such remuneration for the taxable year with 
        respect to such employee exceeds $1,000,000.
          (2) Publicly held corporation.--For purposes of this 
        subsection, the term ``publicly held corporation'' 
        means any corporation issuing any class of common 
        equity securities required to be registered under 
        section 12 of the Securities Exchange Act of 1934.
          (3) Covered employee.--For purposes of this 
        subsection, the term ``covered employee'' means any 
        employee of the taxpayer if--
                  (A) as of the close of the taxable year, such 
                employee is the chief executive officer of the 
                taxpayer or is an individual acting in such a 
                capacity, or
                  (B) the total compensation of such employee 
                for the taxable year is required to be reported 
                to shareholders under the Securities Exchange 
                Act of 1934 by reason of such employee being 
                among the 4 highest compensated officers for 
                the taxable year (other than the chief 
                executive officer).
          (4) Applicable employee remuneration.--For purposes 
        of this subsection--
                  (A) In general.--Except as otherwise provided 
                in this paragraph, the term ``applicable 
                employee remuneration'' means, with respect to 
                any covered employee for any taxable year, the 
                aggregate amount allowable as a deduction under 
                this chapter for such taxable year (determined 
                without regard to this subsection) for 
                remuneration for services performed by such 
                employee (whether or not during the taxable 
                year).
                  (B) Exception for remuneration payable on 
                commission basis.--The term ``applicable 
                employee remuneration'' shall not include any 
                remuneration payable on a commission basis 
                solely on account of income generated directly 
                by the individual performance of the individual 
                to whom such remuneration is payable.
                  (C) Other performance-based compensation.--
                The term ``applicable employee remuneration'' 
                shall not include any remuneration payable 
                solely on account of the attainment of one or 
                more performance goals, but only if--
                          (i) the performance goals are 
                        determined by a compensation committee 
                        of the board of directors of the 
                        taxpayer which is comprised solely of 2 
                        or more outside directors,
                          (ii) the material terms under which 
                        the remuneration is to be paid, 
                        including the performance goals, are 
                        disclosed to shareholders and approved 
                        by a majority of the vote in a separate 
                        shareholder vote before the payment of 
                        such remuneration, and
                          (iii) before any payment of such 
                        remuneration, the compensation 
                        committee referred to in clause (i) 
                        certifies that the performance goals 
                        and any other material terms were in 
                        fact satisfied.
                  (D) Exception for existing binding 
                contracts.--The term ``applicable employee 
                remuneration'' shall not include any 
                remuneration payable under a written binding 
                contract which was in effect on February 17, 
                1993, and which was not modified thereafter in 
                any material respect before such remuneration 
                is paid.
                  (E) Remuneration.--For purposes of this 
                paragraph, the term ``remuneration'' includes 
                any remuneration (including benefits) in any 
                medium other than cash, but shall not include--
                          (i) any payment referred to in so 
                        much of section 3121(a)(5) as precedes 
                        subparagraph (E) thereof, and
                          (ii) any benefit provided to or on 
                        behalf of an employee if at the time 
                        such benefit is provided it is 
                        reasonable to believe that the employee 
                        will be able to exclude such benefit 
                        from gross income under this chapter.
                For purposes of clause (i), section 3121(a)(5) 
                shall be applied without regard to section 
                3121(v)(1).
                  (F) Coordination with disallowed golden 
                parachute payments.--The dollar limitation 
                contained in paragraph (1) shall be reduced 
                (but not below zero) by the amount (if any) 
                which would have been included in the 
                applicable employee remuneration of the covered 
                employee for the taxable year but for being 
                disallowed under section 280G.
                  (G) Coordination with excise tax on specified 
                stock compensation.--The dollar limitation 
                contained in paragraph (1) with respect to any 
                covered employee shall be reduced (but not 
                below zero) by the amount of any payment (with 
                respect to such employee) of the tax imposed by 
                section 4985 directly or indirectly by the 
                expatriated corporation (as defined in such 
                section) or by any member of the expanded 
                affiliated group (as defined in such section) 
                which includes such corporation.
          (5) Special rule for application to employers 
        participating in the Troubled Assets Relief Program.--
                  (A) In general.--In the case of an applicable 
                employer, no deduction shall be allowed under 
                this chapter--
                          (i) in the case of executive 
                        remuneration for any applicable taxable 
                        year which is attributable to services 
                        performed by a covered executive during 
                        such applicable taxable year, to the 
                        extent that the amount of such 
                        remuneration exceeds $500,000, or
                          (ii) in the case of deferred 
                        deduction executive remuneration for 
                        any taxable year for services performed 
                        during any applicable taxable year by a 
                        covered executive, to the extent that 
                        the amount of such remuneration exceeds 
                        $500,000 reduced (but not below zero) 
                        by the sum of--
                                  (I) the executive 
                                remuneration for such 
                                applicable taxable year, plus
                                  (II) the portion of the 
                                deferred deduction executive 
                                remuneration for such services 
                                which was taken into account 
                                under this clause in a 
                                preceding taxable year.
                  (B) Applicable employer.--For purposes of 
                this paragraph--
                          (i) In general.--Except as provided 
                        in clause (ii), the term ``applicable 
                        employer'' means any employer from whom 
                        1 or more troubled assets are acquired 
                        under a program established by the 
                        Secretary under section 101(a) of the 
                        Emergency Economic Stabilization Act of 
                        2008 if the aggregate amount of the 
                        assets so acquired for all taxable 
                        years exceeds $300,000,000.
                          (ii) Disregard of certain assets sold 
                        through direct purchase.--If the only 
                        sales of troubled assets by an employer 
                        under the program described in clause 
                        (i) are through 1 or more direct 
                        purchases (within the meaning of 
                        section 113(c) of the Emergency 
                        Economic Stabilization Act of 2008), 
                        such assets shall not be taken into 
                        account under clause (i) in determining 
                        whether the employer is an applicable 
                        employer for purposes of this 
                        paragraph.
                          (iii) Aggregation rules.--Two or more 
                        persons who are treated as a single 
                        employer under subsection (b) or (c) of 
                        section 414 shall be treated as a 
                        single employer, except that in 
                        applying section 1563(a) for purposes 
                        of either such subsection, paragraphs 
                        (2) and (3) thereof shall be 
                        disregarded.
                  (C) Applicable taxable year.--For purposes of 
                this paragraph, the term ``applicable taxable 
                year'' means, with respect to any employer--
                          (i) the first taxable year of the 
                        employer--
                                  (I) which includes any 
                                portion of the period during 
                                which the authorities under 
                                section 101(a) of the Emergency 
                                Economic Stabilization Act of 
                                2008 are in effect (determined 
                                under section 120 thereof), and
                                  (II) in which the aggregate 
                                amount of troubled assets 
                                acquired from the employer 
                                during the taxable year 
                                pursuant to such authorities 
                                (other than assets to which 
                                subparagraph (B)(ii) applies), 
                                when added to the aggregate 
                                amount so acquired for all 
                                preceding taxable years, 
                                exceeds $300,000,000, and
                          (ii) any subsequent taxable year 
                        which includes any portion of such 
                        period.
                  (D) Covered executive.--For purposes of this 
                paragraph--
                          (i) In general.--The term ``covered 
                        executive'' means, with respect to any 
                        applicable taxable year, any employee--
                                  (I) who, at any time during 
                                the portion of the taxable year 
                                during which the authorities 
                                under section 101(a) of the 
                                Emergency Economic 
                                Stabilization Act of 2008 are 
                                in effect (determined under 
                                section 120 thereof), is the 
                                chief executive officer of the 
                                applicable employer or the 
                                chief financial officer of the 
                                applicable employer, or an 
                                individual acting in either 
                                such capacity, or
                                  (II) who is described in 
                                clause (ii).
                          (ii) Highest compensated employees.--
                        An employee is described in this clause 
                        if the employee is 1 of the 3 highest 
                        compensated officers of the applicable 
                        employer for the taxable year (other 
                        than an individual described in clause 
                        (i)(I)), determined--
                                  (I) on the basis of the 
                                shareholder disclosure rules 
                                for compensation under the 
                                Securities Exchange Act of 1934 
                                (without regard to whether 
                                those rules apply to the 
                                employer), and
                                  (II) by only taking into 
                                account employees employed 
                                during the portion of the 
                                taxable year described in 
                                clause (i)(I).
                          (iii) Employee remains covered 
                        executive.--If an employee is a covered 
                        executive with respect to an applicable 
                        employer for any applicable taxable 
                        year, such employee shall be treated as 
                        a covered executive with respect to 
                        such employer for all subsequent 
                        applicable taxable years and for all 
                        subsequent taxable years in which 
                        deferred deduction executive 
                        remuneration with respect to services 
                        performed in all such applicable 
                        taxable years would (but for this 
                        paragraph) be deductible.
                  (E) Executive remuneration.--For purposes of 
                this paragraph, the term ``executive 
                remuneration'' means the applicable employee 
                remuneration of the covered executive, as 
                determined under paragraph (4) without regard 
                to subparagraphs (B), (C), and (D) thereof. 
                Such term shall not include any deferred 
                deduction executive remuneration with respect 
                to services performed in a prior applicable 
                taxable year.
                  (F) Deferred deduction executive 
                remuneration.--For purposes of this paragraph, 
                the term ``deferred deduction executive 
                remuneration'' means remuneration which would 
                be executive remuneration for services 
                performed in an applicable taxable year but for 
                the fact that the deduction under this chapter 
                (determined without regard to this paragraph) 
                for such remuneration is allowable in a 
                subsequent taxable year.
                  (G) Coordination.--Rules similar to the rules 
                of subparagraphs (F) and (G) of paragraph (4) 
                shall apply for purposes of this paragraph.
                  (H) Regulatory authority.--The Secretary may 
                prescribe such guidance, rules, or regulations 
                as are necessary to carry out the purposes of 
                this paragraph and the Emergency Economic 
                Stabilization Act of 2008, including the extent 
                to which this paragraph applies in the case of 
                any acquisition, merger, or reorganization of 
                an applicable employer.
          (6) Special rule for application to certain health 
        insurance providers.--
                  (A) In general.--No deduction shall be 
                allowed under this chapter--
                          (i) in the case of applicable 
                        individual remuneration which is for 
                        any disqualified taxable year beginning 
                        after December 31, 2012, and which is 
                        attributable to services performed by 
                        an applicable individual during such 
                        taxable year, to the extent that the 
                        amount of such remuneration exceeds 
                        $500,000, or
                          (ii) in the case of deferred 
                        deduction remuneration for any taxable 
                        year beginning after December 31, 2012, 
                        which is attributable to services 
                        performed by an applicable individual 
                        during any disqualified taxable year 
                        beginning after December 31, 2009, to 
                        the extent that the amount of such 
                        remuneration exceeds $500,000 reduced 
                        (but not below zero) by the sum of--
                                  (I) the applicable individual 
                                remuneration for such 
                                disqualified taxable year, plus
                                  (II) the portion of the 
                                deferred deduction remuneration 
                                for such services which was 
                                taken into account under this 
                                clause in a preceding taxable 
                                year (or which would have been 
                                taken into account under this 
                                clause in a preceding taxable 
                                year if this clause were 
                                applied by substituting 
                                `December 31, 2009' for 
                                `December 31, 2012' in the 
                                matter preceding subclause 
                                (I)).
                  (B) Disqualified taxable year.--For purposes 
                of this paragraph, the term ``disqualified 
                taxable year'' means, with respect to any 
                employer, any taxable year for which such 
                employer is a covered health insurance 
                provider.
                  (C) Covered health insurance provider.--For 
                purposes of this paragraph--
                          (i) In general.--The term ``covered 
                        health insurance provider'' means--
                                  (I) with respect to taxable 
                                years beginning after December 
                                31, 2009, and before January 1, 
                                2013, any employer which is a 
                                health insurance issuer (as 
                                defined in section 9832(b)(2)) 
                                and which receives premiums 
                                from providing health insurance 
                                coverage (as defined in section 
                                9832(b)(1)), and
                                  (II) with respect to taxable 
                                years beginning after December 
                                31, 2012, any employer which is 
                                a health insurance issuer (as 
                                defined in section 9832(b)(2)) 
                                and with respect to which not 
                                less than 25 percent of the 
                                gross premiums received from 
                                providing health insurance 
                                coverage (as defined in section 
                                9832(b)(1)) is from minimum 
                                essential coverage (as defined 
                                in section 5000A(f)).
                          (ii) Aggregation rules.--Two or more 
                        persons who are treated as a single 
                        employer under subsection (b), (c), 
                        (m), or (o) of section 414 shall be 
                        treated as a single employer, except 
                        that in applying section 1563(a) for 
                        purposes of any such subsection, 
                        paragraphs (2) and (3) thereof shall be 
                        disregarded.
                  (D) Applicable individual remuneration.--For 
                purposes of this paragraph, the term 
                ``applicable individual remuneration'' means, 
                with respect to any applicable individual for 
                any disqualified taxable year, the aggregate 
                amount allowable as a deduction under this 
                chapter for such taxable year (determined 
                without regard to this subsection) for 
                remuneration (as defined in paragraph (4) 
                without regard to subparagraphs (B), (C), and 
                (D) thereof) for services performed by such 
                individual (whether or not during the taxable 
                year). Such term shall not include any deferred 
                deduction remuneration with respect to services 
                performed during the disqualified taxable year.
                  (E) Deferred deduction remuneration.--For 
                purposes of this paragraph, the term ``deferred 
                deduction remuneration'' means remuneration 
                which would be applicable individual 
                remuneration for services performed in a 
                disqualified taxable year but for the fact that 
                the deduction under this chapter (determined 
                without regard to this paragraph) for such 
                remuneration is allowable in a subsequent 
                taxable year.
                  (F) Applicable individual.--For purposes of 
                this paragraph, the term ``applicable 
                individual'' means, with respect to any covered 
                health insurance provider for any disqualified 
                taxable year, any individual--
                          (i) who is an officer, director, or 
                        employee in such taxable year, or
                          (ii) who provides services for or on 
                        behalf of such covered health insurance 
                        provider during such taxable year.
                  (G) Coordination.--Rules similar to the rules 
                of subparagraphs (F) and (G) of paragraph (4) 
                shall apply for purposes of this paragraph.
                  (H) Regulatory authority.--The Secretary may 
                prescribe such guidance, rules, or regulations 
                as are necessary to carry out the purposes of 
                this paragraph.
                  (I) Termination.--This paragraph shall not 
                apply to taxable years beginning after December 
                31, 2017.
  (n) Special Rule for Certain Group Health Plans.--
          (1) In general.--No deduction shall be allowed under 
        this chapter to an employer for any amount paid or 
        incurred in connection with a group health plan if the 
        plan does not reimburse for inpatient hospital care 
        services provided in the State of New York--
                  (A) except as provided in subparagraphs (B) 
                and (C), at the same rate as licensed 
                commercial insurers are required to reimburse 
                hospitals for such services when such 
                reimbursement is not through such a plan,
                  (B) in the case of any reimbursement through 
                a health maintenance organization, at the same 
                rate as health maintenance organizations are 
                required to reimburse hospitals for such 
                services for individuals not covered by such a 
                plan (determined without regard to any 
                government-supported individuals exempt from 
                such rate), or
                  (C) in the case of any reimbursement through 
                any corporation organized under Article 43 of 
                the New York State Insurance Law, at the same 
                rate as any such corporation is required to 
                reimburse hospitals for such services for 
                individuals not covered by such a plan.
          (2) State law exception.--Paragraph (1) shall not 
        apply to any group health plan which is not required 
        under the laws of the State of New York (determined 
        without regard to this subsection or other provisions 
        of Federal law) to reimburse at the rates provided in 
        paragraph (1).
          (3) Group health plan.--For purposes of this 
        subsection, the term ``group health plan'' means a plan 
        of, or contributed to by, an employer or employee 
        organization (including a self-insured plan) to provide 
        health care (directly or otherwise) to any employee, 
        any former employee, the employer, or any other 
        individual associated or formerly associated with the 
        employer in a business relationship, or any member of 
        their family.
  (o) Treatment of Certain Expenses of Rural Mail Carriers.--
          (1) General rule.--In the case of any employee of the 
        United States Postal Service who performs services 
        involving the collection and delivery of mail on a 
        rural route and who receives qualified reimbursements 
        for the expenses incurred by such employee for the use 
        of a vehicle in performing such services--
                  (A) the amount allowable as a deduction under 
                this chapter for the use of a vehicle in 
                performing such services shall be equal to the 
                amount of such qualified reimbursements; and
                  (B) such qualified reimbursements shall be 
                treated as paid under a reimbursement or other 
                expense allowance arrangement for purposes of 
                section 62(a)(2)(A) (and section 62(c) shall 
                not apply to such qualified reimbursements).
          (2) Special rule where expenses exceed 
        reimbursements.--Notwithstanding paragraph (1)(A), if 
        the expenses incurred by an employee for the use of a 
        vehicle in performing services described in paragraph 
        (1) exceed the qualified reimbursements for such 
        expenses, such excess shall be taken into account in 
        computing the miscellaneous itemized deductions of the 
        employee under section 67.
          (3) Definition of qualified reimbursements.--For 
        purposes of this subsection, the term ``qualified 
        reimbursements'' means the amounts paid by the United 
        States Postal Service to employees as an equipment 
        maintenance allowance under the 1991 collective 
        bargaining agreement between the United States Postal 
        Service and the National Rural Letter Carriers' 
        Association. Amounts paid as an equipment maintenance 
        allowance by such Postal Service under later collective 
        bargaining agreements that supersede the 1991 agreement 
        shall be considered qualified reimbursements if such 
        amounts do not exceed the amounts that would have been 
        paid under the 1991 agreement, adjusted for changes in 
        the Consumer Price Index (as defined in section 
        1(f)(5)) since 1991.
  (p) Treatment of Expenses of Members of Reserve Component of 
Armed Forces of the United States.--For purposes of subsection 
(a)(2), in the case of an individual who performs services as a 
member of a reserve component of the Armed Forces of the United 
States at any time during the taxable year, such individual 
shall be deemed to be away from home in the pursuit of a trade 
or business for any period during which such individual is away 
from home in connection with such service.
  (q) Cross Reference.--
          (1) For special rule relating to expenses in 
        connection with subdividing real property for sale, see 
        section 1237.
          (2) For special rule relating to the treatment of 
        payments by a transferee of a franchise, trademark, or 
        trade name, see section 1253.
          (3) For special rules relating to--
                  (A) funded welfare benefit plans, see section 
                419, and
                  (B) deferred compensation and other deferred 
                benefits, see section 404.

           *       *       *       *       *       *       *


PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS

           *       *       *       *       *       *       *


SEC. 213. MEDICAL, DENTAL, ETC., EXPENSES.

  (a) Allowance of Deduction.--There shall be allowed as a 
deduction the expenses paid during the taxable year, not 
compensated for by insurance or otherwise, for medical care of 
the taxpayer, his spouse, or a dependent (as defined in section 
152, determined without regard to subsections (b)(1), (b)(2), 
and (d)(1)(B) thereof), to the extent that such expenses exceed 
[10 percent] 7.5 percent of adjusted gross income.
  (b) Limitation With Respect to Medicine and Drugs.--An amount 
paid during the taxable year for medicine or a drug shall be 
taken into account under subsection (a) only if such medicine 
or drug is a prescribed drug or is insulin.
  (c) Special Rule for Decedents.--
          (1) Treatment of expenses paid after death.--For 
        purposes of subsection (a), expenses for the medical 
        care of the taxpayer which are paid out of his estate 
        during the 1-year period beginning with the day after 
        the date of his death shall be treated as paid by the 
        taxpayer at the time incurred.
          (2) Limitation.--Paragraph (1) shall not apply if the 
        amount paid is allowable under section 2053 as a 
        deduction in computing the taxable estate of the 
        decedent, but this paragraph shall not apply if (within 
        the time and in the manner and form prescribed by the 
        Secretary) there is filed--
                  (A) a statement that such amount has not been 
                allowed as a deduction under section 2053, and
                  (B) a waiver of the right to have such amount 
                allowed at any time as a deduction under 
                section 2053.
  (d) Definitions.--For purposes of this section--
          (1) The term ``medical care'' means amounts paid--
                  (A) for the diagnosis, cure, mitigation, 
                treatment, or prevention of disease, or for the 
                purpose of affecting any structure or function 
                of the body,
                  (B) for transportation primarily for and 
                essential to medical care referred to in 
                subparagraph (A),
                  (C) for qualified long-term care services (as 
                defined in section 7702B(c)), or
                  (D) for insurance (including amounts paid as 
                premiums under part B of title XVIII of the 
                Social Security Act, relating to supplementary 
                medical insurance for the aged) covering 
                medical care referred to in subparagraphs (A) 
                and (B) or for any qualified long- term care 
                insurance contract (as defined in section 
                7702B(b)).
        In the case of a qualified long-term care insurance 
        contract (as defined in section 7702B(b)), only 
        eligible long-term care premiums (as defined in 
        paragraph (10)) shall be taken into account under 
        subparagraph (D).
          (2) Amounts paid for certain lodging away from home 
        treated as paid for medical care
          Amounts paid for lodging (not lavish or extravagant 
        under the circumstances) while away from home primarily 
        for and essential to medical care referred to in 
        paragraph (1)(A) shall be treated as amounts paid for 
        medical care if--
                  (A) the medical care referred to in paragraph 
                (1)(A) is provided by a physician in a licensed 
                hospital (or in a medical care facility which 
                is related to, or the equivalent of, a licensed 
                hospital), and
                  (B) there is no significant element of 
                personal pleasure, recreation, or vacation in 
                the travel away from home.
        The amount taken into account under the preceding 
        sentence shall not exceed $50 for each night for each 
        individual.
          (3) Prescribed drug
          The term ``prescribed drug'' means a drug or 
        biological which requires a prescription of a physician 
        for its use by an individual.
          (4) Physician
          The term ``physician'' has the meaning given to such 
        term by section 1861(r) of the Social Security Act (42 
        U.S.C. 1395x(r)).
          (5) Special rule in the case of child of divorced 
        parents, etc.
          Any child to whom section 152(e) applies shall be 
        treated as a dependent of both parents for purposes of 
        this section.
          (6) In the case of an insurance contract under which 
        amounts are payable for other than medical care 
        referred to in subparagraphs (A), (B), and (C) of 
        paragraph (1)--
                  (A) no amount shall be treated as paid for 
                insurance to which paragraph (1)(D) applies 
                unless the charge for such insurance is either 
                separately stated in the contract, or furnished 
                to the policyholder by the insurance company in 
                a separate statement,
                  (B) the amount taken into account as the 
                amount paid for such insurance shall not exceed 
                such charge, and
                  (C) no amount shall be treated as paid for 
                such insurance if the amount specified in the 
                contract (or furnished to the policyholder by 
                the insurance company in a separate statement) 
                as the charge for such insurance is 
                unreasonably large in relation to the total 
                charges under the contract.
          (7) Subject to the limitations of paragraph (6), 
        premiums paid during the taxable year by a taxpayer 
        before he attains the age of 65 for insurance covering 
        medical care (within the meaning of subparagraphs (A), 
        (B), and (C) of paragraph (1)) for the taxpayer, his 
        spouse, or a dependent after the taxpayer attains the 
        age of 65 shall be treated as expenses paid during the 
        taxable year for insurance which constitutes medical 
        care if premiums for such insurance are payable (on a 
        level payment basis) under the contract for a period of 
        10 years or more or until the year in which the 
        taxpayer attains the age of 65 (but in no case for a 
        period of less than 5 years).
          (8) The determination of whether an individual is 
        married at any time during the taxable year shall be 
        made in accordance with the provisions of section 
        6013(d) (relating to determination of status as husband 
        and wife).
          (9) Cosmetic surgery.--
                  (A) In general.--The term ``medical care'' 
                does not include cosmetic surgery or other 
                similar procedures, unless the surgery or 
                procedure is necessary to ameliorate a 
                deformity arising from, or directly related to, 
                a congenital abnormality, a personal injury 
                resulting from an accident or trauma, or 
                disfiguring disease.
                  (B) Cosmetic surgery defined.--For purposes 
                of this paragraph, the term ``cosmetic 
                surgery'' means any procedure which is directed 
                at improving the patient's appearance and does 
                not meaningfully promote the proper function of 
                the body or prevent or treat illness or 
                disease.
          (10) Eligible long-term care premiums.--
                  (A) In general.--For purposes of this 
                section, the term ``eligible long-term care 
                Premiums'' means the amount paid during a 
                taxable year for any qualified long-term care 
                insurance contract (as defined in section 
                7702B(b)) covering an individual, to the extent 
                such amount does not exceed the limitation 
                determined under the following table:


 
------------------------------------------------------------------------
 In the case of an individual with
an attained age before the close of           The limitation is:
        the taxable year of:
------------------------------------------------------------------------
40 or less                           $200
More than 40 but not more than 50    375
More than 50 but not more than 60    750
More than 60 but not more than 70    2,000
More than 70                         2,500
------------------------------------------------------------------------

                  (B) Indexing.--
                          (i) In general.--In the case of any 
                        taxable year beginning in a calendar 
                        year after 1997, each dollar amount 
                        contained in subparagraph (A) shall be 
                        increased by the medical care cost 
                        adjustment of such amount for such 
                        calendar year. If any increase 
                        determined under the preceding sentence 
                        is not a multiple of $10, such increase 
                        shall be rounded to the nearest 
                        multiple of $10.
                          (ii) Medical care cost adjustment.--
                        For purposes of clause (i), the medical 
                        care cost adjustment for any calendar 
                        year is the percentage (if any) by 
                        which--
                                  (I) the medical care 
                                component of the Consumer Price 
                                Index (as defined in section 
                                1(f)(5)) for August of the 
                                preceding calendar year, 
                                exceeds
                                  (II) such component for 
                                August of 1996.
                        The Secretary shall, in consultation 
                        with the Secretary of Health and Human 
                        Services, prescribe an adjustment which 
                        the Secretary determines is more 
                        appropriate for purposes of this 
                        paragraph than the adjustment described 
                        in the preceding sentence, and the 
                        adjustment so prescribed shall apply in 
                        lieu of the adjustment described in the 
                        preceding sentence.
          (11) Certain payments to relatives treated as not 
        paid for medical care --An amount paid for a qualified 
        long-term care service (as defined in section 7702B(c)) 
        provided to an individual shall be treated as not paid 
        for medical care if such service is provided--
                  (A) by the spouse of the individual or by a 
                relative (directly or through a partnership, 
                corporation, or other entity) unless the 
                service is provided by a licensed professional 
                with respect to such service, or
                  (B) by a corporation or partnership which is 
                related (within the meaning of section 267(b) 
                or 707(b)) to the individual.
        For purposes of this paragraph, the term ``relative'' 
        means an individual bearing a relationship to the 
        individual which is described in any of subparagraphs 
        (A) through (G) of section 152(d)(2). This paragraph 
        shall not apply for purposes of section 105(b) with 
        respect to reimbursements through insurance.
  (e) Exclusion of Amounts Allowed for Care of Certain 
Dependents.--Any expense allowed as a credit under section 21 
shall not be treated as an expense paid for medical care.
  (f) Special Rule for 2013, 2014, 2015, [and 2016] 2016, and 
2017.--In the case of any taxable year beginning after December 
31, 2012, and ending before January 1, [2017] 2018, subsection 
(a) shall be applied with respect to a taxpayer by substituting 
``7.5 percent'' for ``10 percent'' if such taxpayer or such 
taxpayer's spouse has attained age 65 before the close of such 
taxable year.

           *       *       *       *       *       *       *


SEC. 220. ARCHER MSAS.

  (a) Deduction Allowed.--In the case of an individual who is 
an eligible individual for any month during the taxable year, 
there shall be allowed as a deduction for the taxable year an 
amount equal to the aggregate amount paid in cash during such 
taxable year by such individual to an Archer MSA of such 
individual.
  (b) Limitations.--
          (1) In general.--The amount allowable as a deduction 
        under subsection (a) to an individual for the taxable 
        year shall not exceed the sum of the monthly 
        limitations for months during such taxable year that 
        the individual is an eligible individual.
          (2) Monthly limitation.--The monthly limitation for 
        any month is the amount equal to 1/12 of--
                  (A) in the case of an individual who has 
                self-only coverage under the high deductible 
                health plan as of the first day of such month, 
                65 percent of the annual deductible under such 
                coverage, and
                  (B) in the case of an individual who has 
                family coverage under the high deductible 
                health plan as of the first day of such month, 
                75 percent of the annual deductible under such 
                coverage.
          (3) Special rule for married individuals.--In the 
        case of individuals who are married to each other, if 
        either spouse has family coverage--
                  (A) both spouses shall be treated as having 
                only such family coverage (and if such spouses 
                each have family coverage under different 
                plans, as having the family coverage with the 
                lowest annual deductible), and
                  (B) the limitation under paragraph (1) (after 
                the application of subparagraph (A) of this 
                paragraph) shall be divided equally between 
                them unless they agree on a different division.
          (4) Deduction not to exceed compensation.--
                  (A) Employees.--The deduction allowed under 
                subsection (a) for contributions as an eligible 
                individual described in subclause (I) of 
                subsection (c)(1)(A)(iii) shall not exceed such 
                individual's wages, salaries, tips, and other 
                employee compensation which are attributable to 
                such individual's employment by the employer 
                referred to in such subclause.
                  (B) Self-employed individuals.--The deduction 
                allowed under subsection (a) for contributions 
                as an eligible individual described in 
                subclause (II) of subsection (c)(1)(A)(iii) 
                shall not exceed such individual's earned 
                income (as defined in section 401(c)(1)) 
                derived by the taxpayer from the trade or 
                business with respect to which the high 
                deductible health plan is established.
                  (C) Community property laws not to apply.--
                The limitations under this paragraph shall be 
                determined without regard to community property 
                laws.
          (5) Coordination with exclusion for employer 
        contributions.--No deduction shall be allowed under 
        this section for any amount paid for any taxable year 
        to an Archer MSA of an individual if--
                  (A) any amount is contributed to any Archer 
                MSA of such individual for such year which is 
                excludable from gross income under section 
                106(b), or
                  (B) if such individual's spouse is covered 
                under the high deductible health plan covering 
                such individual, any amount is contributed for 
                such year to any Archer MSA of such spouse 
                which is so excludable.
          (6) Denial of deduction to dependents.--No deduction 
        shall be allowed under this section to any individual 
        with respect to whom a deduction under section 151 is 
        allowable to another taxpayer for a taxable year 
        beginning in the calendar year in which such 
        individual's taxable year begins.
          (7) Medicare eligible individuals.--The limitation 
        under this subsection for any month with respect to an 
        individual shall be zero for the first month such 
        individual is entitled to benefits under title XVIII of 
        the Social Security Act and for each month thereafter.
  (c) Definitions.--For purposes of this section--
          (1) Eligible individual.--
                  (A) In general.--The term ``eligible 
                individual'' means, with respect to any month, 
                any individual if--
                          (i) such individual is covered under 
                        a high deductible health plan as of the 
                        1st day of such month,
                          (ii) such individual is not, while 
                        covered under a high deductible health 
                        plan, covered under any health plan--
                                  (I) which is not a high 
                                deductible health plan, and
                                  (II) which provides coverage 
                                for any benefit which is 
                                covered under the high 
                                deductible health plan, and
                          (iii)
                                  (I) the high deductible 
                                health plan covering such 
                                individual is established and 
                                maintained by the employer of 
                                such individual or of the 
                                spouse of such individual and 
                                such employer is a small 
                                employer, or
                                  (II) such individual is an 
                                employee (within the meaning of 
                                section 401(c)(1)) or the 
                                spouse of such an employee and 
                                the high deductible health plan 
                                covering such individual is not 
                                established or maintained by 
                                any employer of such individual 
                                or spouse.
                  (B) Certain coverage disregarded.--
                Subparagraph (A)(ii) shall be applied without 
                regard to--
                          (i) coverage for any benefit provided 
                        by permitted insurance, and
                          (ii) coverage (whether through 
                        insurance or otherwise) for accidents, 
                        disability, dental care, vision care, 
                        or long-term care.
                  (C) Continued eligibility of employee and 
                spouse establishing Archer MSAs.--If, while an 
                employer is a small employer--
                          (i) any amount is contributed to an 
                        Archer MSA of an individual who is an 
                        employee of such employer or the spouse 
                        of such an employee, and
                          (ii) such amount is excludable from 
                        gross income under section 106(b) or 
                        allowable as a deduction under this 
                        section,
                such individual shall not cease to meet the 
                requirement of subparagraph (A)(iii)(I) by 
                reason of such employer ceasing to be a small 
                employer so long as such employee continues to 
                be an employee of such employer.
                  (D) Limitations on eligibility.--For 
                limitations on number of taxpayers who are 
                eligible to have Archer MSAs, see subsection 
                (i).
          (2) High deductible health plan.--
                  (A) In general.--The term ``high deductible 
                health plan'' means a health plan--
                          (i) in the case of self-only 
                        coverage, which has an annual 
                        deductible which is not less than 
                        $1,500 and not more than $2,250,
                          (ii) in the case of family coverage, 
                        which has an annual deductible which is 
                        not less than $3,000 and not more than 
                        $4,500, and
                          (iii) the annual out-of-pocket 
                        expenses required to be paid under the 
                        plan (other than for premiums) for 
                        covered benefits does not exceed--
                                  (I) $3,000 for self-only 
                                coverage, and
                                  (II) $5,500 for family 
                                coverage.
                  (B) Special rules.--
                          (i) Exclusion of certain plans.--Such 
                        term does not include a health plan if 
                        substantially all of its coverage is 
                        coverage described in paragraph (1)(B).
                          (ii) Safe harbor for absence of 
                        preventive care deductible.--A plan 
                        shall not fail to be treated as a high 
                        deductible health plan by reason of 
                        failing to have a deductible for 
                        preventive care if the absence of a 
                        deductible for such care is required by 
                        State law.
          (3) Permitted insurance.--The term ``permitted 
        insurance'' means--
                  (A) insurance if substantially all of the 
                coverage provided under such insurance relates 
                to--
                          (i) liabilities incurred under 
                        workers' compensation laws,
                          (ii) tort liabilities,
                          (iii) liabilities relating to 
                        ownership or use of property, or
                          (iv) such other similar liabilities 
                        as the Secretary may specify by 
                        regulations,
                  (B) insurance for a specified disease or 
                illness, and
                  (C) insurance paying a fixed amount per day 
                (or other period) of hospitalization.
          (4) Small employer.--
                  (A) In general.--The term ``small employer'' 
                means, with respect to any calendar year, any 
                employer if such employer employed an average 
                of 50 or fewer employees on business days 
                during either of the 2 preceding calendar 
                years. For purposes of the preceding sentence, 
                a preceding calendar year may be taken into 
                account only if the employer was in existence 
                throughout such year.
                  (B) Employers not in existence in preceding 
                year.--In the case of an employer which was not 
                in existence throughout the 1st preceding 
                calendar year, the determination under 
                subparagraph (A) shall be based on the average 
                number of employees that it is reasonably 
                expected such employer will employ on business 
                days in the current calendar year.
                  (C) Certain growing employers retain 
                treatment as small employer.--The term ``small 
                employer'' includes, with respect to any 
                calendar year, any employer if--
                          (i) such employer met the requirement 
                        of subparagraph (A) (determined without 
                        regard to subparagraph (B)) for any 
                        preceding calendar year after 1996,
                          (ii) any amount was contributed to 
                        the Archer MSA of any employee of such 
                        employer with respect to coverage of 
                        such employee under a high deductible 
                        health plan of such employer during 
                        such preceding calendar year and such 
                        amount was excludable from gross income 
                        under section 106(b) or allowable as a 
                        deduction under this section, and
                          (iii) such employer employed an 
                        average of 200 or fewer employees on 
                        business days during each preceding 
                        calendar year after 1996.
                  (D) Special rules.--
                          (i) Controlled groups.--For purposes 
                        of this paragraph, all persons treated 
                        as a single employer under subsection 
                        (b), (c), (m), or (o) of section 414 
                        shall be treated as 1 employer.
                          (ii) Predecessors.--Any reference in 
                        this paragraph to an employer shall 
                        include a reference to any predecessor 
                        of such employer.
          (5) Family coverage.--The term ``family coverage'' 
        means any coverage other than self-only coverage.
  (d) Archer Msa.--For purposes of this section--
          (1) Archer MSA.--The term ``Archer MSA'' means a 
        trust created or organized in the United States as a 
        medical savings account exclusively for the purpose of 
        paying the qualified medical expenses of the account 
        holder, but only if the written governing instrument 
        creating the trust meets the following requirements:
                  (A) Except in the case of a rollover 
                contribution described in subsection (f)(5), no 
                contribution will be accepted--
                          (i) unless it is in cash, or
                          (ii) to the extent such contribution, 
                        when added to previous contributions to 
                        the trust for the calendar year, 
                        exceeds 75 percent of the highest 
                        annual limit deductible permitted under 
                        subsection (c)(2)(A)(ii) for such 
                        calendar year.
                  (B) The trustee is a bank (as defined in 
                section 408(n)), an insurance company (as 
                defined in section 816), or another person who 
                demonstrates to the satisfaction of the 
                Secretary that the manner in which such person 
                will administer the trust will be consistent 
                with the requirements of this section.
                  (C) No part of the trust assets will be 
                invested in life insurance contracts.
                  (D) The assets of the trust will not be 
                commingled with other property except in a 
                common trust fund or common investment fund.
                  (E) The interest of an individual in the 
                balance in his account is nonforfeitable.
          (2) Qualified medical expenses.--
                  (A) In general.--The term ``qualified medical 
                expenses'' means, with respect to an account 
                holder, amounts paid by such holder for medical 
                care (as defined in section 213(d)) for such 
                individual, the spouse of such individual, and 
                any dependent (as defined in section 152, 
                determined without regard to subsections 
                (b)(1), (b)(2), and (d)(1)(B) thereof) of such 
                individual, but only to the extent such amounts 
                are not compensated for by insurance or 
                otherwise. [Such term shall include an amount 
                paid for medicine or a drug only if such 
                medicine or drug is a prescribed drug 
                (determined without regard to whether such drug 
                is available without a prescription) or is 
                insulin.]
                  (B) Health insurance may not be purchased 
                from account.--
                          (i) In general.--Subparagraph (A) 
                        shall not apply to any payment for 
                        insurance.
                          (ii) Exceptions.--Clause (i) shall 
                        not apply to any expense for coverage 
                        under--
                                  (I) a health plan during any 
                                period of continuation coverage 
                                required under any Federal law,
                                  (II) a qualified long-term 
                                care insurance contract (as 
                                defined in section 7702B(b)), 
                                or
                                  (III) a health plan during a 
                                period in which the individual 
                                is receiving unemployment 
                                compensation under any Federal 
                                or State law.
                  (C) Medical expenses of individuals who are 
                not eligible individuals.--Subparagraph (A) 
                shall apply to an amount paid by an account 
                holder for medical care of an individual who is 
                not described in clauses (i) and (ii) of 
                subsection (c)(1)(A)for the month in which the 
                expense for such care is incurred only if no 
                amount is contributed (other than a rollover 
                contribution) to any Archer MSA of such account 
                holder for the taxable year which includes such 
                month. This subparagraph shall not apply to any 
                expense for coverage described in subclause (I) 
                or (III) of subparagraph (B)(ii).
          (3) Account holder.--The term ``account holder'' 
        means the individual on whose behalf the Archer MSA was 
        established.
          (4) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this 
        section:
                  (A) Section 219(d)(2) (relating to no 
                deduction for rollovers).
                  (B) Section 219(f)(3) (relating to time when 
                contributions deemed made).
                  (C) Except as provided in section 106(b), 
                section 219(f)(5) (relating to employer 
                payments).
                  (D) Section 408(g) (relating to community 
                property laws).
                  (E) Section 408(h) (relating to custodial 
                accounts).
  (e) Tax Treatment of Accounts.--
          (1) In general.--An Archer MSA is exempt from 
        taxation under this subtitle unless such account has 
        ceased to be an Archer MSA. Notwithstanding the 
        preceding sentence, any such account is subject to the 
        taxes imposed by section 511 (relating to imposition of 
        tax on unrelated business income of charitable, etc. 
        organizations).
          (2) Account terminations.--Rules similar to the rules 
        of paragraphs (2) and (4) of section 408(e) shall apply 
        to Archer MSAs, and any amount treated as distributed 
        under such rules shall be treated as not used to pay 
        qualified medical expenses.
  (f) Tax Treatment of Distributions.--
          (1) Amounts used for qualified medical expenses.--Any 
        amount paid or distributed out of an Archer MSA which 
        is used exclusively to pay qualified medical expenses 
        of any account holder shall not be includible in gross 
        income.
          (2) Inclusion of amounts not used for qualified 
        medical expenses.--Any amount paid or distributed out 
        of an Archer MSA which is not used exclusively to pay 
        the qualified medical expenses of the account holder 
        shall be included in the gross income of such holder.
          (3) Excess contributions returned before due date of 
        return.--
                  (A) In general.--If any excess contribution 
                is contributed for a taxable year to any Archer 
                MSA of an individual, paragraph (2) shall not 
                apply to distributions from the Archer MSAs of 
                such individual (to the extent such 
                distributions do not exceed the aggregate 
                excess contributions to all such accounts of 
                such individual for such year) if--
                          (i) such distribution is received by 
                        the individual on or before the last 
                        day prescribed by law (including 
                        extensions of time) for filing such 
                        individual's return for such taxable 
                        year, and
                          (ii) such distribution is accompanied 
                        by the amount of net income 
                        attributable to such excess 
                        contribution.
                Any net income described in clause (ii) shall 
                be included in the gross income of the 
                individual for the taxable year in which it is 
                received.
                  (B) Excess contribution.--For purposes of 
                subparagraph (A), the term ``excess 
                contribution'' means any contribution (other 
                than a rollover contribution) which is neither 
                excludable from gross income under section 
                106(b) nor deductible under this section.
          (4) Additional tax on distributions not used for 
        qualified medical expenses.--
                  (A) In general.--The tax imposed by this 
                chapter on the account holder for any taxable 
                year in which there is a payment or 
                distribution from an Archer MSA of such holder 
                which is includible in gross income under 
                paragraph (2) shall be increased by [20 
                percent] 15 percent of the amount which is so 
                includible.
                  (B) Exception for disability or death.--
                Subparagraph (A) shall not apply if the payment 
                or distribution is made after the account 
                holder becomes disabled within the meaning of 
                section 72(m)(7) or dies.
                  (C) Exception for distributions after 
                medicare eligibility.--Subparagraph (A) shall 
                not apply to any payment or distribution after 
                the date on which the account holder attains 
                the age specified in section 1811 of the Social 
                Security Act.
          (5) Rollover contribution.--An amount is described in 
        this paragraph as a rollover contribution if it meets 
        the requirements of subparagraphs (A) and (B).
                  (A) In general.--Paragraph (2) shall not 
                apply to any amount paid or distributed from an 
                Archer MSA to the account holder to the extent 
                the amount received is paid into an Archer MSA 
                or a health savings account (as defined in 
                section 223(d)) for the benefit of such holder 
                not later than the 60th day after the day on 
                which the holder receives the payment or 
                distribution.
                  (B) Limitation.--This paragraph shall not 
                apply to any amount described in subparagraph 
                (A) received by an individual from an Archer 
                MSA if, at any time during the 1-year period 
                ending on the day of such receipt, such 
                individual received any other amount described 
                in subparagraph (A) from an Archer MSA which 
                was not includible in the individual's gross 
                income because of the application of this 
                paragraph.
          (6) Coordination with medical expense deduction.--For 
        purposes of determining the amount of the deduction 
        under section 213, any payment or distribution out of 
        an Archer MSA for qualified medical expenses shall not 
        be treated as an expense paid for medical care.
          (7) Transfer of account incident to divorce.--The 
        transfer of an individual's interest in an Archer MSA 
        to an individual's spouse or former spouse under a 
        divorce or separation instrument described in 
        subparagraph (A) of section 71(b)(2) shall not be 
        considered a taxable transfer made by such individual 
        notwithstanding any other provision of this subtitle, 
        and such interest shall, after such transfer, be 
        treated as an Archer MSA with respect to which such 
        spouse is the account holder.
          (8) Treatment after death of account holder.--
                  (A) Treatment if designated beneficiary is 
                spouse.--If the account holder's surviving 
                spouse acquires such holder's interest in an 
                Archer MSA by reason of being the designated 
                beneficiary of such account at the death of the 
                account holder, such Archer MSA shall be 
                treated as if the spouse were the account 
                holder.
                  (B) Other cases.--
                          (i) In general.--If, by reason of the 
                        death of the account holder, any person 
                        acquires the account holder's interest 
                        in an Archer MSA in a case to which 
                        subparagraph (A) does not apply--
                                  (I) such account shall cease 
                                to be an Archer MSA as of the 
                                date of death, and
                                  (II) an amount equal to the 
                                fair market value of the assets 
                                in such account on such date 
                                shall be includible if such 
                                person is not the estate of 
                                such holder, in such person's 
                                gross income for the taxable 
                                year which includes such date, 
                                or if such person is the estate 
                                of such holder, in such 
                                holder's gross income for the 
                                last taxable year of such 
                                holder.
                          (ii) Special rules.--
                                  (I) Reduction of inclusion 
                                for pre-death expenses.--The 
                                amount includible in gross 
                                income under clause (i) by any 
                                person (other than the estate) 
                                shall be reduced by the amount 
                                of qualified medical expenses 
                                which were incurred by the 
                                decedent before the date of the 
                                decedent's death and paid by 
                                such person within 1 year after 
                                such date.
                                  (II) Deduction for estate 
                                taxes.--An appropriate 
                                deduction shall be allowed 
                                under section 691(c) to any 
                                person (other than the decedent 
                                or the decedent's spouse) with 
                                respect to amounts included in 
                                gross income under clause (i) 
                                by such person.
  (g) Cost-Of-Living Adjustment.--In the case of any taxable 
year beginning in a calendar year after 1998, each dollar 
amount in subsection (c)(2) shall be increased by an amount 
equal to--
          (1) such dollar amount, multiplied by
          (2) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which such 
        taxable year begins by substituting ``calendar year 
        1997'' for ``calendar year 1992'' in subparagraph (B) 
        thereof.
If any increase under the preceding sentence is not a multiple 
of $50, such increase shall be rounded to the nearest multiple 
of $50.
  (h) Reports.--The Secretary may require the trustee of an 
Archer MSA to make such reports regarding such account to the 
Secretary and to the account holder with respect to 
contributions, distributions, and such other matters as the 
Secretary determines appropriate. The reports required by this 
subsection shall be filed at such time and in such manner and 
furnished to such individuals at such time and in such manner 
as may be required by the Secretary.
  (i) Limitation on Number of Taxpayers Having Archer Msas.--
          (1) In general.--Except as provided in paragraph (5), 
        no individual shall be treated as an eligible 
        individual for any taxable year beginning after the 
        cut-off year unless--
                  (A) such individual was an active MSA 
                participant for any taxable year ending on or 
                before the close of the cut-off year, or
                  (B) such individual first became an active 
                MSA participant for a taxable year ending after 
                the cut-off year by reason of coverage under a 
                high deductible health plan of an MSA-
                participating employer.
          (2) Cut-off year.--For purposes of paragraph (1), the 
        term ``cut-off year'' means the earlier of--
                  (A) calendar year 2007, or
                  (B) the first calendar year before 2007 for 
                which the Secretary determines under subsection 
                (j) that the numerical limitation for such year 
                has been exceeded.
          (3) Active MSA participant.--For purposes of this 
        subsection--
                  (A) In general.--The term ``active MSA 
                participant'' means, with respect to any 
                taxable year, any individual who is the account 
                holder of any Archer MSA into which any 
                contribution was made which was excludable from 
                gross income under section 106(b), or allowable 
                as a deduction under this section, for such 
                taxable year.
                  (B) Special rule for cut-off years before 
                2007.--In the case of a cut-off year before 
                2007--
                          (i) an individual shall not be 
                        treated as an eligible individual for 
                        any month of such year or an active MSA 
                        participant under paragraph (1)(A) 
                        unless such individual is, on or before 
                        the cut-off date, covered under a high 
                        deductible health plan, and
                          (ii) an employer shall not be treated 
                        as an MSA-participating employer unless 
                        the employer, on or before the cut-off 
                        date, offered coverage under a high 
                        deductible health plan to any employee.
                  (C) Cut-off date.--For purposes of 
                subparagraph (B)--
                          (i) In general.--Except as otherwise 
                        provided in this subparagraph, the cut-
                        off date is October 1 of the cut-off 
                        year.
                          (ii) Employees with enrollment 
                        periods after October 1.--In the case 
                        of an individual described in subclause 
                        (I) of subsection (c)(1)(A)(iii), if 
                        the regularly scheduled enrollment 
                        period for health plans of the 
                        individual's employer occurs during the 
                        last 3 months of the cut-off year, the 
                        cut-off date is December 31 of the cut-
                        off year.
                          (iii) Self-employed individuals.--In 
                        the case of an individual described in 
                        subclause (II) of subsection 
                        (c)(1)(A)(iii), the cut-off date is 
                        November 1 of the cut-off year.
                          (iv) Special rules for 1997.--If 1997 
                        is a cut-off year by reason of 
                        subsection (j)(1)(A)--
                                  (I) each of the cut-off dates 
                                under clauses (i) and (iii) 
                                shall be 1 month earlier than 
                                the date determined without 
                                regard to this clause, and
                                  (II) clause (ii) shall be 
                                applied by substituting ``4 
                                months'' for ``3 months''.
          (4) MSA-participating employer.--For purposes of this 
        subsection, the term ``MSA-participating employer'' 
        means any small employer if--
                  (A) such employer made any contribution to 
                the Archer MSA of any employee during the cut-
                off year or any preceding calendar year which 
                was excludable from gross income under section 
                106(b), or
                  (B) at least 20 percent of the employees of 
                such employer who are eligible individuals for 
                any month of the cut-off year by reason of 
                coverage under a high deductible health plan of 
                such employer each made a contribution of at 
                least $100 to their Archer MSAs for any taxable 
                year ending with or within the cut-off year 
                which was allowable as a deduction under this 
                section.
          (5) Additional eligibility after cut-off year.--If 
        the Secretary determines under subsection (j)(2)(A) 
        that the numerical limit for the calendar year 
        following a cut-off year described in paragraph (2)(B) 
        has not been exceeded--
                  (A) this subsection shall not apply to any 
                otherwise eligible individual who is covered 
                under a high deductible health plan during the 
                first 6 months of the second calendar year 
                following the cut-off year (and such individual 
                shall be treated as an active MSA participant 
                for purposes of this subsection if a 
                contribution is made to any Archer MSA with 
                respect to such coverage), and
                  (B) any employer who offers coverage under a 
                high deductible health plan to any employee 
                during such 6-month period shall be treated as 
                an MSA-participating employer for purposes of 
                this subsection if the requirements of 
                paragraph (4) are met with respect to such 
                coverage.
        For purposes of this paragraph, subsection (j)(2)(A) 
        shall be applied for 1998 by substituting ``750,000'' 
        for ``600,000''.
  (j) Determination of Whether Numerical Limits Are Exceeded.--
          (1) Determination of whether limit exceeded for 
        1997.--The numerical limitation for 1997 is exceeded 
        if, based on the reports required under paragraph (4), 
        the number of Archer MSAs established as of--
                  (A) April 30, 1997, exceeds 375,000, or
                  (B) June 30, 1997, exceeds 525,000.
          (2) Determination of whether limit exceeded for 1998, 
        1999, 2001, 2002, 2004, 2005, or 2006.--
                  (A) In general.--The numerical limitation for 
                1998, 1999, 2001, 2002, 2004, 2005, or 2006 is 
                exceeded if the sum of--
                          (i) the number of MSA returns filed 
                        on or before April 15 of such calendar 
                        year for taxable years ending with or 
                        within the preceding calendar year, 
                        plus
                          (ii) the Secretary's estimate 
                        (determined on the basis of the returns 
                        described in clause (i)) of the number 
                        of MSA returns for such taxable years 
                        which will be filed after such date,
                exceeds 750,000 (600,000 in the case of 1998). 
                For purposes of the preceding sentence, the 
                term ``MSA return'' means any return on which 
                any exclusion is claimed under section 106(b) 
                or any deduction is claimed under this section.
                  (B) Alternative computation of limitation.--
                The numerical limitation for 1998, 1999, 2001, 
                2002, 2004, 2005, or 2006 is also exceeded if 
                the sum of--
                          (i) 90 percent of the sum determined 
                        under subparagraph (A) for such 
                        calendar year, plus
                          (ii) the product of 2.5 and the 
                        number of Archer MSAs established 
                        during the portion of such year 
                        preceding July 1 (based on the reports 
                        required under paragraph (4)) for 
                        taxable years beginning in such year,
                exceeds 750,000.
                  (C) No limitation for 2000 or 2003.--The 
                numerical limitation shall not apply for 2000 
                or 2003.
          (3) Previously uninsured individuals not included in 
        determination.--
                  (A) In general.--The determination of whether 
                any calendar year is a cut-off year shall be 
                made by not counting the Archer MSA of any 
                previously uninsured individual.
                  (B) Previously uninsured individual.--For 
                purposes of this subsection, the term 
                ``previously uninsured individual'' means, with 
                respect to any Archer MSA, any individual who 
                had no health plan coverage (other than 
                coverage referred to in subsection (c)(1)(B)) 
                at any time during the 6-month period before 
                the date such individual's coverage under the 
                high deductible health plan commences.
          (4) Reporting by MSA trustees.--
                  (A) In general.--Not later than August 1 of 
                1997, 1998, 1999, 2001, 2002, 2004, 2005, and 
                2006, each person who is the trustee of an 
                Archer MSA established before July 1 of such 
                calendar year shall make a report to the 
                Secretary (in such form and manner as the 
                Secretary shall specify) which specifies--
                          (i) the number of Archer MSAs 
                        established before such July 1 (for 
                        taxable years beginning in such 
                        calendar year) of which such person is 
                        the trustee,
                          (ii) the name and TIN of the account 
                        holder of each such account, and
                          (iii) the number of such accounts 
                        which are accounts of previously 
                        uninsured individuals.
                  (B) Additional report for 1997.--Not later 
                than June 1, 1997, each person who is the 
                trustee of an Archer MSA established before May 
                1, 1997, shall make an additional report 
                described in subparagraph (A) but only with 
                respect to accounts established before May 1, 
                1997.
                  (C) Penalty for failure to file report.--The 
                penalty provided in section 6693(a) shall apply 
                to any report required by this paragraph, 
                except that--
                          (i) such section shall be applied by 
                        substituting ``$25'' for ``$50'', and
                          (ii) the maximum penalty imposed on 
                        any trustee shall not exceed $5,000.
                  (D) Aggregation of accounts.--To the extent 
                practicable, in determining the number of 
                Archer MSAs on the basis of the reports under 
                this paragraph, all Archer MSAs of an 
                individual shall be treated as 1 account and 
                all accounts of individuals who are married to 
                each other shall be treated as 1 account.
          (5) Date of making determinations.--Any determination 
        under this subsection that a calendar year is a cut-off 
        year shall be made by the Secretary and shall be 
        published not later than October 1 of such year.

           *       *       *       *       *       *       *


SEC. 223. HEALTH SAVINGS ACCOUNTS.

  (a) Deduction Allowed.--In the case of an individual who is 
an eligible individual for any month during the taxable year, 
there shall be allowed as a deduction for the taxable year an 
amount equal to the aggregate amount paid in cash during such 
taxable year by or on behalf of such individual to a health 
savings account of such individual.
  (b) Limitations.--
          (1) In general.--The amount allowable as a deduction 
        under subsection (a) to an individual for the taxable 
        year shall not exceed the sum of the monthly 
        limitations for months during such taxable year that 
        the individual is an eligible individual.
          (2) Monthly limitation.--The monthly limitation for 
        any month is \1/12\ of--
                  (A) in the case of an eligible individual who 
                has self- only coverage under a high deductible 
                health plan as of the first day of such month, 
                [$2,250] the amount in effect under subsection 
                (c)(2)(A)(ii)(I).
                  (B) in the case of an eligible individual who 
                has family coverage under a high deductible 
                health plan as of the first day of such month, 
                [$4,500] the amount in effect under subsection 
                (c)(2)(A)(ii)(II).
          (3) Additional contributions for individuals 55 or 
        older.--
                  (A) In general.--In the case of an individual 
                who has attained age 55 before the close of the 
                taxable year, the applicable limitation under 
                subparagraphs (A) and (B) of paragraph (2) 
                shall be increased by the additional 
                contribution amount.
                  (B) Additional contribution amount.--For 
                purposes of this section, the additional 
                contribution amount is the amount determined in 
                accordance with the following table:


 
------------------------------------------------------------------------
                                     The additional contribution amount
  For taxable years beginning in:                    is:
------------------------------------------------------------------------
2004                                $500
2005                                $600
2006                                $700
2007                                $800
2008                                $900
2009 and thereafter                 $1,000.
------------------------------------------------------------------------

          (4) Coordination with other contributions.--The 
        limitation which would (but for this paragraph) apply 
        under this subsection to an individual for any taxable 
        year shall be reduced (but not below zero) by the sum 
        of--
                  (A) the aggregate amount paid for such 
                taxable year to Archer MSAs of such individual,
                  (B) the aggregate amount contributed to 
                health savings accounts of such individual 
                which is excludable from the taxpayer's gross 
                income for such taxable year under section 
                106(d) (and such amount shall not be allowed as 
                a deduction under subsection (a)), and
                  (C) the aggregate amount contributed to 
                health savings accounts of such individual for 
                such taxable year under section 408(d)(9) (and 
                such amount shall not be allowed as a deduction 
                under subsection (a)).
        Subparagraph (A) shall not apply with respect to any 
        individual to whom paragraph (5) applies.
          [(5) Special rule for married individuals.--In the 
        case of individuals who are married to each other, if 
        either spouse has family coverage--
                  [(A) both spouses shall be treated as having 
                only such family coverage (and if such spouses 
                each have family coverage under different 
                plans, as having the family coverage with the 
                lowest annual deductible), and
                  [(B) the limitation under paragraph (1) 
                (after the application of subparagraph (A) and 
                without regard to any additional contribution 
                amount under paragraph (3))--
                          [(i) shall be reduced by the 
                        aggregate amount paid to Archer MSAs of 
                        such spouses for the taxable year, and
                          [(ii) after such reduction, shall be 
                        divided equally between them unless 
                        they agree on a different division.]
          (5) Special rule for married individuals with family 
        coverage.--
                  (A) In general.--In the case of individuals 
                who are married to each other, if both spouses 
                are eligible individuals and either spouse has 
                family coverage under a high deductible health 
                plan as of the first day of any month--
                          (i) the limitation under paragraph 
                        (1) shall be applied by not taking into 
                        account any other high deductible 
                        health plan coverage of either spouse 
                        (and if such spouses both have family 
                        coverage under separate high deductible 
                        health plans, only one such coverage 
                        shall be taken into account),
                          (ii) such limitation (after 
                        application of clause (i)) shall be 
                        reduced by the aggregate amount paid to 
                        Archer MSAs of such spouses for the 
                        taxable year, and
                          (iii) such limitation (after 
                        application of clauses (i) and (ii)) 
                        shall be divided equally between such 
                        spouses unless they agree on a 
                        different division.
                  (B) Treatment of additional contribution 
                amounts.--If both spouses referred to in 
                subparagraph (A) have attained age 55 before 
                the close of the taxable year, the limitation 
                referred to in subparagraph (A)(iii) which is 
                subject to division between the spouses shall 
                include the additional contribution amounts 
                determined under paragraph (3) for both 
                spouses. In any other case, any additional 
                contribution amount determined under paragraph 
                (3) shall not be taken into account under 
                subparagraph (A)(iii) and shall not be subject 
                to division between the spouses.
          (6) Denial of deduction to dependents.--No deduction 
        shall be allowed under this section to any individual 
        with respect to whom a deduction under section 151 is 
        allowable to another taxpayer for a taxable year 
        beginning in the calendar year in which such 
        individual's taxable year begins.
          (7) Medicare eligible individuals.--The limitation 
        under this subsection for any month with respect to an 
        individual shall be zero for the first month such 
        individual is entitled to benefits under title XVIII of 
        the Social Security Act and for each month thereafter.
          (8) Increase in limit for individuals becoming 
        eligible individuals after the beginning of the year.--
                  (A) In general.--For purposes of computing 
                the limitation under paragraph (1) for any 
                taxable year, an individual who is an eligible 
                individual during the last month of such 
                taxable year shall be treated--
                          (i) as having been an eligible 
                        individual during each of the months in 
                        such taxable year, and
                          (ii) as having been enrolled, during 
                        each of the months such individual is 
                        treated as an eligible individual 
                        solely by reason of clause (i), in the 
                        same high deductible health plan in 
                        which the individual was enrolled for 
                        the last month of such taxable year.
                  (B) Failure to maintain high deductible 
                health plan coverage.--
                          (i) In general.--If, at any time 
                        during the testing period, the 
                        individual is not an eligible 
                        individual, then--
                                  (I) gross income of the 
                                individual for the taxable year 
                                in which occurs the first month 
                                in the testing period for which 
                                such individual is not an 
                                eligible individual is 
                                increased by the aggregate 
                                amount of all contributions to 
                                the health savings account of 
                                the individual which could not 
                                have been made but for 
                                subparagraph (A), and
                                  (II) the tax imposed by this 
                                chapter for any taxable year on 
                                the individual shall be 
                                increased by 10 percent of the 
                                amount of such increase.
                          (ii) Exception for disability or 
                        death.--Subclauses (I) and (II) of 
                        clause (i) shall not apply if the 
                        individual ceased to be an eligible 
                        individual by reason of the death of 
                        the individual or the individual 
                        becoming disabled (within the meaning 
                        of section 72(m)(7)).
                          (iii) Testing period.--The term 
                        ``testing period'' means the period 
                        beginning with the last month of the 
                        taxable year referred to in 
                        subparagraph (A) and ending on the last 
                        day of the 12th month following such 
                        month.
  (c) Definitions and Special Rules.--For purposes of this 
section--
          (1) Eligible individual.--
                  (A) In general.--The term ``eligible 
                individual'' means, with respect to any month, 
                any individual if--
                          (i) such individual is covered under 
                        a high deductible health plan as of the 
                        1st day of such month, and
                          (ii) such individual is not, while 
                        covered under a high deductible health 
                        plan, covered under any health plan--
                                  (I) which is not a high 
                                deductible health plan, and
                                  (II) which provides coverage 
                                for any benefit which is 
                                covered under the high 
                                deductible health plan.
                  (B) Certain coverage disregarded.--
                Subparagraph (A)(ii) shall be applied without 
                regard to--
                          (i) coverage for any benefit provided 
                        by permitted insurance,
                          (ii) coverage (whether through 
                        insurance or otherwise) for accidents, 
                        disability, dental care, vision care, 
                        or long-term care, and
                          (iii) for taxable years beginning 
                        after December 31, 2006, coverage under 
                        a health flexible spending arrangement 
                        during any period immediately following 
                        the end of a plan year of such 
                        arrangement during which unused 
                        benefits or contributions remaining at 
                        the end of such plan year may be paid 
                        or reimbursed to plan participants for 
                        qualified benefit expenses incurred 
                        during such period if--
                                  (I) the balance in such 
                                arrangement at the end of such 
                                plan year is zero, or
                                  (II) the individual is making 
                                a qualified HSA distribution 
                                (as defined in section 106(e)) 
                                in an amount equal to the 
                                remaining balance in such 
                                arrangement as of the end of 
                                such plan year, in accordance 
                                with rules prescribed by the 
                                Secretary.
                  (C) Special rule for individuals eligible for 
                certain veterans benefits.--An individual shall 
                not fail to be treated as an eligible 
                individual for any period merely because the 
                individual receives hospital care or medical 
                services under any law administered by the 
                Secretary of Veterans Affairs for a service-
                connected disability (within the meaning of 
                section 101(16) of title 38, United States 
                Code).
          (2) High deductible health plan.--
                  (A) In general.--The term ``high deductible 
                health plan'' means a health plan--
                          (i) which has an annual deductible 
                        which is not less than--
                                  (I) $1,000 for self-only 
                                coverage, and
                                  (II) twice the dollar amount 
                                in subclause (I) for family 
                                coverage, and
                          (ii) the sum of the annual deductible 
                        and the other annual out-of-pocket 
                        expenses required to be paid under the 
                        plan (other than for premiums) for 
                        covered benefits does not exceed--
                                  (I) $5,000 for self-only 
                                coverage, and
                                  (II) twice the dollar amount 
                                in subclause (I) for family 
                                coverage.
                  (B) Exclusion of certain plans.--Such term 
                does not include a health plan if substantially 
                all of its coverage is coverage described in 
                paragraph (1)(B).
                  (C) Safe harbor for absence of preventive 
                care deductible.--A plan shall not fail to be 
                treated as a high deductible health plan by 
                reason of failing to have a deductible for 
                preventive care (within the meaning of section 
                1871 of the Social Security Act, except as 
                otherwise provided by the Secretary).
                  (D) Special rules for network plans.--In the 
                case of a plan using a network of providers--
                          (i) Annual out-of-pocket 
                        limitation.--Such plan shall not fail 
                        to be treated as a high deductible 
                        health plan by reason of having an out-
                        of-pocket limitation for services 
                        provided outside of such network which 
                        exceeds the applicable limitation under 
                        subparagraph (A)(ii).
                          (ii) Annual deductible.--Such plan's 
                        annual deductible for services provided 
                        outside of such network shall not be 
                        taken into account for purposes of 
                        subsection (b)(2).
          (3) Permitted insurance.--The term ``permitted 
        insurance'' means--
                  (A) insurance if substantially all of the 
                coverage provided under such insurance relates 
                to--
                          (i) liabilities incurred under 
                        workers' compensation laws,
                          (ii) tort liabilities,
                          (iii) liabilities relating to 
                        ownership or use of property, or
                          (iv) such other similar liabilities 
                        as the Secretary may specify by 
                        regulations,
                  (B) insurance for a specified disease or 
                illness, and
                  (C) insurance paying a fixed amount per day 
                (or other period) of hospitalization.
          (4) Family coverage.--The term ``family coverage'' 
        means any coverage other than self-only coverage.
          (5) Archer MSA.--The term ``Archer MSA'' has the 
        meaning given such term in section 220(d).
  (d) Health Savings Account.--For purposes of this section--
          (1) In general.--The term ``health savings account'' 
        means a trust created or organized in the United States 
        as a health savings account exclusively for the purpose 
        of paying the qualified medical expenses of the account 
        beneficiary, but only if the written governing 
        instrument creating the trust meets the following 
        requirements:
                  (A) Except in the case of a rollover 
                contribution described in subsection (f)(5) or 
                section 220(f)(5), no contribution will be 
                accepted--
                          (i) unless it is in cash, or
                          (ii) to the extent such contribution, 
                        when added to previous contributions to 
                        the trust for the calendar year, 
                        exceeds the sum of--
                                  (I) the dollar amount in 
                                effect under subsection 
                                (b)(2)(B), and
                                  (II) the dollar amount in 
                                effect under subsection 
                                (b)(3)(B).
                  (B) The trustee is a bank (as defined in 
                section 408(n)), an insurance company (as 
                defined in section 816), or another person who 
                demonstrates to the satisfaction of the 
                Secretary that the manner in which such person 
                will administer the trust will be consistent 
                with the requirements of this section.
                  (C) No part of the trust assets will be 
                invested in life insurance contracts.
                  (D) The assets of the trust will not be 
                commingled with other property except in a 
                common trust fund or common investment fund.
                  (E) The interest of an individual in the 
                balance in his account is nonforfeitable.
          (2) Qualified medical expenses.--
                  (A) In general.--The term ``qualified medical 
                expenses'' means, with respect to an account 
                beneficiary, amounts paid by such beneficiary 
                for medical care (as defined in section 213(d) 
                for such individual, the spouse of such 
                individual, and any dependent (as defined in 
                section 152, determined without regard to 
                subsections (b)(1), (b)(2), and (d)(1)(B) 
                thereof) of such individual, but only to the 
                extent such amounts are not compensated for by 
                insurance or otherwise. [Such term shall 
                include an amount paid for medicine or a drug 
                only if such medicine or drug is a prescribed 
                drug (determined without regard to whether such 
                drug is available without a prescription) or is 
                insulin.]
                  (B) Health insurance may not be purchased 
                from account.--Subparagraph (A) shall not apply 
                to any payment for insurance.
                  (C) Exceptions.--Subparagraph (B) shall not 
                apply to any expense for coverage under--
                          (i) a health plan during any period 
                        of continuation coverage required under 
                        any Federal law,
                          (ii) a qualified long-term care 
                        insurance contract (as defined in 
                        section 7702B(b)),
                          (iii) a health plan during a period 
                        in which the individual is receiving 
                        unemployment compensation under any 
                        Federal or State law, or
                          (iv) in the case of an account 
                        beneficiary who has attained the age 
                        specified in section 1811 of the Social 
                        Security Act, any health insurance 
                        other than a medicare supplemental 
                        policy (as defined in section 1882 of 
                        the Social Security Act).
                  (D) Treatment of certain medical expenses 
                incurred before establishment of account.--If a 
                health savings account is established during 
                the 60-day period beginning on the date that 
                coverage of the account beneficiary under a 
                high deductible health plan begins, then, 
                solely for purposes of determining whether an 
                amount paid is used for a qualified medical 
                expense, such account shall be treated as 
                having been established on the date that such 
                coverage begins.
          (3) Account beneficiary.--The term ``account 
        beneficiary'' means the individual on whose behalf the 
        health savings account was established.
          (4) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this 
        section:
                  (A) Section 219(d)(2) (relating to no 
                deduction for rollovers).
                  (B) Section 219(f)(3) (relating to time when 
                contributions deemed made).
                  (C) Except as provided in section 106(d), 
                section 219(f)(5) (relating to employer 
                payments).
                  (D) Section 408(g) (relating to community 
                property laws).
                  (E) Section 408(h) (relating to custodial 
                accounts).
  (e) Tax Treatment of Accounts.--
          (1) In general.--A health savings account is exempt 
        from taxation under this subtitle unless such account 
        has ceased to be a health savings account. 
        Notwithstanding the preceding sentence, any such 
        account is subject to the taxes imposed by section 511 
        (relating to imposition of tax on unrelated business 
        income of charitable, etc. organizations).
          (2) Account terminations.--Rules similar to the rules 
        of paragraphs (2) and (4) of section 408(e) shall apply 
        to health savings accounts, and any amount treated as 
        distributed under such rules shall be treated as not 
        used to pay qualified medical expenses.
  (f) Tax Treatment of Distributions.--
          (1) Amounts used for qualified medical expenses.--Any 
        amount paid or distributed out of a health savings 
        account which is used exclusively to pay qualified 
        medical expenses of any account beneficiary shall not 
        be includible in gross income.
          (2) Inclusion of amounts not used for qualified 
        medical expenses.--Any amount paid or distributed out 
        of a health savings account which is not used 
        exclusively to pay the qualified medical expenses of 
        the account beneficiary shall be included in the gross 
        income of such beneficiary.
          (3) Excess contributions returned before due date of 
        return.--
                  (A) In general.--If any excess contribution 
                is contributed for a taxable year to any health 
                savings account of an individual, paragraph (2) 
                shall not apply to distributions from the 
                health savings accounts of such individual (to 
                the extent such distributions do not exceed the 
                aggregate excess contributions to all such 
                accounts of such individual for such year) if--
                          (i) such distribution is received by 
                        the individual on or before the last 
                        day prescribed by law (including 
                        extensions of time) for filing such 
                        individual's return for such taxable 
                        year, and
                          (ii) such distribution is accompanied 
                        by the amount of net income 
                        attributable to such excess 
                        contribution.
                Any net income described in clause (ii) shall 
                be included in the gross income of the 
                individual for the taxable year in which it is 
                received.
                  (B) Excess contribution.--For purposes of 
                subparagraph (A), the term ``excess 
                contribution'' means any contribution (other 
                than a rollover contribution described in 
                paragraph (5) or section 220(f)(5)) which is 
                neither excludable from gross income under 
                section 106(d) nor deductible under this 
                section.
          (4) Additional tax on distributions not used for 
        qualified medical expenses.--
                  (A) In general.--The tax imposed by this 
                chapter on the account beneficiary for any 
                taxable year in which there is a payment or 
                distribution from a health savings account of 
                such beneficiary which is includible in gross 
                income under paragraph (2) shall be increased 
                by [20 percent] 10 percent of the amount which 
                is so includible.
                  (B) Exception for disability or death.--
                Subparagraph (A) shall not apply if the payment 
                or distribution is made after the account 
                beneficiary becomes disabled within the meaning 
                of section 72(m)(7) or dies.
                  (C) Exception for distributions after 
                medicare eligibility.--Subparagraph (A) shall 
                not apply to any payment or distribution after 
                the date on which the account beneficiary 
                attains the age specified in section 1811 of 
                the Social Security Act.
          (5) Rollover contribution.--An amount is described in 
        this paragraph as a rollover contribution if it meets 
        the requirements of subparagraphs (A) and (B).
                  (A) In general.--Paragraph (2) shall not 
                apply to any amount paid or distributed from a 
                health savings account to the account 
                beneficiary to the extent the amount received 
                is paid into a health savings account for the 
                benefit of such beneficiary not later than the 
                60th day after the day on which the beneficiary 
                receives the payment or distribution.
                  (B) Limitation.--This paragraph shall not 
                apply to any amount described in subparagraph 
                (A) received by an individual from a health 
                savings account if, at any time during the 1-
                year period ending on the day of such receipt, 
                such individual received any other amount 
                described in subparagraph (A) from a health 
                savings account which was not includible in the 
                individual's gross income because of the 
                application of this paragraph.
          (6) Coordination with medical expense deduction.--For 
        purposes of determining the amount of the deduction 
        under section 213, any payment or distribution out of a 
        health savings account for qualified medical expenses 
        shall not be treated as an expense paid for medical 
        care.
          (7) Transfer of account incident to divorce.--The 
        transfer of an individual's interest in a health 
        savings account to an individual's spouse or former 
        spouse under a divorce or separation instrument 
        described in subparagraph (A) of section 71(b)(2) shall 
        not be considered a taxable transfer made by such 
        individual notwithstanding any other provision of this 
        subtitle, and such interest shall, after such transfer, 
        be treated as a health savings account with respect to 
        which such spouse is the account beneficiary.
          (8) Treatment after death of account beneficiary.--
                  (A) Treatment if designated beneficiary is 
                spouse.--If the account beneficiary's surviving 
                spouse acquires such beneficiary's interest in 
                a health savings account by reason of being the 
                designated beneficiary of such account at the 
                death of the account beneficiary, such health 
                savings account shall be treated as if the 
                spouse were the account beneficiary.
                  (B) Other cases.--
                          (i) In general.--If, by reason of the 
                        death of the account beneficiary, any 
                        person acquires the account 
                        beneficiary's interest in a health 
                        savings account in a case to which 
                        subparagraph (A) does not apply--
                                  (I) such account shall cease 
                                to be a health savings account 
                                as of the date of death, and
                                  (II) an amount equal to the 
                                fair market value of the assets 
                                in such account on such date 
                                shall be includible if such 
                                person is not the estate of 
                                such beneficiary, in such 
                                person's gross income for the 
                                taxable year which includes 
                                such date, or if such person is 
                                the estate of such beneficiary, 
                                in such beneficiary's gross 
                                income for the last taxable 
                                year of such beneficiary.
                          (ii) Special rules.--
                                  (I) Reduction of inclusion 
                                for predeath expenses.--The 
                                amount includible in gross 
                                income under clause (i) by any 
                                person (other than the estate) 
                                shall be reduced by the amount 
                                of qualified medical expenses 
                                which were incurred by the 
                                decedent before the date of the 
                                decedent's death and paid by 
                                such person within 1 year after 
                                such date.
                                  (II) Deduction for estate 
                                taxes.--An appropriate 
                                deduction shall be allowed 
                                under section 691(c) to any 
                                person (other than the decedent 
                                or the decedent's spouse) with 
                                respect to amounts included in 
                                gross income under clause (i) 
                                by such person.
  (g) Cost-Of-Living Adjustment.--
          (1) In general.--Each dollar amount in [subsections 
        (b)(2) and] subsection (c)(2)(A) shall be increased by 
        an amount equal to--
                  (A) such dollar amount, multiplied by
                  (B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in 
                which such taxable year begins [determined by 
                substituting for ``calendar year 1992'' in 
                subparagraph (B) thereof--] determined by 
                substituting ``calendar year 2003'' for 
                ``calendar year 1992'' in subparagraph (B) 
                thereof.
                          [(i) except as provided in clause 
                        (ii), ``calendar year 1997'', and
                          [(ii) in the case of each dollar 
                        amount in subsection (c)(2)(A), 
                        ``calendar year 2003''.]
        In the case of adjustments made for any taxable year 
        beginning after 2007, section 1(f)(4) shall be applied 
        for purposes of this paragraph by substituting ``March 
        31'' for ``August 31'', and the Secretary shall publish 
        the adjusted amounts under [subsections (b)(2) and] 
        subsection (c)(2)(A) for taxable years beginning in any 
        calendar year no later than June 1 of the preceding 
        calendar year.
          (2) Rounding.--If any increase under paragraph (1) is 
        not a multiple of $50, such increase shall be rounded 
        to the nearest multiple of $50.
  (h) Reports.--The Secretary may require--
          (1) the trustee of a health savings account to make 
        such reports regarding such account to the Secretary 
        and to the account beneficiary with respect to 
        contributions, distributions, the return of excess 
        contributions, and such other matters as the Secretary 
        determines appropriate, and
          (2) any person who provides an individual with a high 
        deductible health plan to make such reports to the 
        Secretary and to the account beneficiary with respect 
        to such plan as the Secretary determines appropriate.
The reports required by this subsection shall be filed at such 
time and in such manner and furnished to such individuals at 
such time and in such manner as may be required by the 
Secretary.

           *       *       *       *       *       *       *


                CHAPTER 2--TAX ON SELF-EMPLOYMENT INCOME

SEC. 1401. RATE OF TAX.

  (a) Old-Age, Survivors, and Disability Insurance.--In 
addition to other taxes, there shall be imposed for each 
taxable year, on the self-employment income of every 
individual, a tax equal to 12.4 percent of the amount of the 
self-employment income for such taxable year.
  [(b) Hospital Insurance.--
          [(1) In general.--In addition to the tax imposed by 
        the preceding subsection, there shall be imposed for 
        each taxable year, on the self-employment income of 
        every individual, a tax equal to 2.9 percent of the 
        amount of the self-employment income for such taxable 
        year.
          [(2) Additional tax.--
                  [(A) In general.--In addition to the tax 
                imposed by paragraph (1) and the preceding 
                subsection, there is hereby imposed on every 
                taxpayer (other than a corporation, estate, or 
                trust) for each taxable year beginning after 
                December 31, 2012, a tax equal to 0.9 percent 
                of the self-employment income for such taxable 
                year which is in excess of--
                          [(i) in the case of a joint return, 
                        $250,000,
                          [(ii) in the case of a married 
                        taxpayer (as defined in section 7703) 
                        filing a separate return, \1/2\ of the 
                        dollar amount determined under clause 
                        (i), and
                          [(iii) in any other case, $200,000.
                  [(B) Coordination with FICA.--The amounts 
                under clause (i), (ii), or (iii) (whichever is 
                applicable) of subparagraph (A) shall be 
                reduced (but not below zero) by the amount of 
                wages taken into account in determining the tax 
                imposed under section 3121(b)(2) with respect 
                to the taxpayer.]
  (b) Hospital Insurance.--In addition to the tax imposed by 
the preceding subsection, there shall be imposed for each 
taxable year, on the self-employment income of every 
individual, a tax equal to 2.9 percent of the amount of the 
self-employment income for such taxable year.
  (c) Relief from Taxes in Cases Covered by Certain 
International Agreements.--During any period in which there is 
in effect an agreement entered into pursuant to section 233 of 
the Social Security Act with any foreign country, the self-
employment income of an individual shall be exempt from the 
taxes imposed by this section to the extent that such self-
employment income is subject under such agreement exclusively 
to the laws applicable to the social security system of such 
foreign country.

           *       *       *       *       *       *       *


           [CHAPTER 2A--UNEARNED INCOME MEDICARE CONTRIBUTION

[SEC. 1411. IMPOSITION OF TAX.

  [(a) In General.--Except as provided in subsection (e)--
          [(1) Application to individuals.--In the case of an 
        individual, there is hereby imposed (in addition to any 
        other tax imposed by this subtitle) for each taxable 
        year a tax equal to 3.8 percent of the lesser of--
                  [(A) net investment income for such taxable 
                year, or
                  [(B) the excess (if any) of--
                          [(i) the modified adjusted gross 
                        income for such taxable year, over
                          [(ii) the threshold amount.
          [(2) Application to estates and trusts.--In the case 
        of an estate or trust, there is hereby imposed (in 
        addition to any other tax imposed by this subtitle) for 
        each taxable year a tax of 3.8 percent of the lesser 
        of--
                  [(A) the undistributed net investment income 
                for such taxable year, or
                  [(B) the excess (if any) of--
                          [(i) the adjusted gross income (as 
                        defined in section 67(e)) for such 
                        taxable year, over
                          [(ii) the dollar amount at which the 
                        highest tax bracket in section 1(e) 
                        begins for such taxable year.
  [(b) Threshold Amount.--For purposes of this chapter, the 
term ``threshold amount'' means--
          [(1) in the case of a taxpayer making a joint return 
        under section 6013 or a surviving spouse (as defined in 
        section 2(a)), $250,000,
          [(2) in the case of a married taxpayer (as defined in 
        section 7703) filing a separate return, \1/2\ of the 
        dollar amount determined under paragraph (1), and
          [(3) in any other case, $200,000.
  [(c) Net Investment Income.--For purposes of this chapter--
          [(1) In general.--The term ``net investment income'' 
        means the excess (if any) of--
                  [(A) the sum of--
                          [(i) gross income from interest, 
                        dividends, annuities, royalties, and 
                        rents, other than such income which is 
                        derived in the ordinary course of a 
                        trade or business not described in 
                        paragraph (2),
                          [(ii) other gross income derived from 
                        a trade or business described in 
                        paragraph (2), and
                          [(iii) net gain (to the extent taken 
                        into account in computing taxable 
                        income) attributable to the disposition 
                        of property other than property held in 
                        a trade or business not described in 
                        paragraph (2), over (B) the deductions 
                        allowed by this subtitle which are 
                        properly allocable to such gross income 
                        or net gain.
          [(2) Trades and businesses to which tax applies.--A 
        trade or business is described in this paragraph if 
        such trade or business is--
                  [(A) a passive activity (within the meaning 
                of section 469) with respect to the taxpayer, 
                or
                  [(B) a trade or business of trading in 
                financial instruments or commodities (as 
                defined in section 475(e)(2)).
          [(3) Income on investment of working capital subject 
        to tax.--A rule similar to the rule of section 
        469(e)(1)(B) shall apply for purposes of this 
        subsection.
          [(4) Exception for certain active interests in 
        partnerships and S corporations.--In the case of a 
        disposition of an interest in a partnership or S 
        corporation--
                  [(A) gain from such disposition shall be 
                taken into account under clause (iii) of 
                paragraph (1)(A) only to the extent of the net 
                gain which would be so taken into account by 
                the transferor if all property of the 
                partnership or S corporation were sold for fair 
                market value immediately before the disposition 
                of such interest, and
                  [(B) a rule similar to the rule of 
                subparagraph (A) shall apply to a loss from 
                such disposition.
          [(5) Exception for distributions from qualified 
        plans.--The term ``net investment income'' shall not 
        include any distribution from a plan or arrangement 
        described in section 401(a), 403(a), 403(b), 408, 408A, 
        or 457(b).
          [(6) Special rule.--Net investment income shall not 
        include any item taken into account in determining 
        self-employment income for such taxable year on which a 
        tax is imposed by section 1401(b).
  [(d) Modified Adjusted Gross Income.--For purposes of this 
chapter, the term ``modified adjusted gross income'' means 
adjusted gross income increased by the excess of--
          [(1) the amount excluded from gross income under 
        section 911(a)(1), over
          [(2) the amount of any deductions (taken into account 
        in computing adjusted gross income) or exclusions 
        disallowed under section 911(d)(6) with respect to the 
        amounts described in paragraph (1).
  [(e) Nonapplication of Section.--This section shall not apply 
to--
          [(1) a nonresident alien, or
          [(2) a trust all of the unexpired interests in which 
        are devoted to one or more of the purposes described in 
        section 170(c)(2)(B).]

           *       *       *       *       *       *       *


Subtitle C--Employment Taxes

           *       *       *       *       *       *       *


CHAPTER 21--FEDERAL INSURANCE CONTRIBUTIONS ACT

           *       *       *       *       *       *       *


                     Subchapter A--Tax on Employees

SEC. 3101. RATE OF TAX.

  (a) Old-Age, Survivors, and Disability Insurance.--In 
addition to other taxes, there is hereby imposed on the income 
of every individual a tax equal to 6.2 percent of the wages (as 
defined in section 3121(a)) received by the individual with 
respect to employment (as defined in section 3121(b))
  [(b) Hospital Insurance.--
          [(1) In general.--In addition to the tax imposed by 
        the preceding subsection, there is hereby imposed on 
        the income of every individual a tax equal to 1.45 
        percent of the wages (as defined in section 3121(a)) 
        received by him with respect to employment (as defined 
        in section 3121(b)).
          [(2) Additional tax.--In addition to the tax imposed 
        by paragraph (1) and the preceding subsection, there is 
        hereby imposed on every taxpayer (other than a 
        corporation, estate, or trust) a tax equal to 0.9 
        percent of wages which are received with respect to 
        employment (as defined in section 3121(b)) during any 
        taxable year beginning after December 31, 2012, and 
        which are in excess of--
                  [(A) in the case of a joint return, $250,000,
                  [(B) in the case of a married taxpayer (as 
                defined in section 7703) filing a separate 
                return, \1/2\ of the dollar amount determined 
                under subparagraph (A), and
                  [(C) in any other case, $200,000.]
  (b) Hospital Insurance.--In addition to the tax imposed by 
the preceding subsection, there is hereby imposed on the income 
of every individual a tax equal to 1.45 percent of the wages 
(as defined in section 3121(a)) received by such individual 
with respect to employment (as defined in section 3121(b)).
  (c) Relief from Taxes in Cases Covered by Certain 
International Agreements.--During any period in which there is 
in effect an agreement entered into pursuant to section 233 of 
the Social Security Act with any foreign country, wages 
received by or paid to an individual shall be exempt from the 
taxes imposed by this section to the extent that such wages are 
subject under such agreement exclusively to the laws applicable 
to the social security system of such foreign country.

           *       *       *       *       *       *       *


Subtitle D--Miscellaneous Excise Taxes

           *       *       *       *       *       *       *


CHAPTER 32--MANUFACTURERS EXCISE TAXES

           *       *       *       *       *       *       *


                     Subchapter E--Medical Devices

SEC. 4191. MEDICAL DEVICES.

  (a) In General.--There is hereby imposed on the sale of any 
taxable medical device by the manufacturer, producer, or 
importer a tax equal to 2.3 percent of the price for which so 
sold.
  (b) Taxable Medical Device.--For purposes of this section--
          (1) In general.--The term ``taxable medical device'' 
        means any device (as defined in section 201(h) of the 
        Federal Food, Drug, and Cosmetic Act) intended for 
        humans.
          (2) Exemptions.--Such term shall not include--
                  (A) eyeglasses,
                  (B) contact lenses,
                  (C) hearing aids, and
                  (D) any other medical device determined by 
                the Secretary to be of a type which is 
                generally purchased by the general public at 
                retail for individual use.
  (c) Moratorium.--The tax imposed under subsection (a) shall 
not apply to sales during the period beginning on January 1, 
2016, and ending on December 31, 2017.
  (d) Applicability.--The tax imposed under subsection (a) 
shall not apply to sales after December 31, 2017.

           *       *       *       *       *       *       *


CHAPTER 43--QUALIFIED PENSION, ETC., PLANS

           *       *       *       *       *       *       *


SEC. 4980H. SHARED RESPONSIBILITY FOR EMPLOYERS REGARDING HEALTH 
                    COVERAGE.

  (a) Large Employers Not Offering Health Coverage.--If--
          (1) any applicable large employer fails to offer to 
        its full-time employees (and their dependents) the 
        opportunity to enroll in minimum essential coverage 
        under an eligible employer-sponsored plan (as defined 
        in section 5000A(f)(2)) for any month, and
          (2) at least one full-time employee of the applicable 
        large employer has been certified to the employer under 
        section 1411 of the Patient Protection and Affordable 
        Care Act as having enrolled for such month in a 
        qualified health plan with respect to which an 
        applicable premium tax credit or cost-sharing reduction 
        is allowed or paid with respect to the employee,
then there is hereby imposed on the employer an assessable 
payment equal to the product of the applicable payment amount 
and the number of individuals employed by the employer as full-
time employees during such month.
  (b) Large Employers Offering Coverage With Employees Who 
Qualify for Premium Tax Credits or Cost-Sharing Reductions.--
          (1) In general.--If--
                  (A) an applicable large employer offers to 
                its full-time employees (and their dependents) 
                the opportunity to enroll in minimum essential 
                coverage under an eligible employer-sponsored 
                plan (as defined in section 5000A(f)(2)) for 
                any month, and
                  (B) 1 or more full-time employees of the 
                applicable large employer has been certified to 
                the employer under section 1411 of the Patient 
                Protection and Affordable Care Act as having 
                enrolled for such month in a qualified health 
                plan with respect to which an applicable 
                premium tax credit or cost-sharing reduction is 
                allowed or paid with respect to the employee,
        then there is hereby imposed on the employer an 
        assessable payment equal to the product of the number 
        of full-time employees of the applicable large employer 
        described in subparagraph (B) for such month and an 
        amount equal to \1/12\ of $3,000 ($0 in the case of 
        months beginning after December 31, 2015).
          (2) Overall limitation.--The aggregate amount of tax 
        determined under paragraph (1) with respect to all 
        employees of an applicable large employer for any month 
        shall not exceed the product of the applicable payment 
        amount and the number of individuals employed by the 
        employer as full-time employees during such month.
  (c) Definitions and Special Rules.--For purposes of this 
section--
          (1) Applicable payment amount.--The term ``applicable 
        payment amount'' means, with respect to any month, \1/
        12\ of $2,000 ($0 in the case of months beginning after 
        December 31, 2015).
          (2) Applicable large employer.--
                  (A) In general.--The term ``applicable large 
                employer'' means, with respect to a calendar 
                year, an employer who employed an average of at 
                least 50 full-time employees on business days 
                during the preceding calendar year.
                  (B) Exemption for certain employers.--
                          (i) In general.--An employer shall 
                        not be considered to employ more than 
                        50 full-time employees if--
                                  (I) the employer's workforce 
                                exceeds 50 full-time employees 
                                for 120 days or fewer during 
                                the calendar year, and
                                  (II) the employees in excess 
                                of 50 employed during such 120-
                                day period were seasonal 
                                workers.
                          (ii) Definition of seasonal 
                        workers.--The term ``seasonal worker'' 
                        means a worker who performs labor or 
                        services on a seasonal basis as defined 
                        by the Secretary of Labor, including 
                        workers covered by section 500.20(s)(1) 
                        of title 29, Code of Federal 
                        Regulations and retail workers employed 
                        exclusively during holiday seasons.
                  (C) Rules for determining employer size.--For 
                purposes of this paragraph--
                          (i) Application of aggregation rule 
                        for employers.--All persons treated as 
                        a single employer under subsection (b), 
                        (c), (m), or (o) of section 414 of the 
                        Internal Revenue Code of 1986 shall be 
                        treated as 1 employer.
                          (ii) Employers not in existence in 
                        preceding year.--In the case of an 
                        employer which was not in existence 
                        throughout the preceding calendar year, 
                        the determination of whether such 
                        employer is an applicable large 
                        employer shall be based on the average 
                        number of employees that it is 
                        reasonably expected such employer will 
                        employ on business days in the current 
                        calendar year.
                          (iii) Predecessors.--Any reference in 
                        this subsection to an employer shall 
                        include a reference to any predecessor 
                        of such employer.
                  (D) Application of employer size to 
                assessable penalties.--
                          (i) In general.--The number of 
                        individuals employed by an applicable 
                        large employer as full-time employees 
                        during any month shall be reduced by 30 
                        solely for purposes of calculating--
                                  (I) the assessable payment 
                                under subsection (a), or
                                  (II) the overall limitation 
                                under subsection (b)(2).
                          (ii) Aggregation.--In the case of 
                        persons treated as 1 employer under 
                        subparagraph (C)(i), only 1 reduction 
                        under subclause (I) or (II) shall be 
                        allowed with respect to such persons 
                        and such reduction shall be allocated 
                        among such persons ratably on the basis 
                        of the number of full-time employees 
                        employed by each such person.
                  (E) Full-time equivalents treated as full-
                time employees.--Solely for purposes of 
                determining whether an employer is an 
                applicable large employer under this paragraph, 
                an employer shall, in addition to the number of 
                full-time employees for any month otherwise 
                determined, include for such month a number of 
                full-time employees determined by dividing the 
                aggregate number of hours of service of 
                employees who are not full-time employees for 
                the month by 120.
                  (F) Exemption for health coverage under 
                TRICARE or the Veterans Administration.--Solely 
                for purposes of determining whether an employer 
                is an applicable large employer under this 
                paragraph for any month, an individual shall 
                not be taken into account as an employee for 
                such month if such individual has medical 
                coverage for such month under--
                          (i) chapter 55 of title 10, United 
                        States Code, including coverage under 
                        the TRICARE program, or
                          (ii) under a health care program 
                        under chapter 17 or 18 of title 38, 
                        United States Code, as determined by 
                        the Secretary of Veterans Affairs, in 
                        coordination with the Secretary of 
                        Health and Human Services and the 
                        Secretary.
          (3) Applicable premium tax credit and cost-sharing 
        reduction.--The term ``applicable premium tax credit 
        and cost-sharing reduction'' means--
                  (A) any premium tax credit allowed under 
                section 36B,
                  (B) any cost-sharing reduction under section 
                1402 of the Patient Protection and Affordable 
                Care Act, and
                  (C) any advance payment of such credit or 
                reduction under section 1412 of such Act.
          (4) Full-time employee.--
                  (A) In general.--The term ``full-time 
                employee'' means, with respect to any month, an 
                employee who is employed on average at least 30 
                hours of service per week.
                  (B) Hours of service.--The Secretary, in 
                consultation with the Secretary of Labor, shall 
                prescribe such regulations, rules, and guidance 
                as may be necessary to determine the hours of 
                service of an employee, including rules for the 
                application of this paragraph to employees who 
                are not compensated on an hourly basis.
          (5) Inflation adjustment.--
                  (A) In general.--In the case of any calendar 
                year after 2014, each of the dollar amounts in 
                subsection (b) and paragraph (1) shall be 
                increased by an amount equal to the product 
                of--
                          (i) such dollar amount, and
                          (ii) the premium adjustment 
                        percentage (as defined in section 
                        1302(c)(4) of the Patient Protection 
                        and Affordable Care Act) for the 
                        calendar year.
                  (B) Rounding.--If the amount of any increase 
                under subparagraph (A) is not a multiple of 
                $10, such increase shall be rounded to the next 
                lowest multiple of $10.
          (6) Other definitions.--Any term used in this section 
        which is also used in the Patient Protection and 
        Affordable Care Act shall have the same meaning as when 
        used in such Act.
          (7) Tax nondeductible.--For denial of deduction for 
        the tax imposed by this section, see section 275(a)(6).
  (d) Administration and Procedure.--
          (1) In general.--Any assessable payment provided by 
        this section shall be paid upon notice and demand by 
        the Secretary, and shall be assessed and collected in 
        the same manner as an assessable penalty under 
        subchapter B of chapter 68.
          (2) Time for payment.--The Secretary may provide for 
        the payment of any assessable payment provided by this 
        section on an annual, monthly, or other periodic basis 
        as the Secretary may prescribe.
          (3) Coordination with credits, etc..--The Secretary 
        shall prescribe rules, regulations, or guidance for the 
        repayment of any assessable payment (including 
        interest) if such payment is based on the allowance or 
        payment of an applicable premium tax credit or cost-
        sharing reduction with respect to an employee, such 
        allowance or payment is subsequently disallowed, and 
        the assessable payment would not have been required to 
        be made but for such allowance or payment.

SEC. 4980I. EXCISE TAX ON HIGH COST EMPLOYER-SPONSORED HEALTH COVERAGE.

  (a) Imposition of Tax.--If--
          (1) an employee is covered under any applicable 
        employer-sponsored coverage of an employer at any time 
        during a taxable period, and
          (2) there is any excess benefit with respect to the 
        coverage, there is hereby imposed a tax equal to 40 
        percent of the excess benefit.
  (b) Excess Benefit.--For purposes of this section--
          (1) In general.--The term ``excess benefit'' means, 
        with respect to any applicable employer-sponsored 
        coverage made available by an employer to an employee 
        during any taxable period, the sum of the excess 
        amounts determined under paragraph (2) for months 
        during the taxable period.
          (2) Monthly excess amount.--The excess amount 
        determined under this paragraph for any month is the 
        excess (if any) of--
                  (A) the aggregate cost of the applicable 
                employer- sponsored coverage of the employee 
                for the month, over
                  (B) an amount equal to \1/12\ of the annual 
                limitation under paragraph (3) for the calendar 
                year in which the month occurs.
          (3) Annual limitation.--For purposes of this 
        subsection--
                  (A) In general.--The annual limitation under 
                this paragraph for any calendar year is the 
                dollar limit determined under subparagraph (C) 
                for the calendar year.
                  (B) Applicable annual limitation.--
                          (i) In general.--Except as provided 
                        in clause (ii), the annual limitation 
                        which applies for any month shall be 
                        determined on the basis of the type of 
                        coverage (as determined under 
                        subsection (f)(1)) provided to the 
                        employee by the employer as of the 
                        beginning of the month.
                          (ii) Multiemployer plan coverage.--
                        Any coverage provided under a 
                        multiemployer plan (as defined in 
                        section 414(f)) shall be treated as 
                        coverage other than self-only coverage.
                  (C) Applicable dollar limit.--
                          (i) 2018.--In the case of 2018, the 
                        dollar limit under this subparagraph 
                        is--
                                  (I) in the case of an 
                                employee with self-only 
                                coverage, $10,200 multiplied by 
                                the health cost adjustment 
                                percentage (determined by only 
                                taking into account self-only 
                                coverage), and
                                  (II) in the case of an 
                                employee with coverage other 
                                than self-only coverage, 
                                $27,500 multiplied by the 
                                health cost adjustment 
                                percentage (determined by only 
                                taking into account coverage 
                                other than self-only coverage).
                          (ii) Health cost adjustment 
                        percentage.--For purposes of clause 
                        (i), the health cost adjustment 
                        percentage is equal to 100 percent plus 
                        the excess (if any) of--
                                  (I) the percentage by which 
                                the per employee cost for 
                                providing coverage under the 
                                Blue Cross/Blue Shield standard 
                                benefit option under the 
                                Federal Employees Health 
                                Benefits Plan for plan year 
                                2018 (determined by using the 
                                benefit package for such 
                                coverage in 2010) exceeds such 
                                cost for plan year 2010, over
                                  (II) 55 percent.
                          (iii) Age and gender adjustment.--
                                  (I) In general.--The amount 
                                determined under subclause (I) 
                                or (II) of clause (i), 
                                whichever is applicable, for 
                                any taxable period shall be 
                                increased by the amount 
                                determined under subclause 
                                (II).
                                  (II) Amount determined.--The 
                                amount determined under this 
                                subclause is an amount equal to 
                                the excess (if any) of--
                                          (aa) the premium cost 
                                        of the Blue Cross/Blue 
                                        Shield standard benefit 
                                        option under the 
                                        Federal Employees 
                                        Health Benefits Plan 
                                        for the type of 
                                        coverage provided such 
                                        individual in such 
                                        taxable period if 
                                        priced for the age and 
                                        gender characteristics 
                                        of all employees of the 
                                        individual's employer, 
                                        over
                                          (bb) that premium 
                                        cost for the provision 
                                        of such coverage under 
                                        such option in such 
                                        taxable period if 
                                        priced for the age and 
                                        gender characteristics 
                                        of the national 
                                        workforce.
                          (iv) Exception for certain 
                        individuals.--In the case of an 
                        individual who is a qualified retiree 
                        or who participates in a plan sponsored 
                        by an employer the majority of whose 
                        employees covered by the plan are 
                        engaged in a high-risk profession or 
                        employed to repair or install 
                        electrical or telecommunications 
                        lines--
                                  (I) the dollar amount in 
                                clause (i)(I) shall be 
                                increased by $1,650, and
                                  (II) the dollar amount in 
                                clause (i)(II) shall be 
                                increased by $3,450,
                          (v) Subsequent years.--In the case of 
                        any calendar year after 2018, each of 
                        the dollar amounts under clauses (i) 
                        (after the application of clause (ii)) 
                        and (iv) shall be increased to the 
                        amount equal to such amount as 
                        determined for for the calendar year 
                        preceding such year, increased by an 
                        amount equal to the product of--
                                  (I) such amount as so 
                                determined, multiplied by
                                  (II) the cost-of-living 
                                adjustment determined under 
                                section 1(f)(3) for such year 
                                (determined by substituting the 
                                calendar year that is 2 years 
                                before such year for ``1992'' 
                                in subparagraph (B) thereof), 
                                increased by 1 percentage point 
                                in the case of determinations 
                                for calendar years beginning 
                                before 2020.
                        If any amount determined under this 
                        clause is not a multiple of $50, such 
                        amount shall be rounded to the nearest 
                        multiple of $50.
  (c) Liability to Pay Tax.--
          (1) In general.--Each coverage provider shall pay the 
        tax imposed by subsection (a) on its applicable share 
        of the excess benefit with respect to an employee for 
        any taxable period.
          (2) Coverage provider.--For purposes of this 
        subsection, the term ``coverage provider'' means each 
        of the following:
                  (A) Health insurance coverage.--If the 
                applicable employer-sponsored coverage consists 
                of coverage under a group health plan which 
                provides health insurance coverage, the health 
                insurance issuer.
                  (B) HSA and MSA contributions.--If the 
                applicable employer-sponsored coverage consists 
                of coverage under an arrangement under which 
                the employer makes contributions described in 
                subsection (b) or (d) of section 106, the 
                employer.
                  (C) Other coverage.--In the case of any other 
                applicable employer-sponsored coverage, the 
                person that administers the plan benefits.
          (3) Applicable share.--For purposes of this 
        subsection, a coverage provider's applicable share of 
        an excess benefit for any taxable period is the amount 
        which bears the same ratio to the amount of such excess 
        benefit as--
                  (A) the cost of the applicable employer-
                sponsored coverage provided by the provider to 
                the employee during such period, bears to
                  (B) the aggregate cost of all applicable 
                employer-sponsored coverage provided to the 
                employee by all coverage providers during such 
                period.
          (4) Responsibility to calculate tax and applicable 
        shares.--
                  (A) In general.--Each employer shall--
                          (i) calculate for each taxable period 
                        the amount of the excess benefit 
                        subject to the tax imposed by 
                        subsection (a) and the applicable share 
                        of such excess benefit for each 
                        coverage provider, and
                          (ii) notify, at such time and in such 
                        manner as the Secretary may prescribe, 
                        the Secretary and each coverage 
                        provider of the amount so determined 
                        for the provider.
                  (B) Special rule for multiemployer plans.--In 
                the case of applicable employer-sponsored 
                coverage made available to employees through a 
                multiemployer plan (as defined in section 
                414(f)), the plan sponsor shall make the 
                calculations, and provide the notice, required 
                under subparagraph (A).
  (d) Applicable Employer-Sponsored Coverage; Cost.--For 
purposes of this section--
          (1) Applicable employer-sponsored coverage.--
                  (A) In general.--The term ``applicable 
                employer-sponsored coverage'' means, with 
                respect to any employee, coverage under any 
                group health plan made available to the 
                employee by an employer which is excludable 
                from the employee's gross income under section 
                106, or would be so excludable if it were 
                employer-provided coverage (within the meaning 
                of such section 106).
                  (B) Exceptions.--The term ``applicable 
                employer-sponsored coverage'' shall not 
                include--
                          (i) any coverage (whether through 
                        insurance or otherwise) described in 
                        section 9832(c)(1) (other than 
                        subparagraph (G) thereof) or for long-
                        term care, or
                          (ii) any coverage under a separate 
                        policy, certificate, or contract of 
                        insurance which provides benefits 
                        substantially all of which are for 
                        treatment of the mouth (including any 
                        organ or structure within the mouth) or 
                        for treatment of the eye, or
                          (iii) any coverage described in 
                        section 9832(c)(3) the payment for 
                        which is not excludable from gross 
                        income and for which a deduction under 
                        section 162(l) is not allowable.
                  (C) Coverage includes employee paid 
                portion.--Coverage shall be treated as 
                applicable employer-sponsored coverage without 
                regard to whether the employer or employee pays 
                for the coverage.
                  (D) Self-employed individual.--In the case of 
                an individual who is an employee within the 
                meaning of section 401(c)(1), coverage under 
                any group health plan providing health 
                insurance coverage shall be treated as 
                applicable employer-sponsored coverage if a 
                deduction is allowable under section 162(l) 
                with respect to all or any portion of the cost 
                of the coverage.
                  (E) Governmental plans included.--Applicable 
                employer-sponsored coverage shall include 
                coverage under any group health plan 
                established and maintained primarily for its 
                civilian employees by the Government of the 
                United States, by the government of any State 
                or political subdivision thereof, or by any 
                agency or instrumentality of any such 
                government.
          (2) Determination of cost.--
                  (A) In general.--The cost of applicable 
                employer- sponsored coverage shall be 
                determined under rules similar to the rules of 
                section 4980B(f)(4), except that in determining 
                such cost, any portion of the cost of such 
                coverage which is attributable to the tax 
                imposed under this section shall not be taken 
                into account and the amount of such cost shall 
                be calculated separately for self-only coverage 
                and other coverage. In the case of applicable 
                employer-sponsored coverage which provides 
                coverage to retired employees, the plan may 
                elect to treat a retired employee who has not 
                attained the age of 65 and a retired employee 
                who has attained the age of 65 as similarly 
                situated beneficiaries.
                  (B) Health FSAS.--In the case of applicable 
                employer- sponsored coverage consisting of 
                coverage under a flexible spending arrangement 
                (as defined in section 106(c)(2)), the cost of 
                the coverage shall be equal to the sum of--
                          (i) the amount of employer 
                        contributions under any salary 
                        reduction election under the 
                        arrangement, plus
                          (ii) the amount determined under 
                        subparagraph (A) with respect to any 
                        reimbursement under the arrangement in 
                        excess of the contributions described 
                        in clause (i).
                  (C) Archer MSAS and HSAS.--In the case of 
                applicable employer-sponsored coverage 
                consisting of coverage under an arrangement 
                under which the employer makes contributions 
                described in subsection (b) or (d) of section 
                106, the cost of the coverage shall be equal to 
                the amount of employer contributions under the 
                arrangement.
                  (D) Qualified small employer health 
                reimbursement arrangements.--In the case of 
                applicable employer-sponsored coverage 
                consisting of coverage under any qualified 
                small employer health reimbursement arrangement 
                (as defined in section 9831(d)(2)), the cost of 
                coverage shall be equal to the amount described 
                in section 6051(a)(15).
                  (E) Allocation on a monthly basis.--If cost 
                is determined on other than a monthly basis, 
                the cost shall be allocated to months in a 
                taxable period on such basis as the Secretary 
                may prescribe.
          (3) Employee.--The term ``employee'' includes any 
        former employee, surviving spouse, or other primary 
        insured individual.
  (e) Penalty for Failure to Properly Calculate Excess 
Benefit.--
          (1) In general.--If, for any taxable period, the tax 
        imposed by subsection (a) exceeds the tax determined 
        under such subsection with respect to the total excess 
        benefit calculated by the employer or plan sponsor 
        under subsection (c)(4)--
                  (A) each coverage provider shall pay the tax 
                on its applicable share (determined in the same 
                manner as under subsection (c)(4)) of the 
                excess, but no penalty shall be imposed on the 
                provider with respect to such amount, and
                  (B) the employer or plan sponsor shall, in 
                addition to any tax imposed by subsection (a), 
                pay a penalty in an amount equal to such 
                excess, plus interest at the underpayment rate 
                determined under section 6621 for the period 
                beginning on the due date for the payment of 
                tax imposed by subsection (a) to which the 
                excess relates and ending on the date of 
                payment of the penalty.
          (2) Limitations on penalty.--
                  (A) Penalty not to apply where failure not 
                discovered exercising reasonable diligence.--No 
                penalty shall be imposed by paragraph (1)(B) on 
                any failure to properly calculate the excess 
                benefit during any period for which it is 
                established to the satisfaction of the 
                Secretary that the employer or plan sponsor 
                neither knew, nor exercising reasonable 
                diligence would have known, that such failure 
                existed.
                  (B) Penalty not to apply to failures 
                corrected within 30 days.--No penalty shall be 
                imposed by paragraph (1)(B) on any such failure 
                if--
                          (i) such failure was due to 
                        reasonable cause and not to willful 
                        neglect, and
                          (ii) such failure is corrected during 
                        the 30-day period beginning on the 1st 
                        date that the employer knew, or 
                        exercising reasonable diligence would 
                        have known, that such failure existed.
                  (C) Waiver by Secretary.--In the case of any 
                such failure which is due to reasonable cause 
                and not to willful neglect, the Secretary may 
                waive part or all of the penalty imposed by 
                paragraph (1), to the extent that the payment 
                of such penalty would be excessive or otherwise 
                inequitable relative to the failure involved.
  (f) Other Definitions and Special Rules.--For purposes of 
this section--
          (1) Coverage determinations.--
                  (A) In general.--Except as provided in 
                subparagraph (B), an employee shall be treated 
                as having self-only coverage with respect to 
                any applicable employer-sponsored coverage of 
                an employer.
                  (B) Minimum essential coverage.--An employee 
                shall be treated as having coverage other than 
                self-only coverage only if the employee is 
                enrolled in coverage other than self-only 
                coverage in a group health plan which provides 
                minimum essential coverage (as defined in 
                section 5000A(f)) to the employee and at least 
                one other beneficiary, and the benefits 
                provided under such minimum essential coverage 
                do not vary based on whether any individual 
                covered under such coverage is the employee or 
                another beneficiary.
          (2) Qualified retiree.--The term ``qualified 
        retiree'' means any individual who--
                  (A) is receiving coverage by reason of being 
                a retiree,
                  (B) has attained age 55, and
                  (C) is not entitled to benefits or eligible 
                for enrollment under the Medicare program under 
                title XVIII of the Social Security Act.
          (3) Employees engaged in high-risk profession.--The 
        term ``employees engaged in a high-risk profession'' 
        means law enforcement officers (as such term is defined 
        in section 1204 of the Omnibus Crime Control and Safe 
        Streets Act of 1968), employees in fire protection 
        activities (as such term is defined in section 3(y) of 
        the Fair Labor Standards Act of 1938), individuals who 
        provide out- of-hospital emergency medical care 
        (including emergency medical technicians, paramedics, 
        and first-responders), individuals whose primary work 
        is longshore work (as defined in section 258(b) of the 
        Immigration and Nationality Act (8 U.S.C. 1288(b)), 
        determined without regard to paragraph (2) thereof), 
        and individuals engaged in the construction, mining, 
        agriculture (not including food processing), forestry, 
        and fishing industries. Such term includes an employee 
        who is retired from a high-risk profession described in 
        the preceding sentence, if such employee satisfied the 
        requirements of such sentence for a period of not less 
        than 20 years during the employee's employment.
          (4) Group health plan.--The term ``group health 
        plan'' has the meaning given such term by section 
        5000(b)(1). Section 9831(d)(1) shall not apply for 
        purposes of this section.
          (5) Health insurance coverage; health insurance 
        issuer.--
                  (A) Health insurance coverage.--The term 
                ``health insurance coverage'' has the meaning 
                given such term by section 9832(b)(1) (applied 
                without regard to subparagraph (B) thereof, 
                except as provided by the Secretary in 
                regulations).
                  (B) Health insurance issuer.--The term 
                ``health insurance issuer'' has the meaning 
                given such term by section 9832(b)(2).
          (6) Person that administers the plan benefits.--The 
        term ``person that administers the plan benefits'' 
        shall include the plan sponsor if the plan sponsor 
        administers benefits under the plan.
          (7) Plan sponsor.--The term ``plan sponsor'' has the 
        meaning given such term in section 3(16)(B) of the 
        Employee Retirement Income Security Act of 1974.
          (8) Taxable period.--The term ``taxable period'' 
        means the calendar year or such shorter period as the 
        Secretary may prescribe. The Secretary may have 
        different taxable periods for employers of varying 
        sizes.
          (9) Aggregation rules.--All employers treated as a 
        single employer under subsection (b), (c), (m), or (o) 
        of section 414 shall be treated as a single employer.
          (10) Deductibility of tax.--Section 275(a)(6) shall 
        not apply to the tax imposed by subsection (a).
  (g) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary to carry out this section.
  (h) Shall Not Apply.--No tax shall be imposed under this 
section with respect to any taxable period beginning after 
December 31, 2019, and before January 1, 2025.

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         CHAPTER 48--MAINTENANCE OF MINIMUM ESSENTIAL COVERAGE

SEC. 5000A. REQUIREMENT TO MAINTAIN MINIMUM ESSENTIAL COVERAGE.

  (a) Requirement to Maintain Minimum Essential Coverage.--An 
applicable individual shall for each month beginning after 2013 
ensure that the individual, and any dependent of the individual 
who is an applicable individual, is covered under minimum 
essential coverage for such month.
  (b) Shared Responsibility Payment.--
          (1) In general.--If a taxpayer who is an applicable 
        individual, or an applicable individual for whom the 
        taxpayer is liable under paragraph (3), fails to meet 
        the requirement of subsection (a) for 1 or more months, 
        then, except as provided in subsection (e), there is 
        hereby imposed on the taxpayer a penalty with respect 
        to such failures in the amount determined under 
        subsection (c).
          (2) Inclusion with return.--Any penalty imposed by 
        this section with respect to any month shall be 
        included with a taxpayer's return under chapter 1 for 
        the taxable year which includes such month.
          (3) Payment of penalty.--If an individual with 
        respect to whom a penalty is imposed by this section 
        for any month--
                  (A) is a dependent (as defined in section 
                152) of another taxpayer for the other 
                taxpayer's taxable year including such month, 
                such other taxpayer shall be liable for such 
                penalty, or
                  (B) files a joint return for the taxable year 
                including such month, such individual and the 
                spouse of such individual shall be jointly 
                liable for such penalty.
  (c) Amount of Penalty.--
          (1) In general.--The amount of the penalty imposed by 
        this section on any taxpayer for any taxable year with 
        respect to failures described in subsection (b)(1) 
        shall be equal to the lesser of--
                  (A) the sum of the monthly penalty amounts 
                determined under paragraph (2) for months in 
                the taxable year during which 1 or more such 
                failures occurred, or
                  (B) an amount equal to the national average 
                premium for qualified health plans which have a 
                bronze level of coverage, provide coverage for 
                the applicable family size involved, and are 
                offered through Exchanges for plan years 
                beginning in the calendar year with or within 
                which the taxable year ends.
          (2) Monthly penalty amounts.--For purposes of 
        paragraph (1)(A), the monthly penalty amount with 
        respect to any taxpayer for any month during which any 
        failure described in subsection (b)(1) occurred is an 
        amount equal to \1/12\ of the greater of the following 
        amounts:
                  (A) Flat dollar amount.--An amount equal to 
                the lesser of--
                          (i) the sum of the applicable dollar 
                        amounts for all individuals with 
                        respect to whom such failure occurred 
                        during such month, or
                          (ii) 300 percent of the applicable 
                        dollar amount (determined without 
                        regard to paragraph (3)(C)) for the 
                        calendar year with or within which the 
                        taxable year ends.
                  (B) Percentage of income.--An amount equal to 
                the following percentage of the excess of the 
                taxpayer's household income for the taxable 
                year over the amount of gross income specified 
                in section 6012(a)(1) with respect to the 
                taxpayer for the taxable year:
                          (i) 1.0 percent for taxable years 
                        beginning in 2014.
                          (ii) 2.0 percent for taxable years 
                        beginning in 2015.
                          (iii) [2.5 percent] Zero percent for 
                        taxable years beginning after 2015.
          (3) Applicable dollar amount.--For purposes of 
        paragraph (1)--
                  (A) In general.--Except as provided in 
                subparagraphs (B) and (C), the applicable 
                dollar amount is [$695] $0.
                  (B) Phase in.--The applicable dollar amount 
                is $95 for 2014 and $325 for 2015.
                  (C) Special rule for individuals under age 
                18.--If an applicable individual has not 
                attained the age of 18 as of the beginning of a 
                month, the applicable dollar amount with 
                respect to such individual for the month shall 
                be equal to one-half of the applicable dollar 
                amount for the calendar year in which the month 
                occurs.
                  [(D) Indexing of amount.--In the case of any 
                calendar year beginning after 2016, the 
                applicable dollar amount shall be equal to 
                $695, increased by an amount equal to--
                          [(i) $695, multiplied by
                          [(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for 
                        the calendar year, determined by 
                        substituting ``calendar year 2015'' 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.]
          (4) Terms relating to income and families.--For 
        purposes of this section--
                  (A) Family size.--The family size involved 
                with respect to any taxpayer shall be equal to 
                the number of individuals for whom the taxpayer 
                is allowed a deduction under section 151 
                (relating to allowance of deduction for 
                personal exemptions) for the taxable year.
                  (B) Household income.--The term ``household 
                income'' means, with respect to any taxpayer 
                for any taxable year, an amount equal to the 
                sum of--
                          (i) the modified adjusted gross 
                        income of the taxpayer, plus
                          (ii) the aggregate modified adjusted 
                        gross incomes of all other individuals 
                        who--
                                  (I) were taken into account 
                                in determining the taxpayer's 
                                family size under paragraph 
                                (1), and
                                  (II) were required to file a 
                                return of tax imposed by 
                                section 1 for the taxable year.
                  (C) Modified adjusted gross income.--The term 
                ``modified adjusted gross income'' means 
                adjusted gross income increased by--
                          (i) any amount excluded from gross 
                        income under section 911, and
                          (ii) any amount of interest received 
                        or accrued by the taxpayer during the 
                        taxable year which is exempt from tax.
  (d) Applicable Individual.--For purposes of this section--
          (1) In general.--The term ``applicable individual'' 
        means, with respect to any month, an individual other 
        than an individual described in paragraph (2), (3), or 
        (4).
          (2) Religious exemptions.--
                  (A) Religious conscience exemption.--Such 
                term shall not include any individual for any 
                month if such individual has in effect an 
                exemption under section 1311(d)(4)(H) of the 
                Patient Protection and Affordable Care Act 
                which certifies that such individual is--
                          (i) a member of a recognized 
                        religious sect or division thereof 
                        which is described in section 
                        1402(g)(1), and
                          (ii) an adherent of established 
                        tenets or teachings of such sect or 
                        division as described in such section.
                  (B) Health care sharing ministry.--
                          (i) In general.--Such term shall not 
                        include any individual for any month if 
                        such individual is a member of a health 
                        care sharing ministry for the month.
                          (ii) Health care sharing ministry.--
                        The term ``health care sharing 
                        ministry'' means an organization--
                                  (I) which is described in 
                                section 501(c)(3) and is exempt 
                                from taxation under section 
                                501(a),
                                  (II) members of which share a 
                                common set of ethical or 
                                religious beliefs and share 
                                medical expenses among members 
                                in accordance with those 
                                beliefs and without regard to 
                                the State in which a member 
                                resides or is employed,
                                  (III) members of which retain 
                                membership even after they 
                                develop a medical condition,
                                  (IV) which (or a predecessor 
                                of which) has been in existence 
                                at all times since December 31, 
                                1999, and medical expenses of 
                                its members have been shared 
                                continuously and without 
                                interruption since at least 
                                December 31, 1999, and
                                  (V) which conducts an annual 
                                audit which is performed by an 
                                independent certified public 
                                accounting firm in accordance 
                                with generally accepted 
                                accounting principles and which 
                                is made available to the public 
                                upon request.
          (3) Individuals not lawfully present.--Such term 
        shall not include an individual for any month if for 
        the month the individual is not a citizen or national 
        of the United States or an alien lawfully present in 
        the United States.
          (4) Incarcerated individuals.--Such term shall not 
        include an individual for any month if for the month 
        the individual is incarcerated, other than 
        incarceration pending the disposition of charges.
  (e) Exemptions.--No penalty shall be imposed under subsection 
(a) with respect to--
          (1) Individuals who cannot afford coverage.--
                  (A) In general.--Any applicable individual 
                for any month if the applicable individual's 
                required contribution (determined on an annual 
                basis) for coverage for the month exceeds 8 
                percent of such individual's household income 
                for the taxable year described in section 
                1412(b)(1)(B) of the Patient Protection and 
                Affordable Care Act. For purposes of applying 
                this subparagraph, the taxpayer's household 
                income shall be increased by any exclusion from 
                gross income for any portion of the required 
                contribution made through a salary reduction 
                arrangement.
                  (B) Required contribution.--For purposes of 
                this paragraph, the term ``required 
                contribution'' means--
                          (i) in the case of an individual 
                        eligible to purchase minimum essential 
                        coverage consisting of coverage through 
                        an eligible-employer-sponsored plan, 
                        the portion of the annual premium which 
                        would be paid by the individual 
                        (without regard to whether paid through 
                        salary reduction or otherwise) for 
                        self-only coverage, or
                          (ii) in the case of an individual 
                        eligible only to purchase minimum 
                        essential coverage described in 
                        subsection (f)(1)(C), the annual 
                        premium for the lowest cost bronze plan 
                        available in the individual market 
                        through the Exchange in the State in 
                        the rating area in which the individual 
                        resides (without regard to whether the 
                        individual purchased a qualified health 
                        plan through the Exchange), reduced by 
                        the amount of the credit allowable 
                        under section 36B for the taxable year 
                        (determined as if the individual was 
                        covered by a qualified health plan 
                        offered through the Exchange for the 
                        entire taxable year).
                  (C) Special rules for individuals related to 
                employees.--For purposes of subparagraph 
                (B)(i), if an applicable individual is eligible 
                for minimum essential coverage through an 
                employer by reason of a relationship to an 
                employee, the determination under subparagraph 
                (A) shall be made by reference to required 
                contribution of the employee.
                  (D) Indexing.--In the case of plan years 
                beginning in any calendar year after 2014, 
                subparagraph (A) shall be applied by 
                substituting for ``8 percent'' the percentage 
                the Secretary of Health and Human Services 
                determines reflects the excess of the rate of 
                premium growth between the preceding calendar 
                year and 2013 over the rate of income growth 
                for such period.
          (2) Taxpayers with income below filing threshold.--
        Any applicable individual for any month during a 
        calendar year if the individual's household income for 
        the taxable year described in section 1412(b)(1)(B) of 
        the Patient Protection and Affordable Care Act is the 
        amount of gross income specified in section 6012(a)(1) 
        with respect to the taxpayer.
          (3) Members of Indian tribes.--Any applicable 
        individual for any month during which the individual is 
        a member of an Indian tribe (as defined in section 
        45A(c)(6)).
          (4) Months during short coverage gaps.--
                  (A) In general.--Any month the last day of 
                which occurred during a period in which the 
                applicable individual was not covered by 
                minimum essential coverage for a continuous 
                period of less than 3 months.
                  (B) Special rules.--For purposes of applying 
                this paragraph--
                          (i) the length of a continuous period 
                        shall be determined without regard to 
                        the calendar years in which months in 
                        such period occur,
                          (ii) if a continuous period is 
                        greater than the period allowed under 
                        subparagraph (A), no exception shall be 
                        provided under this paragraph for any 
                        month in the period, and
                          (iii) if there is more than 1 
                        continuous period described in 
                        subparagraph (A) covering months in a 
                        calendar year, the exception provided 
                        by this paragraph shall only apply to 
                        months in the first of such periods.
                The Secretary shall prescribe rules for the 
                collection of the penalty imposed by this 
                section in cases where continuous periods 
                include months in more than 1 taxable year.
          (5) Hardships.--Any applicable individual who for any 
        month is determined by the Secretary of Health and 
        Human Services under section 1311(d)(4)(H) to have 
        suffered a hardship with respect to the capability to 
        obtain coverage under a qualified health plan.
  (f) Minimum Essential Coverage.--For purposes of this 
section--
          (1) In general.--The term ``minimum essential 
        coverage'' means any of the following:
                  (A) Government sponsored programs.--Coverage 
                under--
                          (i) the Medicare program under part A 
                        of title XVIII of the Social Security 
                        Act,
                          (ii) the Medicaid program under title 
                        XIX of the Social Security Act,
                          (iii) the CHIP program under title 
                        XXI of the Social Security Act,
                          (iv) medical coverage under chapter 
                        55 of title 10, United States Code, 
                        including coverage under the TRICARE 
                        program;
                          (v) a health care program under 
                        chapter 17 or 18 of title 38, United 
                        States Code, as determined by the 
                        Secretary of Veterans Affairs, in 
                        coordination with the Secretary of 
                        Health and Human Services and the 
                        Secretary,
                          (vi) a health plan under section 
                        2504(e) of title 22, United States Code 
                        (relating to Peace Corps volunteers); 
                        or
                          (vii) the Nonappropriated Fund Health 
                        Benefits Program of the Department of 
                        Defense, established under section 349 
                        of the National Defense Authorization 
                        Act for Fiscal Year 1995 (Public Law 
                        103-337; 10 U.S.C. 1587 note).
                  (B) Employer-sponsored plan.--Coverage under 
                an eligible employer-sponsored plan.
                  (C) Plans in the individual market.--Coverage 
                under a health plan offered in the individual 
                market within a State.
                  (D) Grandfathered health plan.--Coverage 
                under a grandfathered health plan.
                  (E) Other coverage.--Such other health 
                benefits coverage, such as a State health 
                benefits risk pool, as the Secretary of Health 
                and Human Services, in coordination with the 
                Secretary, recognizes for purposes of this 
                subsection.
          (2) Eligible employer-sponsored plan.--The term 
        ``eligible employer-sponsored plan'' means, with 
        respect to any employee, a group health plan or group 
        health insurance coverage offered by an employer to the 
        employee which is--
                  (A) a governmental plan (within the meaning 
                of section 2791(d)(8) of the Public Health 
                Service Act), or
                  (B) any other plan or coverage offered in the 
                small or large group market within a State.
        Such term shall include a grandfathered health plan 
        described in paragraph (1)(D) offered in a group 
        market.
          (3) Excepted benefits not treated as minimum 
        essential coverage.--The term ``minimum essential 
        coverage'' shall not include health insurance coverage 
        which consists of coverage of excepted benefits--
                  (A) described in paragraph (1) of subsection 
                (c) of section 2791 of the Public Health 
                Service Act; or
                  (B) described in paragraph (2), (3), or (4) 
                of such subsection if the benefits are provided 
                under a separate policy, certificate, or 
                contract of insurance.
          (4) Individuals residing outside United States or 
        residents of territories.--Any applicable individual 
        shall be treated as having minimum essential coverage 
        for any month--
                  (A) if such month occurs during any period 
                described in subparagraph (A) or (B) of section 
                911(d)(1) which is applicable to the 
                individual, or
                  (B) if such individual is a bona fide 
                resident of any possession of the United States 
                (as determined under section 937(a)) for such 
                month.
          (5) Insurance-related terms.--Any term used in this 
        section which is also used in title I of the Patient 
        Protection and Affordable Care Act shall have the same 
        meaning as when used in such title.
  (g) Administration and Procedure.--
          (1) In general.--The penalty provided by this section 
        shall be paid upon notice and demand by the Secretary, 
        and except as provided in paragraph (2), shall be 
        assessed and collected in the same manner as an 
        assessable penalty under subchapter B of chapter 68.
          (2) Special rules.--Notwithstanding any other 
        provision of law--
                  (A) Waiver of criminal penalties.--In the 
                case of any failure by a taxpayer to timely pay 
                any penalty imposed by this section, such 
                taxpayer shall not be subject to any criminal 
                prosecution or penalty with respect to such 
                failure.
                  (B) Limitations on liens and levies.--The 
                Secretary shall not--
                          (i) file notice of lien with respect 
                        to any property of a taxpayer by reason 
                        of any failure to pay the penalty 
                        imposed by this section, or
                          (ii) levy on any such property with 
                        respect to such failure.

           *       *       *       *       *       *       *


                     [CHAPTER 49--COSMETIC SERVICES

[SEC. 5000B. IMPOSITION OF TAX ON INDOOR TANNING SERVICES.

  [(a) In General.--There is hereby imposed on any indoor 
tanning service a tax equal to 10 percent of the amount paid 
for such service (determined without regard to this section), 
whether paid by insurance or otherwise.
  [(b) Indoor Tanning Service.--For purposes of this section--
          [(1) In general.--The term ``indoor tanning service'' 
        means a service employing any electronic product 
        designed to incorporate 1 or more ultraviolet lamps and 
        intended for the irradiation of an individual by 
        ultraviolet radiation, with wavelengths in air between 
        200 and 400 nanometers, to induce skin tanning.
          [(2) Exclusion of phototherapy services.--Such term 
        does not include any phototherapy service performed by 
        a licensed medical professional.
  [(c) Payment of Tax.--
          [(1) In general.--The tax imposed by this section 
        shall be paid by the individual on whom the service is 
        performed.
          [(2) Collection.--Every person receiving a payment 
        for services on which a tax is imposed under subsection 
        (a) shall collect the amount of the tax from the 
        individual on whom the service is performed and remit 
        such tax quarterly to the Secretary at such time and in 
        such manner as provided by the Secretary.
          [(3) Secondary liability.--Where any tax imposed by 
        subsection (a) is not paid at the time payments for 
        indoor tanning services are made, then to the extent 
        that such tax is not collected, such tax shall be paid 
        by the person who performs the service.]

           *       *       *       *       *       *       *


Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


CHAPTER 61--INFORMATION AND RETURNS

           *       *       *       *       *       *       *


Subchapter A--Returns and Records

           *       *       *       *       *       *       *


PART III--INFORMATION RETURNS

           *       *       *       *       *       *       *


   Subpart B--Information Concerning Transactions with Other Persons

Sec. 6041. Information at source.
     * * * * * * *
Sec. 6050X. Returns by health insurance providers relating to health 
          insurance coverage credit.

           *       *       *       *       *       *       *


SEC. 6050X. RETURNS BY HEALTH INSURANCE PROVIDERS RELATING TO HEALTH 
                    INSURANCE COVERAGE CREDIT.

  (a) Requirement of Reporting.--Every person who provides 
eligible health insurance for any month of any calendar year 
with respect to any individual shall, at such time as the 
Secretary may prescribe, make the return described in 
subsection (b) with respect to each such individual. With 
respect to any individual with respect to whom payments under 
section 7529 are made by the Secretary, the reporting under 
subsection (b) shall be made on a monthly basis.
  (b) Form and Manner of Returns.--A return is described in 
this subsection if such return--
          (1) is in such form as the Secretary may prescribe, 
        and
          (2) contains, with respect to each policy of eligible 
        health insurance--
                  (A) the name, address, and TIN of each 
                individual covered under such policy,
                  (B) the premiums paid with respect to such 
                policy,
                  (C) the amount of advance payments made on 
                behalf of the individual under section 7529,
                  (D) the months during which such health 
                insurance is provided to the individual,
                  (E) whether such policy constitutes a high 
                deductible health plan (as defined in section 
                223(c)(2)), and
                  (F) such other information as the Secretary 
                may prescribe.
  (c) Statements to Be Furnished to Individuals With Respect to 
Whom Information Is Required.--Every person required to make a 
return under subsection (a) shall furnish to each individual 
whose name is required to be set forth in such return a written 
statement showing--
          (1) the name and address of the person required to 
        make such return and the phone number of the 
        information contact for such person, and
          (2) the information required to be shown on the 
        return with respect to such individual.
The written statement required under the preceding sentence 
shall be furnished on or before January 31 of the year 
following the calendar year to which such statement relates.
  (d) Definitions.--For purposes of this section, terms used in 
this section which are also used in section 36C shall have the 
same meaning as when used in section 36C.

         Subpart C--Information Regarding Wages Paid Employees

SEC. 6051. RECEIPTS FOR EMPLOYEES.

  (a) Requirement.--Every person required to deduct and 
withhold from an employee a tax under section 3101 or 3402, or 
who would have been required to deduct and withhold a tax under 
section 3402 (determined without regard to subsection (n)) if 
the employee had claimed no more than one withholding 
exemption, or every employer engaged in a trade or business who 
pays remuneration for services performed by an employee, 
including the cash value of such remuneration paid in any 
medium other than cash, shall furnish to each such employee in 
respect of the remuneration paid by such person to such 
employee during the calendar year, on or before January 31 of 
the succeeding year, or, if his employment is terminated before 
the close of such calendar year, within 30 days after the date 
of receipt of a written request from the employee if such 30-
day period ends before January 31, a written statement showing 
the following:
          (1) the name of such person,
          (2) the name of the employee (and an identifying 
        number for the employee if wages as defined in section 
        3121(a) have been paid),
          (3) the total amount of wages as defined in section 
        3401(a),
          (4) the total amount deducted and withheld as tax 
        under section 3402,
          (5) the total amount of wages as defined in section 
        3121(a),
          (6) the total amount deducted and withheld as tax 
        under section 3101,
          (8) the total amount of elective deferrals (within 
        the meaning of section 402(g)(3)) and compensation 
        deferred under section 457, including the amount of 
        designated Roth contributions (as defined in section 
        402A),
          (9) the total amount incurred for dependent care 
        assistance with respect to such employee under a 
        dependent care assistance program described in section 
        129(d),
          (10) in the case of an employee who is a member of 
        the Armed Forces of the United States, such employee's 
        earned income as determined for purposes of section 32 
        (relating to earned income credit),
          (11) the amount contributed to any Archer MSA (as 
        defined in section 220(d)) of such employee or such 
        employee's spouse,
          (12) the amount contributed to any health savings 
        account (as defined in section 223(d)) of such employee 
        or such employee's spouse,
          (13) the total amount of deferrals for the year under 
        a nonqualified deferred compensation plan (within the 
        meaning of section 409A(d)),
          (14) the aggregate cost (determined under rules 
        similar to the rules of section 4980B(f)(4)) of 
        applicable employer-sponsored coverage (as defined in 
        section 4980I(d)(1)), except that this paragraph shall 
        not apply to--
                  (A) coverage to which paragraphs (11) and 
                (12) apply, or
                  (B) the amount of any salary reduction 
                contributions to a flexible spending 
                arrangement (within the meaning of section 
                125), [and]
          (15) the total amount of permitted benefit (as 
        defined in section 9831(d)(3)(C)) for the year under a 
        qualified small employer health reimbursement 
        arrangement (as defined in section 9831(d)(2)) with 
        respect to the employee[.], and
          (16) each month with respect to which the employee is 
        eligible for other specified coverage (as defined in 
        section 36C(g)) in connection with employment with the 
        employer.
In the case of compensation paid for service as a member of a 
uniformed service, the statement shall show, in lieu of the 
amount required to be shown by paragraph (5), the total amount 
of wages as defined in section 3121(a), computed in accordance 
with such section and section 3121(i)(2). In the case of 
compensation paid for service as a volunteer or volunteer 
leader within the meaning of the Peace Corps Act, the statement 
shall show, in lieu of the amount required to be shown by 
paragraph (5), the total amount of wages as defined in section 
3121(a), computed in accordance with such section and section 
3121(i)(3). In the case of tips received by an employee in the 
course of his employment, the amounts required to be shown by 
paragraphs (3) and (5) shall include only such tips as are 
included in statements furnished to the employer pursuant to 
section 6053(a). The amounts required to be shown by paragraph 
(5) shall not include wages which are exempted pursuant to 
sections 3101(c) and 3111(c) from the taxes imposed by sections 
3101 and 3111. In the case of the amounts required to be shown 
by paragraph (13), the Secretary may (by regulation) establish 
a minimum amount of deferrals below which paragraph (13) does 
not apply.
  (b) Special Rule as to Compensation of Members of Armed 
Forces.--In the case of compensation paid for service as a 
member of the Armed Forces, the statement required by 
subsection (a) shall be furnished if any tax was withheld 
during the calendar year under section 3402, or if any of the 
compensation paid during such year is includible in gross 
income under chapter 1, or if during the calendar year any 
amount was required to be withheld as tax under section 3101. 
In lieu of the amount required to be shown by paragraph (3) of 
subsection (a), such statement shall show as wages paid during 
the calendar year the amount of such compensation paid during 
the calendar year which is not excluded from gross income under 
chapter 1 (whether or not such compensation constituted wages 
as defined in section 3401(a)).
  (c) Additional Requirements.--The statements required to be 
furnished pursuant to this section in respect of any 
remuneration shall be furnished at such other times, shall 
contain such other information, and shall be in such form as 
the Secretary may by regulations prescribe. The statements 
required under this section shall also show the proportion of 
the total amount withheld as tax under section 3101 which is 
for financing the cost of hospital insurance benefits under 
part A of title XVIII of the Social Security Act.
  (d) Statements to Constitute Information Returns.--A 
duplicate of any statement made pursuant to this section and in 
accordance with regulations prescribed by the Secretary shall, 
when required by such regulations, be filed with the Secretary.
  (e) Railroad Employees.--
          (1) Additional requirement.--Every person required to 
        deduct and withhold tax under section 3201 from an 
        employee shall include on or with the statement 
        required to be furnished such employee under subsection 
        (a) a notice concerning the provisions of this title 
        with respect to the allowance of a credit or refund of 
        the tax on wages imposed by section 3101(b) and the tax 
        on compensation imposed by section 3201 or 3211 which 
        is treated as a tax on wages imposed by section 
        3101(b).
          (2) Information to be supplied to employees.--Each 
        person required to deduct and withhold tax under 
        section 3201 during any year from an employee who has 
        also received wages during such year subject to the tax 
        imposed by section 3101(b) shall, upon request of such 
        employee, furnish to him a written statement showing--
                  (A) the total amount of compensation with 
                respect to which the tax imposed by section 
                3201 was deducted,
                  (B) the total amount deducted as tax under 
                section 3201, and
                  (C) the portion of the total amount deducted 
                as tax under section 3201 which is for 
                financing the cost of hospital insurance under 
                part A of title XVIII of the Social Security 
                Act.
  (f) Statements Required in Case of Sick Pay Paid by Third 
Parties.--
          (1) Statements required from payor.--
                  (A) In general.--If, during any calendar 
                year, any person makes a payment of third-party 
                sick pay to an employee, such person shall, on 
                or before January 15 of the succeeding year, 
                furnish a written statement to the employer in 
                respect of whom such payment was made showing--
                          (i) the name and, if there is 
                        withholding under section 3402(o), the 
                        social security number of such 
                        employee,
                          (ii) the total amount of the third-
                        party sick pay paid to such employee 
                        during the calendar year, and
                          (iii) the total amount (if any) 
                        deducted and withheld from such sick 
                        pay under section 3402.
                For purposes of the preceding sentence, the 
                term ``third-party sick pay'' means any sick 
                pay (as defined in section 3402(o)(2)(C)) which 
                does not constitute wages for purposes of 
                chapter 24 (determined without regard to 
                section 3402(o)(1)).
                  (B) Special rules.--
                          (i) Statements are in lieu of other 
                        reporting requirements.--The reporting 
                        requirements of subparagraph (A) with 
                        respect to any payments shall, with 
                        respect to such payments, be in lieu of 
                        the requirements of subsection (a) and 
                        of section 6041.
                          (ii) Penalties made applicable.--For 
                        purposes of sections 6674 and 7204, the 
                        statements required to be furnished by 
                        subparagraph (A) shall be treated as 
                        statements required under this section 
                        to be furnished to employees.
          (2) Information required to be furnished by 
        employer.--Every employer who receives a statement 
        under paragraph (1)(A) with respect to sick pay paid to 
        any employee during any calendar year shall, on or 
        before January 31 of the succeeding year, furnish a 
        written statement to such employee showing--
                  (A) the information shown on the statement 
                furnished under paragraph (1)(A), and
                  (B) if any portion of the sick pay is 
                excludable from gross income under section 
                104(a)(3), the portion which is not so 
                excludable and the portion which is so 
                excludable.
        To the extent practicable, the information required 
        under the preceding sentence shall be furnished on or 
        with the statement (if any) required under subsection 
        (a).

           *       *       *       *       *       *       *


       Subpart D--Information Regarding Health Insurance Coverage

SEC. 6055. REPORTING OF HEALTH INSURANCE COVERAGE.

  (a) In General.--Every person who provides minimum essential 
coverage to an individual during a calendar year shall, at such 
time as the Secretary may prescribe, make a return described in 
subsection (b).
  (b) Form and Manner of Return.--
          (1) In general.--A return is described in this 
        subsection if such return--
                  (A) is in such form as the Secretary may 
                prescribe, and
                  (B) contains--
                          (i) the name, address and TIN of the 
                        primary insured and the name and TIN of 
                        each other individual obtaining 
                        coverage under the policy,
                          (ii) the dates during which such 
                        individual was covered under minimum 
                        essential coverage during the calendar 
                        year,
                          (iii) in the case of minimum 
                        essential coverage which consists of 
                        health insurance coverage, information 
                        concerning--
                                  (I) whether or not the 
                                coverage is a qualified health 
                                plan offered through an 
                                Exchange established under 
                                section 1311 of the Patient 
                                Protection and Affordable Care 
                                Act, and
                                  (II) in the case of a 
                                qualified health plan, the 
                                amount (if any) of any advance 
                                payment under section 1412 of 
                                the Patient Protection and 
                                Affordable Care Act of any 
                                cost-sharing reduction under 
                                section 1402 of such Act or of 
                                any premium tax credit under 
                                section 36B with respect to 
                                such coverage, and
                          (iv) such other information as the 
                        Secretary may require.
          (2) Information relating to employer-provided 
        coverage.--If minimum essential coverage provided to an 
        individual under subsection (a) consists of health 
        insurance coverage of a health insurance issuer 
        provided through a group health plan of an employer, a 
        return described in this subsection shall include--
                  (A) the name, address, and employer 
                identification number of the employer 
                maintaining the plan,
                  (B) the portion of the premium (if any) 
                required to be paid by the employer, and
                  (C) if the health insurance coverage is a 
                qualified health plan in the small group market 
                offered through an Exchange, such other 
                information as the Secretary may require for 
                administration of the credit under section 45R 
                (relating to credit for employee health 
                insurance expenses of small employers).
          (3) Information relating to off-exchange premium 
        credit eligible coverage.--If minimum essential 
        coverage provided to an individual under subsection (a) 
        consists of a qualified health plan (as defined in 
        section 36B(c)(3)) which is not enrolled in through an 
        Exchange established under title I of the Patient 
        Protection and Affordable Care Act, a return described 
        in this subsection shall include--
                  (A) a statement that such plan is a qualified 
                health plan (as defined in section 36B(c)(3)),
                  (B) the premiums paid with respect to such 
                coverage,
                  (C) the months during which such coverage is 
                provided to the individual,
                  (D) the adjusted monthly premium for the 
                applicable second lowest cost silver plan (as 
                defined in section 36B(b)(3)) for each such 
                month with respect to such individual, and
                  (E) such other information as the Secretary 
                may prescribe.
        This paragraph shall not apply with respect to coverage 
        provided for any month beginning after December 31, 
        2019.
  (c) Statements to be Furnished to Individuals With Respect to 
Whom Information Is Reported.--
          (1) In general.--Every person required to make a 
        return under subsection (a) shall furnish to each 
        individual whose name is required to be set forth in 
        such return a written statement showing--
                  (A) the name and address of the person 
                required to make such return and the phone 
                number of the information contact for such 
                person, and
                  (B) the information required to be shown on 
                the return with respect to such individual.
          (2) Time for furnishing statements.--The written 
        statement required under paragraph (1) shall be 
        furnished on or before January 31 of the year following 
        the calendar year for which the return under subsection 
        (a) was required to be made.
  (d) Coverage Provided by Governmental Units.--In the case of 
coverage provided by any governmental unit or any agency or 
instrumentality thereof, the officer or employee who enters 
into the agreement to provide such coverage (or the person 
appropriately designated for purposes of this section) shall 
make the returns and statements required by this section.
  (e) Minimum Essential Coverage.--For purposes of this 
section, the term ``minimum essential coverage'' has the 
meaning given such term by section 5000A(f).

           *       *       *       *       *       *       *


Subchapter B--Miscellaneous Provisions

           *       *       *       *       *       *       *


SEC. 6103. CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND RETURN 
                    INFORMATION.

  (a) General Rule.--Returns and return information shall be 
confidential, and except as authorized by this title--
          (1) no officer or employee of the United States,
          (2) no officer or employee of any State, any local 
        law enforcement agency receiving information under 
        subsection (i)(1)(C) or (7)(A), any local child support 
        enforcement agency, or any local agency administering a 
        program listed in subsection (l)(7)(D) who has or had 
        access to returns or return information under this 
        section or section 6104(c), and
          (3) no other person (or officer or employee thereof) 
        who has or had access to returns or return information 
        under subsection (e)(1)(D)(iii), subsection (k)(10), 
        paragraph (6), (10), (12), (16), (19), (20), or (21) of 
        subsection (l), paragraph (2) or (4)(B) of subsection 
        (m), or subsection (n),
shall disclose any return or return information obtained by him 
in any manner in connection with his service as such an officer 
or an employee or otherwise or under the provisions of this 
section. For purposes of this subsection, the term ``officer or 
employee'' includes a former officer or employee.
  (b) Definitions.--For purposes of this section--
          (1) Return.--The term ``return'' means any tax or 
        information return, declaration of estimated tax, or 
        claim for refund required by, or provided for or 
        permitted under, the provisions of this title which is 
        filed with the Secretary by, on behalf of, or with 
        respect to any person, and any amendment or supplement 
        thereto, including supporting schedules, attachments, 
        or lists which are supplemental to, or part of, the 
        return so filed.
          (2) Return information.--The term ``return 
        information'' means--
                  (A) a taxpayer's identity, the nature, 
                source, or amount of his income, payments, 
                receipts, deductions, exemptions, credits, 
                assets, liabilities, net worth, tax liability, 
                tax withheld, deficiencies, overassessments, or 
                tax payments, whether the taxpayer's return 
                was, is being, or will be examined or subject 
                to other investigation or processing, or any 
                other data, received by, recorded by, prepared 
                by, furnished to, or collected by the Secretary 
                with respect to a return or with respect to the 
                determination of the existence, or possible 
                existence, of liability (or the amount thereof) 
                of any person under this title for any tax, 
                penalty, interest, fine, forfeiture, or other 
                imposition, or offense,
                  (B) any part of any written determination or 
                any background file document relating to such 
                written determination (as such terms are 
                defined in section 6110(b)) which is not open 
                to public inspection under section 6110,
                  (C) any advance pricing agreement entered 
                into by a taxpayer and the Secretary and any 
                background information related to such 
                agreement or any application for an advance 
                pricing agreement, and
                  (D) any agreement under section 7121, and any 
                similar agreement, and any background 
                information related to such an agreement or 
                request for such an agreement,
        but such term does not include data in a form which 
        cannot be associated with, or otherwise identify, 
        directly or indirectly, a particular taxpayer. Nothing 
        in the preceding sentence, or in any other provision of 
        law, shall be construed to require the disclosure of 
        standards used or to be used for the selection of 
        returns for examination, or data used or to be used for 
        determining such standards, if the Secretary determines 
        that such disclosure will seriously impair assessment, 
        collection, or enforcement under the internal revenue 
        laws.
          (3) Taxpayer return information.--The term ``taxpayer 
        return information'' means return information as 
        defined in paragraph (2) which is filed with, or 
        furnished to, the Secretary by or on behalf of the 
        taxpayer to whom such return information relates.
          (4) Tax administration.--The term ``tax 
        administration''--
                  (A) means--
                          (i) the administration, management, 
                        conduct, direction, and supervision of 
                        the execution and application of the 
                        internal revenue laws or related 
                        statutes (or equivalent laws and 
                        statutes of a State) and tax 
                        conventions to which the United States 
                        is a party, and
                          (ii) the development and formulation 
                        of Federal tax policy relating to 
                        existing or proposed internal revenue 
                        laws, related statutes, and tax 
                        conventions, and
                  (B) includes assessment, collection, 
                enforcement, litigation, publication, and 
                statistical gathering functions under such 
                laws, statutes, or conventions.
          (5) State.--
                  (A) In general.--The term ``State'' means--
                          (i) any of the 50 States, the 
                        District of Columbia, the Commonwealth 
                        of Puerto Rico, the Virgin Islands, 
                        Guam, American Samoa, and the 
                        Commonwealth of the Northern Mariana 
                        Islands,
                          (ii) for purposes of subsections 
                        (a)(2), (b)(4), (d)(1), (h)(4), and 
                        (p), any municipality--
                                  (I) with a population in 
                                excess of 250,000 (as 
                                determined under the most 
                                recent decennial United States 
                                census data available),
                                  (II) which imposes a tax on 
                                income or wages, and
                                  (III) with which the 
                                Secretary (in his sole 
                                discretion) has entered into an 
                                agreement regarding disclosure, 
                                and
                          (iii) for purposes of subsections 
                        (a)(2), (b)(4), (d)(1), (h)(4), and 
                        (p), any governmental entity--
                                  (I) which is formed and 
                                operated by a qualified group 
                                of municipalities, and
                                  (II) with which the Secretary 
                                (in his sole discretion) has 
                                entered into an agreement 
                                regarding disclosure.
                  (B) Regional income tax agencies.--For 
                purposes of subparagraph (A)(iii)--
                          (i) Qualified group of 
                        municipalities.--The term ``qualified 
                        group of municipalities'' means, with 
                        respect to any governmental entity, 2 
                        or more municipalities--
                                  (I) each of which imposes a 
                                tax on income or wages,
                                  (II) each of which, under the 
                                authority of a State statute, 
                                administers the laws relating 
                                to the imposition of such taxes 
                                through such entity, and
                                  (III) which collectively have 
                                a population in excess of 
                                250,000 (as determined under 
                                the most recent decennial 
                                United States census data 
                                available).
                          (ii) References to state law, etc.--
                        For purposes of applying subparagraph 
                        (A)(iii) to the subsections referred to 
                        in such subparagraph, any reference in 
                        such subsections to State law, 
                        proceedings, or tax returns shall be 
                        treated as references to the law, 
                        proceedings, or tax returns, as the 
                        case may be, of the municipalities 
                        which form and operate the governmental 
                        entity referred to in such 
                        subparagraph.
                          (iii) Disclosure to contractors and 
                        other agents.--Notwithstanding any 
                        other provision of this section, no 
                        return or return information shall be 
                        disclosed to any contractor or other 
                        agent of a governmental entity referred 
                        to in subparagraph (A)(iii) unless such 
                        entity, to the satisfaction of the 
                        Secretary--
                                  (I) has requirements in 
                                effect which require each such 
                                contractor or other agent which 
                                would have access to returns or 
                                return information to provide 
                                safeguards (within the meaning 
                                of subsection (p)(4)) to 
                                protect the confidentiality of 
                                such returns or return 
                                information,
                                  (II) agrees to conduct an on-
                                site review every 3 years (or a 
                                mid-point review in the case of 
                                contracts or agreements of less 
                                than 3 years in duration) of 
                                each contractor or other agent 
                                to determine compliance with 
                                such requirements,
                                  (III) submits the findings of 
                                the most recent review 
                                conducted under subclause (II) 
                                to the Secretary as part of the 
                                report required by subsection 
                                (p)(4)(E), and
                                  (IV) certifies to the 
                                Secretary for the most recent 
                                annual period that such 
                                contractor or other agent is in 
                                compliance with all such 
                                requirements.
                        The certification required by subclause 
                        (IV) shall include the name and address 
                        of each contractor and other agent, a 
                        description of the contract or 
                        agreement with such contractor or other 
                        agent, and the duration of such 
                        contract or agreement. The requirements 
                        of this clause shall not apply to 
                        disclosures pursuant to subsection (n) 
                        for purposes of Federal tax 
                        administration and a rule similar to 
                        the rule of subsection (p)(8)(B) shall 
                        apply for purposes of this clause.
          (6) Taxpayer identity.--The term ``taxpayer 
        identity'' means the name of a person with respect to 
        whom a return is filed, his mailing address, his 
        taxpayer identifying number (as described in section 
        6109), or a combination thereof.
          (7) Inspection.--The terms ``inspected'' and 
        ``inspection'' mean any examination of a return or 
        return information.
          (8) Disclosure.--The term ``disclosure'' means the 
        making known to any person in any manner whatever a 
        return or return information.
          (9) Federal agency.--The term ``Federal agency'' 
        means an agency within the meaning of section 551(1) of 
        title 5, United States Code.
          (10) Chief executive officer.--The term ``chief 
        executive officer'' means, with respect to any 
        municipality, any elected official and the chief 
        official (even if not elected) of such municipality.
          (11) Terrorist incident, threat, or activity.--The 
        term ``terrorist incident, threat, or activity'' means 
        an incident, threat, or activity involving an act of 
        domestic terrorism (as defined in section 2331(5) of 
        title 18, United States Code) or international 
        terrorism (as defined in section 2331(1) of such 
        title).
  (c) Disclosure of Returns and Return Information to Designee 
of Taxpayer.--The Secretary may, subject to such requirements 
and conditions as he may prescribe by regulations, disclose the 
return of any taxpayer, or return information with respect to 
such taxpayer, to such person or persons as the taxpayer may 
designate in a request for or consent to such disclosure, or to 
any other person at the taxpayer's request to the extent 
necessary to comply with a request for information or 
assistance made by the taxpayer to such other person. However, 
return information shall not be disclosed to such person or 
persons if the Secretary determines that such disclosure would 
seriously impair Federal tax administration.
  (d) Disclosure to State Tax Officials and State and Local Law 
Enforcement Agencies.--
          (1) In general.--Returns and return information with 
        respect to taxes imposed by chapters 1, 2, 6, 11, 12, 
        21, 23, 24, 31, 32, 44, 51, and 52 and subchapter D of 
        chapter 36 shall be open to inspection by, or 
        disclosure to, any State agency, body, or commission, 
        or its legal representative, which is charged under the 
        laws of such State with responsibility for the 
        administration of State tax laws for the purpose of, 
        and only to the extent necessary in, the administration 
        of such laws, including any procedures with respect to 
        locating any person who may be entitled to a refund. 
        Such inspection shall be permitted, or such disclosure 
        made, only upon written request by the head of such 
        agency, body, or commission, and only to the 
        representatives of such agency, body, or commission 
        designated in such written request as the individuals 
        who are to inspect or to receive the returns or return 
        information on behalf of such agency, body, or 
        commission. Such representatives shall not include any 
        individual who is the chief executive officer of such 
        State or who is neither an employee or legal 
        representative of such agency, body, or commission nor 
        a person described in subsection (n). However, such 
        return information shall not be disclosed to the extent 
        that the Secretary determines that such disclosure 
        would identify a confidential informant or seriously 
        impair any civil or criminal tax investigation.
          (2) Disclosure to State audit agencies.--
                  (A) In general.--Any returns or return 
                information obtained under paragraph (1) by any 
                State agency, body, or commission may be open 
                to inspection by, or disclosure to, officers 
                and employees of the State audit agency for the 
                purpose of, and only to the extent necessary 
                in, making an audit of the State agency, body, 
                or commission referred to in paragraph (1).
                  (B) State audit agency.--For purposes of 
                subparagraph (A), the term ``State audit 
                agency'' means any State agency, body, or 
                commission which is charged under the laws of 
                the State with the responsibility of auditing 
                State revenues and programs.
          (3) Exception for reimbursement under section 7624.--
        Nothing in this section shall be construed to prevent 
        the Secretary from disclosing to any State or local law 
        enforcement agency which may receive a payment under 
        section 7624 the amount of the recovered taxes with 
        respect to which such a payment may be made.
          (4) Availability and use of death information.--
                  (A) In general.--No returns or return 
                information may be disclosed under paragraph 
                (1) to any agency, body, or commission of any 
                State (or any legal representative thereof) 
                during any period during which a contract 
                meeting the requirements of subparagraph (B) is 
                not in effect between such State and the 
                Secretary of Health and Human Services.
                  (B) Contractual requirements.--A contract 
                meets the requirements of this subparagraph 
                if--
                          (i) such contract requires the State 
                        to furnish the Secretary of Health and 
                        Human Services information concerning 
                        individuals with respect to whom death 
                        certificates (or equivalent documents 
                        maintained by the State or any 
                        subdivision thereof) have been 
                        officially filed with it, and
                          (ii) such contract does not include 
                        any restriction on the use of 
                        information obtained by such Secretary 
                        pursuant to such contract, except that 
                        such contract may provide that such 
                        information is only to be used by the 
                        Secretary (or any other Federal agency) 
                        for purposes of ensuring that Federal 
                        benefits or other payments are not 
                        erroneously paid to deceased 
                        individuals.
                Any information obtained by the Secretary of 
                Health and Human Services under such a contract 
                shall be exempt from disclosure under section 
                552 of title 5, United States Code, and from 
                the requirements of section 552a of such title 
                5.
                  (C) Special exception.--The provisions of 
                subparagraph (A) shall not apply to any State 
                which on July 1, 1993, was not, pursuant to a 
                contract, furnishing the Secretary of Health 
                and Human Services information concerning 
                individuals with respect to whom death 
                certificates (or equivalent documents 
                maintained by the State or any subdivision 
                thereof) have been officially filed with it.
          (5) Disclosure for combined employment tax 
        reporting.--
                  (A) In general.--The Secretary may disclose 
                taxpayer identity information and signatures to 
                any agency, body, or commission of any State 
                for the purpose of carrying out with such 
                agency, body, or commission a combined Federal 
                and State employment tax reporting program 
                approved by the Secretary. Subsections (a)(2) 
                and (p)(4) and sections 7213 and 7213A shall 
                not apply with respect to disclosures or 
                inspections made pursuant to this paragraph.
                  (B) Termination.--The Secretary may not make 
                any disclosure under this paragraph after 
                December 31, 2007.
          (6) Limitation on disclosure regarding regional 
        income tax agencies treated as States.--For purposes of 
        paragraph (1), inspection by or disclosure to an entity 
        described in subsection (b)(5)(A)(iii) shall be for the 
        purpose of, and only to the extent necessary in, the 
        administration of the laws of the member municipalities 
        in such entity relating to the imposition of a tax on 
        income or wages. Such entity may not redisclose any 
        return or return information received pursuant to 
        paragraph (1) to any such member municipality.
  (e) Disclosure to Persons Having Material Interest.--
          (1) In general.--The return of a person shall, upon 
        written request, be open to inspection by or disclosure 
        to--
                  (A) in the case of the return of an 
                individual--
                          (i) that individual,
                          (ii) the spouse of that individual if 
                        the individual and such spouse have 
                        signified their consent to consider a 
                        gift reported on such return as made 
                        one-half by him and one-half by the 
                        spouse pursuant to the provisions of 
                        section 2513; or
                          (iii) the child of that individual 
                        (or such child's legal representative) 
                        to the extent necessary to comply with 
                        the provisions of section 1(g);
                  (B) in the case of an income tax return filed 
                jointly, either of the individuals with respect 
                to whom the return is filed;
                  (C) in the case of the return of a 
                partnership, any person who was a member of 
                such partnership during any part of the period 
                covered by the return;
                  (D) in the case of the return of a 
                corporation or a subsidiary thereof--
                          (i) any person designated by 
                        resolution of its board of directors or 
                        other similar governing body,
                          (ii) any officer or employee of such 
                        corporation upon written request signed 
                        by any principal officer and attested 
                        to by the secretary or other officer,
                          (iii) any bona fide shareholder of 
                        record owning 1 percent or more of the 
                        outstanding stock of such corporation,
                          (iv) if the corporation was an S 
                        corporation, any person who was a 
                        shareholder during any part of the 
                        period covered by such return during 
                        which an election under section 1362(a) 
                        was in effect, or
                          (v) if the corporation has been 
                        dissolved, any person authorized by 
                        applicable State law to act for the 
                        corporation or any person who the 
                        Secretary finds to have a material 
                        interest which will be affected by 
                        information contained therein;
                  (E) in the case of the return of an estate--
                          (i) the administrator, executor, or 
                        trustee of such estate, and
                          (ii) any heir at law, next of kin, or 
                        beneficiary under the will, of the 
                        decedent, but only if the Secretary 
                        finds that such heir at law, next of 
                        kin, or beneficiary has a material 
                        interest which will be affected by 
                        information contained therein; and
                  (F) in the case of the return of a trust--
                          (i) the trustee or trustees, jointly 
                        or separately, and
                          (ii) any beneficiary of such trust, 
                        but only if the Secretary finds that 
                        such beneficiary has a material 
                        interest which will be affected by 
                        information contained therein.
          (2) Incompetency.--If an individual described in 
        paragraph (1) is legally incompetent, the applicable 
        return shall, upon written request, be open to 
        inspection by or disclosure to the committee, trustee, 
        or guardian of his estate.
          (3) Deceased individuals.--The return of a decedent 
        shall, upon written request, be open to inspection by 
        or disclosure to--
                  (A) the administrator, executor, or trustee 
                of his estate, and
                  (B) any heir at law, next of kin, or 
                beneficiary under the will, of such decedent, 
                or a donee of property, but only if the 
                Secretary finds that such heir at law, next of 
                kin, beneficiary, or donee has a material 
                interest which will be affected by information 
                contained therein.
          (4) Title 11 cases and receivership proceedings.--
        If--
                  (A) there is a trustee in a title 11 case in 
                which the debtor is the person with respect to 
                whom the return is filed, or
                  (B) substantially all of the property of the 
                person with respect to whom the return is filed 
                is in the hands of a receiver,
        such return or returns for prior years of such person 
        shall, upon written request, be open to inspection by 
        or disclosure to such trustee or receiver, but only if 
        the Secretary finds that such trustee or receiver, in 
        his fiduciary capacity, has a material interest which 
        will be affected by information contained therein.
          (5) Individual's title 11 case.--
                  (A) In general.--In any case to which section 
                1398 applies (determined without regard to 
                section 1398(b)(1)), any return of the debtor 
                for the taxable year in which the case 
                commenced or any preceding taxable year shall, 
                upon written request, be open to inspection by 
                or disclosure to the trustee in such case.
                  (B) Return of estate available to debtor.--
                Any return of an estate in a case to which 
                section 1398 applies shall, upon written 
                request, be open to inspection by or disclosure 
                to the debtor in such case.
                  (C) Special rule for involuntary cases.--In 
                an involuntary case, no disclosure shall be 
                made under subparagraph (A) until the order for 
                relief has been entered by the court having 
                jurisdiction of such case unless such court 
                finds that such disclosure is appropriate for 
                purposes of determining whether an order for 
                relief should be entered.
          (6) Attorney in fact.--Any return to which this 
        subsection applies shall, upon written request, also be 
        open to inspection by or disclosure to the attorney in 
        fact duly authorized in writing by any of the persons 
        described in paragraph (1), (2), (3), (4), (5), (8), or 
        (9) to inspect the return or receive the information on 
        his behalf, subject to the conditions provided in such 
        paragraphs.
          (7) Return information.--Return information with 
        respect to any taxpayer may be open to inspection by or 
        disclosure to any person authorized by this subsection 
        to inspect any return of such taxpayer if the Secretary 
        determines that such disclosure would not seriously 
        impair Federal tax administration.
          (8) Disclosure of collection activities with respect 
        to joint return.--If any deficiency of tax with respect 
        to a joint return is assessed and the individuals 
        filing such return are no longer married or no longer 
        reside in the same household, upon request in writing 
        by either of such individuals, the Secretary shall 
        disclose in writing to the individual making the 
        request whether the Secretary has attempted to collect 
        such deficiency from such other individual, the general 
        nature of such collection activities, and the amount 
        collected. The preceding sentence shall not apply to 
        any deficiency which may not be collected by reason of 
        section 6502.
          (9) Disclosure of certain information where more than 
        1 person subject to penalty under section 6672.--If the 
        Secretary determines that a person is liable for a 
        penalty under section 6672(a) with respect to any 
        failure, upon request in writing of such person, the 
        Secretary shall disclose in writing to such person--
                  (A) the name of any other person whom the 
                Secretary has determined to be liable for such 
                penalty with respect to such failure, and
                  (B) whether the Secretary has attempted to 
                collect such penalty from such other person, 
                the general nature of such collection 
                activities, and the amount collected.
          (10) Limitation on certain disclosures under this 
        subsection.--In the case of an inspection or disclosure 
        under this subsection relating to the return of a 
        partnership, S corporation, trust, or an estate, the 
        information inspected or disclosed shall not include 
        any supporting schedule, attachment, or list which 
        includes the taxpayer identity information of a person 
        other than the entity making the return or the person 
        conducting the inspection or to whom the disclosure is 
        made.
          (11) Disclosure of information regarding status of 
        investigation of violation of this section.--In the 
        case of a person who provides to the Secretary 
        information indicating a violation of section 7213, 
        7213A, or 7214 with respect to any return or return 
        information of such person, the Secretary may disclose 
        to such person (or such person's designee)--
                  (A) whether an investigation based on the 
                person's provision of such information has been 
                initiated and whether it is open or closed,
                  (B) whether any such investigation 
                substantiated such a violation by any 
                individual, and
                  (C) whether any action has been taken with 
                respect to such individual (including whether a 
                referral has been made for prosecution of such 
                individual).
  (f) Disclosure to Committees of Congress.--
          (1) Committee on Ways and Means, Committee on 
        Finance, and Joint Committee on Taxation.--Upon written 
        request from the chairman of the Committee on Ways and 
        Means of the House of Representatives, the chairman of 
        the Committee on Finance of the Senate, or the chairman 
        of the Joint Committee on Taxation, the Secretary shall 
        furnish such committee with any return or return 
        information specified in such request, except that any 
        return or return information which can be associated 
        with, or otherwise identify, directly or indirectly, a 
        particular taxpayer shall be furnished to such 
        committee only when sitting in closed executive session 
        unless such taxpayer otherwise consents in writing to 
        such disclosure.
          (2) Chief of Staff of Joint Committee on Taxation.--
        Upon written request by the Chief of Staff of the Joint 
        Committee on Taxation, the Secretary shall furnish him 
        with any return or return information specified in such 
        request. Such Chief of Staff may submit such return or 
        return information to any committee described in 
        paragraph (1), except that any return or return 
        information which can be associated with, or otherwise 
        identify, directly or indirectly, a particular taxpayer 
        shall be furnished to such committee only when sitting 
        in closed executive session unless such taxpayer 
        otherwise consents in writing to such disclosure.
          (3) Other committees.--Pursuant to an action by, and 
        upon written request by the chairman of, a committee of 
        the Senate or the House of Representatives (other than 
        a committee specified in paragraph (1)) specially 
        authorized to inspect any return or return information 
        by a resolution of the Senate or the House of 
        Representatives or, in the case of a joint committee 
        (other than the joint committee specified in paragraph 
        (1)) by concurrent resolution, the Secretary shall 
        furnish such committee, or a duly authorized and 
        designated subcommittee thereof, sitting in closed 
        executive session, with any return or return 
        information which such resolution authorizes the 
        committee or subcommittee to inspect. Any resolution 
        described in this paragraph shall specify the purpose 
        for which the return or return information is to be 
        furnished and that such information cannot reasonably 
        be obtained from any other source.
          (4) Agents of committees and submission of 
        information to Senate or House of Representatives.--
                  (A) Committees described in paragraph (1).--
                Any committee described in paragraph (1) or the 
                Chief of Staff of the Joint Committee on 
                Taxation shall have the authority, acting 
                directly, or by or through such examiners or 
                agents as the chairman of such committee or 
                such chief of staff may designate or appoint, 
                to inspect returns and return information at 
                such time and in such manner as may be 
                determined by such chairman or chief of staff. 
                Any return or return information obtained by or 
                on behalf of such committee pursuant to the 
                provisions of this subsection may be submitted 
                by the committee to the Senate or the House of 
                Representatives, or to both. The Joint 
                Committee on Taxation may also submit such 
                return or return information to any other 
                committee described in paragraph (1), except 
                that any return or return information which can 
                be associated with, or otherwise identify, 
                directly or indirectly, a particular taxpayer 
                shall be furnished to such committee only when 
                sitting in closed executive session unless such 
                taxpayer otherwise consents in writing to such 
                disclosure.
                  (B) Other committees.--Any committee or 
                subcommittee described in paragraph (3) shall 
                have the right, acting directly, or by or 
                through no more than four examiners or agents, 
                designated or appointed in writing in equal 
                numbers by the chairman and ranking minority 
                member of such committee or subcommittee, to 
                inspect returns and return information at such 
                time and in such manner as may be determined by 
                such chairman and ranking minority member. Any 
                return or return information obtained by or on 
                behalf of such committee or subcommittee 
                pursuant to the provisions of this subsection 
                may be submitted by the committee to the Senate 
                or the House of Representatives, or to both, 
                except that any return or return information 
                which can be associated with, or otherwise 
                identify, directly or indirectly, a particular 
                taxpayer, shall be furnished to the Senate or 
                the House of Representatives only when sitting 
                in closed executive session unless such 
                taxpayer otherwise consents in writing to such 
                disclosure.
          (5) Disclosure by whistleblower.--Any person who 
        otherwise has or had access to any return or return 
        information under this section may disclose such return 
        or return information to a committee referred to in 
        paragraph (1) or any individual authorized to receive 
        or inspect information under paragraph (4)(A) if such 
        person believes such return or return information may 
        relate to possible misconduct, maladministration, or 
        taxpayer abuse.
  (g) Disclosure to President and Certain Other Persons.--
          (1) In general.--Upon written request by the 
        President, signed by him personally, the Secretary 
        shall furnish to the President, or to such employee or 
        employees of the White House Office as the President 
        may designate by name in such request, a return or 
        return information with respect to any taxpayer named 
        in such request. Any such request shall state--
                  (A) the name and address of the taxpayer 
                whose return or return information is to be 
                disclosed,
                  (B) the kind of return or return information 
                which is to be disclosed,
                  (C) the taxable period or periods covered by 
                such return or return information, and
                  (D) the specific reason why the inspection or 
                disclosure is requested.
          (2) Disclosure of return information as to 
        Presidential appointees and certain other Federal 
        Government appointees.--The Secretary may disclose to a 
        duly authorized representative of the Executive Office 
        of the President or to the head of any Federal agency, 
        upon written request by the President or head of such 
        agency, or to the Federal Bureau of Investigation on 
        behalf of and upon written request by the President or 
        such head, return information with respect to an 
        individual who is designated as being under 
        consideration for appointment to a position in the 
        executive or judicial branch of the Federal Government. 
        Such return information shall be limited to whether 
        such individual--
                  (A) has filed returns with respect to the 
                taxes imposed under chapter 1 for not more than 
                the immediately preceding 3 years;
                  (B) has failed to pay any tax within 10 days 
                after notice and demand, or has been assessed 
                any penalty under this title for negligence, in 
                the current year or immediately preceding 3 
                years;
                  (C) has been or is under investigation for 
                possible criminal offenses under the internal 
                revenue laws and the results of any such 
                investigation; or
                  (D) has been assessed any civil penalty under 
                this title for fraud.
        Within 3 days of the receipt of any request for any 
        return information with respect to any individual under 
        this paragraph, the Secretary shall notify such 
        individual in writing that such information has been 
        requested under the provisions of this paragraph.
          (3) Restriction on disclosure.--The employees to whom 
        returns and return information are disclosed under this 
        subsection shall not disclose such returns and return 
        information to any other person except the President or 
        the head of such agency without the personal written 
        direction of the President or the head of such agency.
          (4) Restriction on disclosure to certain employees.--
        Disclosure of returns and return information under this 
        subsection shall not be made to any employee whose 
        annual rate of basic pay is less than the annual rate 
        of basic pay specified for positions subject to section 
        5316 of title 5, United States Code.
          (5) Reporting requirements.--Within 30 days after the 
        close of each calendar quarter, the President and the 
        head of any agency requesting returns and return 
        information under this subsection shall each file a 
        report with the Joint Committee on Taxation setting 
        forth the taxpayers with respect to whom such requests 
        were made during such quarter under this subsection, 
        the returns or return information involved, and the 
        reasons for such requests. The President shall not be 
        required to report on any request for returns and 
        return information pertaining to an individual who was 
        an officer or employee of the executive branch of the 
        Federal Government at the time such request was made. 
        Reports filed pursuant to this paragraph shall not be 
        disclosed unless the Joint Committee on Taxation 
        determines that disclosure thereof (including 
        identifying details) would be in the national interest. 
        Such reports shall be maintained by the Joint Committee 
        on Taxation for a period not exceeding 2 years unless, 
        within such period, the Joint Committee on Taxation 
        determines that a disclosure to the Congress is 
        necessary.
  (h) Disclosure to Certain Federal Officers and Employees for 
Purposes of Tax Administration, Etc..--
          (1) Department of the Treasury.--Returns and return 
        information shall, without written request, be open to 
        inspection by or disclosure to officers and employees 
        of the Department of the Treasury whose official duties 
        require such inspection or disclosure for tax 
        administration purposes.
          (2) Department of Justice.--In a matter involving tax 
        administration, a return or return information shall be 
        open to inspection by or disclosure to officers and 
        employees of the Department of Justice (including 
        United States attorneys) personally and directly 
        engaged in, and solely for their use in, any proceeding 
        before a Federal grand jury or preparation for any 
        proceeding (or investigation which may result in such a 
        proceeding) before a Federal grand jury or any Federal 
        or State court, but only if--
                  (A) the taxpayer is or may be a party to the 
                proceeding, or the proceeding arose out of, or 
                in connection with, determining the taxpayer's 
                civil or criminal liability, or the collection 
                of such civil liability in respect of any tax 
                imposed under this title;
                  (B) the treatment of an item reflected on 
                such return is or may be related to the 
                resolution of an issue in the proceeding or 
                investigation; or
                  (C) such return or return information relates 
                or may relate to a transactional relationship 
                between a person who is or may be a party to 
                the proceeding and the taxpayer which affects, 
                or may affect, the resolution of an issue in 
                such proceeding or investigation.
          (3) Form of request.--In any case in which the 
        Secretary is authorized to disclose a return or return 
        information to the Department of Justice pursuant to 
        the provisions of this subsection--
                  (A) if the Secretary has referred the case to 
                the Department of Justice, or if the proceeding 
                is authorized by subchapter B of chapter 76, 
                the Secretary may make such disclosure on his 
                own motion, or
                  (B) if the Secretary receives a written 
                request from the Attorney General, the Deputy 
                Attorney General, or an Assistant Attorney 
                General for a return of, or return information 
                relating to, a person named in such request and 
                setting forth the need for the disclosure, the 
                Secretary shall disclose return or return the 
                information so requested.
          (4) Disclosure in judicial and administrative tax 
        proceedings.--A return or return information may be 
        disclosed in a Federal or State judicial or 
        administrative proceeding pertaining to tax 
        administration, but only--
                  (A) if the taxpayer is a party to the 
                proceeding, or the proceeding arose out of, or 
                in connection with, determining the taxpayer's 
                civil or criminal liability, or the collection 
                of such civil liability, in respect of any tax 
                imposed under this title;
                  (B) if the treatment of an item reflected on 
                such return is directly related to the 
                resolution of an issue in the proceeding;
                  (C) if such return or return information 
                directly relates to a transactional 
                relationship between a person who is a party to 
                the proceeding and the taxpayer which directly 
                affects the resolution of an issue in the 
                proceeding; or
                  (D) to the extent required by order of a 
                court pursuant to section 3500 of title 18, 
                United States Code, or rule 16 of the Federal 
                Rules of Criminal Procedure, such court being 
                authorized in the issuance of such order to 
                give due consideration to congressional policy 
                favoring the confidentiality of returns and 
                return information as set forth in this title.
        However, such return or return information shall not be 
        disclosed as provided in subparagraph (A), (B), or (C) 
        if the Secretary determines that such disclosure would 
        identify a confidential informant or seriously impair a 
        civil or criminal tax investigation.
          (5) Withholding of tax from social security 
        benefits.--Upon written request of the payor agency, 
        the Secretary may disclose available return information 
        from the master files of the Internal Revenue Service 
        with respect to the address and status of an individual 
        as a nonresident alien or as a citizen or resident of 
        the United States to the Social Security Administration 
        or the Railroad Retirement Board (whichever is 
        appropriate) for purposes of carrying out its 
        responsibilities for withholding tax under section 1441 
        from social security benefits (as defined in section 
        86(d)).
          (6) Internal Revenue Service Oversight Board.--
                  (A) In general.--Notwithstanding paragraph 
                (1), and except as provided in subparagraph 
                (B), no return or return information may be 
                disclosed to any member of the Oversight Board 
                described in subparagraph (A) or (D) of section 
                7802(b)(1) or to any employee or detailee of 
                such Board by reason of their service with the 
                Board. Any request for information not 
                permitted to be disclosed under the preceding 
                sentence, and any contact relating to a 
                specific taxpayer, made by any such individual 
                to an officer or employee of the Internal 
                Revenue Service shall be reported by such 
                officer or employee to the Secretary, the 
                Treasury Inspector General for Tax 
                Administration, and the Joint Committee on 
                Taxation.
                  (B) Exception for reports to the Board.--If--
                          (i) the Commissioner or the Treasury 
                        Inspector General for Tax 
                        Administration prepares any report or 
                        other matter for the Oversight Board in 
                        order to assist the Board in carrying 
                        out its duties; and
                          (ii) the Commissioner or such 
                        Inspector General determines it is 
                        necessary to include any return or 
                        return information in such report or 
                        other matter to enable the Board to 
                        carry out such duties, such return or 
                        return information (other than 
                        information regarding taxpayer 
                        identity) may be disclosed to members, 
                        employees, or detailees of the Board 
                        solely for the purpose of carrying out 
                        such duties.
  (i) Disclosure to Federal Officers or Employees for 
Administration of Federal Laws Not Relating to Tax 
Administration.--
          (1) Disclosure of returns and return information for 
        use in criminal investigations.--
                  (A) In general.--Except as provided in 
                paragraph (6), any return or return information 
                with respect to any specified taxable period or 
                periods shall, pursuant to and upon the grant 
                of an ex parte order by a Federal district 
                court judge or magistrate judge under 
                subparagraph (B), be open (but only to the 
                extent necessary as provided in such order) to 
                inspection by, or disclosure to, officers and 
                employees of any Federal agency who are 
                personally and directly engaged in--
                          (i) preparation for any judicial or 
                        administrative proceeding pertaining to 
                        the enforcement of a specifically 
                        designated Federal criminal statute 
                        (not involving tax administration) to 
                        which the United States or such agency 
                        is or may be a party, or pertaining to 
                        the case of a missing or exploited 
                        child,
                          (ii) any investigation which may 
                        result in such a proceeding, or
                          (iii) any Federal grand jury 
                        proceeding pertaining to enforcement of 
                        such a criminal statute to which the 
                        United States or such agency is or may 
                        be a party, or to such a case of a 
                        missing or exploited child,
                solely for the use of such officers and 
                employees in such preparation, investigation, 
                or grand jury proceeding.
                  (B) Application for order.--The Attorney 
                General, the Deputy Attorney General, the 
                Associate Attorney General, any Assistant 
                Attorney General, any United States attorney, 
                any special prosecutor appointed under section 
                593 of title 28, United States Code, or any 
                attorney in charge of a criminal division 
                organized crime strike force established 
                pursuant to section 510 of title 28, United 
                States Code, may authorize an application to a 
                Federal district court judge or magistrate 
                judge for the order referred to in subparagraph 
                (A). Upon such application, such judge or 
                magistrate judge may grant such order if he 
                determines on the basis of the facts submitted 
                by the applicant that--
                          (i) there is reasonable cause to 
                        believe, based upon information 
                        believed to be reliable, that a 
                        specific criminal act has been 
                        committed,
                          (ii) there is reasonable cause to 
                        believe that the return or return 
                        information is or may be relevant to a 
                        matter relating to the commission of 
                        such act, and
                          (iii) the return or return 
                        information is sought exclusively for 
                        use in a Federal criminal investigation 
                        or proceeding concerning such act (or 
                        any criminal investigation or 
                        proceeding, in the case of a matter 
                        relating to a missing or exploited 
                        child), and the information sought to 
                        be disclosed cannot reasonably be 
                        obtained, under the circumstances, from 
                        another source.
                  (C) Disclosure to State and local law 
                enforcement agencies in the case of matters 
                pertaining to a missing or exploited child.--
                          (i) In general.--In the case of an 
                        investigation pertaining to a missing 
                        or exploited child, the head of any 
                        Federal agency, or his designee, may 
                        disclose any return or return 
                        information obtained under subparagraph 
                        (A) to officers and employees of any 
                        State or local law enforcement agency, 
                        but only if--
                                  (I) such State or local law 
                                enforcement agency is part of a 
                                team with the Federal agency in 
                                such investigation, and
                                  (II) such information is 
                                disclosed only to such officers 
                                and employees who are 
                                personally and directly engaged 
                                in such investigation.
                          (ii) Limitation on use of 
                        information.--Information disclosed 
                        under this subparagraph shall be solely 
                        for the use of such officers and 
                        employees in locating the missing 
                        child, in a grand jury proceeding, or 
                        in any preparation for, or 
                        investigation which may result in, a 
                        judicial or administrative proceeding.
                          (iii) Missing child.--For purposes of 
                        this subparagraph, the term ``missing 
                        child'' shall have the meaning given 
                        such term by section 403 of the Missing 
                        Children's Assistance Act (42 U.S.C. 
                        5772).
                          (iv) Exploited child.--For purposes 
                        of this subparagraph, the term 
                        ``exploited child'' means a minor with 
                        respect to whom there is reason to 
                        believe that a specified offense 
                        against a minor (as defined by section 
                        111(7) of the Sex Offender Registration 
                        and Notification Act (42 U.S.C. 
                        16911(7))) has or is occurring.
          (2) Disclosure of return information other than 
        taxpayer return information for use in criminal 
        investigations.--
                  (A) In general.--Except as provided in 
                paragraph (6), upon receipt by the Secretary of 
                a request which meets the requirements of 
                subparagraph (B) from the head of any Federal 
                agency or the Inspector General thereof, or, in 
                the case of the Department of Justice, the 
                Attorney General, the Deputy Attorney General, 
                the Associate Attorney General, any Assistant 
                Attorney General, the Director of the Federal 
                Bureau of Investigation, the Administrator of 
                the Drug Enforcement Administration, any United 
                States attorney, any special prosecutor 
                appointed under section 593 of title 28, United 
                States Code, or any attorney in charge of a 
                criminal division organized crime strike force 
                established pursuant to section 510 of title 
                28, United States Code, the Secretary shall 
                disclose return information (other than 
                taxpayer return information) to officers and 
                employees of such agency who are personally and 
                directly engaged in--
                          (i) preparation for any judicial or 
                        administrative proceeding described in 
                        paragraph (1)(A)(i),
                          (ii) any investigation which may 
                        result in such a proceeding, or
                          (iii) any grand jury proceeding 
                        described in paragraph (1)(A)(iii),
                solely for the use of such officers and 
                employees in such preparation, investigation, 
                or grand jury proceeding.
                  (B) Requirements.--A request meets the 
                requirements of this subparagraph if the 
                request is in writing and sets forth--
                          (i) the name and address of the 
                        taxpayer with respect to whom the 
                        requested return information relates;
                          (ii) the taxable period or periods to 
                        which such return information relates;
                          (iii) the statutory authority under 
                        which the proceeding or investigation 
                        described in subparagraph (A) is being 
                        conducted; and
                          (iv) the specific reason or reasons 
                        why such disclosure is, or may be, 
                        relevant to such proceeding or 
                        investigation.
                  (C) Taxpayer identity.--For purposes of this 
                paragraph, a taxpayer's identity shall not be 
                treated as taxpayer return information.
          (3) Disclosure of return information to apprise 
        appropriate officials of criminal or terrorist 
        activities or emergency circumstances.--
                  (A) Possible violations of Federal criminal 
                law.--
                          (i) In general.--Except as provided 
                        in paragraph (6), the Secretary may 
                        disclose in writing return information 
                        (other than taxpayer return 
                        information) which may constitute 
                        evidence of a violation of any Federal 
                        criminal law (not involving tax 
                        administration) to the extent necessary 
                        to apprise the head of the appropriate 
                        Federal agency charged with the 
                        responsibility of enforcing such law. 
                        The head of such agency may disclose 
                        such return information to officers and 
                        employees of such agency to the extent 
                        necessary to enforce such law.
                          (ii) Taxpayer identity.--If there is 
                        return information (other than taxpayer 
                        return information) which may 
                        constitute evidence of a violation by 
                        any taxpayer of any Federal criminal 
                        law (not involving tax administration), 
                        such taxpayer's identity may also be 
                        disclosed under clause (i).
                  (B) Emergency circumstances.--
                          (i) Danger of death or physical 
                        injury.--Under circumstances involving 
                        an imminent danger of death or physical 
                        injury to any individual, the Secretary 
                        may disclose return information to the 
                        extent necessary to apprise appropriate 
                        officers or employees of any Federal or 
                        State law enforcement agency of such 
                        circumstances.
                          (ii) Flight from Federal 
                        prosecution.--Under circumstances 
                        involving the imminent flight of any 
                        individual from Federal prosecution, 
                        the Secretary may disclose return 
                        information to the extent necessary to 
                        apprise appropriate officers or 
                        employees of any Federal law 
                        enforcement agency of such 
                        circumstances.
                  (C) Terrorist activities, etc..--
                          (i) In general.--Except as provided 
                        in paragraph (6), the Secretary may 
                        disclose in writing return information 
                        (other than taxpayer return 
                        information) that may be related to a 
                        terrorist incident, threat, or activity 
                        to the extent necessary to apprise the 
                        head of the appropriate Federal law 
                        enforcement agency responsible for 
                        investigating or responding to such 
                        terrorist incident, threat, or 
                        activity. The head of the agency may 
                        disclose such return information to 
                        officers and employees of such agency 
                        to the extent necessary to investigate 
                        or respond to such terrorist incident, 
                        threat, or activity.
                          (ii) Disclosure to the Department of 
                        Justice.--Returns and taxpayer return 
                        information may also be disclosed to 
                        the Attorney General under clause (i) 
                        to the extent necessary for, and solely 
                        for use in preparing, an application 
                        under paragraph (7)(D).
                          (iii) Taxpayer identity.--For 
                        purposes of this subparagraph, a 
                        taxpayer's identity shall not be 
                        treated as taxpayer return information.
          (4) Use of certain disclosed returns and return 
        information in judicial or administrative 
        proceedings.--
                  (A) Returns and taxpayer return 
                information.--Except as provided in 
                subparagraph (C), any return or taxpayer return 
                information obtained under paragraph (1) or 
                (7)(C) may be disclosed in any judicial or 
                administrative proceeding pertaining to 
                enforcement of a specifically designated 
                Federal criminal statute or related civil 
                forfeiture (not involving tax administration) 
                to which the United States or a Federal agency 
                is a party--
                          (i) if the court finds that such 
                        return or taxpayer return information 
                        is probative of a matter in issue 
                        relevant in establishing the commission 
                        of a crime or the guilt or liability of 
                        a party, or
                          (ii) to the extent required by order 
                        of the court pursuant to section 3500 
                        of title 18, United States Code, or 
                        rule 16 of the Federal Rules of 
                        Criminal Procedure.
                  (B) Return information (other than taxpayer 
                return information).--Except as provided in 
                subparagraph (C), any return information (other 
                than taxpayer return information) obtained 
                under paragraph (1), (2), (3)(A) or (C), or (7) 
                may be disclosed in any judicial or 
                administrative proceeding pertaining to 
                enforcement of a specifically designated 
                Federal criminal statute or related civil 
                forfeiture (not involving tax administration) 
                to which the United States or a Federal agency 
                is a party.
                  (C) Confidential informant; impairment of 
                investigations.--No return or return 
                information shall be admitted into evidence 
                under subparagraph (A)(i) or (B) if the 
                Secretary determines and notifies the Attorney 
                General or his delegate or the head of the 
                Federal agency that such admission would 
                identify a confidential informant or seriously 
                impair a civil or criminal tax investigation.
                  (D) Consideration of confidentiality 
                policy.--In ruling upon the admissibility of 
                returns or return information, and in the 
                issuance of an order under subparagraph 
                (A)(ii), the court shall give due consideration 
                to congressional policy favoring the 
                confidentiality of returns and return 
                information as set forth in this title.
                  (E) Reversible error.--The admission into 
                evidence of any return or return information 
                contrary to the provisions of this paragraph 
                shall not, as such, constitute reversible error 
                upon appeal of a judgment in the proceeding.
          (5) Disclosure to locate fugitives from justice.--
                  (A) In general.--Except as provided in 
                paragraph (6), the return of an individual or 
                return information with respect to such 
                individual shall, pursuant to and upon the 
                grant of an ex parte order by a Federal 
                district court judge or magistrate judge under 
                subparagraph (B), be open (but only to the 
                extent necessary as provided in such order) to 
                inspection by, or disclosure to, officers and 
                employees of any Federal agency exclusively for 
                use in locating such individual.
                  (B) Application for order.--Any person 
                described in paragraph (1)(B) may authorize an 
                application to a Federal district court judge 
                or magistrate judge for an order referred to in 
                subparagraph (A). Upon such application, such 
                judge or magistrate judge may grant such order 
                if he determines on the basis of the facts 
                submitted by the applicant that--
                          (i) a Federal arrest warrant relating 
                        to the commission of a Federal felony 
                        offense has been issued for an 
                        individual who is a fugitive from 
                        justice,
                          (ii) the return of such individual or 
                        return information with respect to such 
                        individual is sought exclusively for 
                        use in locating such individual, and
                          (iii) there is reasonable cause to 
                        believe that such return or return 
                        information may be relevant in 
                        determining the location of such 
                        individual.
          (6) Confidential informants; impairment of 
        investigations.--The Secretary shall not disclose any 
        return or return information under paragraph (1), (2), 
        (3)(A) or (C), (5), (7), or (8) if the Secretary 
        determines (and, in the case of a request for 
        disclosure pursuant to a court order described in 
        paragraph (1)(B) or (5)(B), certifies to the court) 
        that such disclosure would identify a confidential 
        informant or seriously impair a civil or criminal tax 
        investigation.
          (7) Disclosure upon request of information relating 
        to terrorist activities, etc..--
                  (A) Disclosure to law enforcement agencies.--
                          (i) In general.--Except as provided 
                        in paragraph (6), upon receipt by the 
                        Secretary of a written request which 
                        meets the requirements of clause (iii), 
                        the Secretary may disclose return 
                        information (other than taxpayer return 
                        information) to officers and employees 
                        of any Federal law enforcement agency 
                        who are personally and directly engaged 
                        in the response to or investigation of 
                        any terrorist incident, threat, or 
                        activity.
                          (ii) Disclosure to State and local 
                        law enforcement agencies.--The head of 
                        any Federal law enforcement agency may 
                        disclose return information obtained 
                        under clause (i) to officers and 
                        employees of any State or local law 
                        enforcement agency but only if such 
                        agency is part of a team with the 
                        Federal law enforcement agency in such 
                        response or investigation and such 
                        information is disclosed only to 
                        officers and employees who are 
                        personally and directly engaged in such 
                        response or investigation.
                          (iii) Requirements.--A request meets 
                        the requirements of this clause if--
                                  (I) the request is made by 
                                the head of any Federal law 
                                enforcement agency (or his 
                                delegate) involved in the 
                                response to or investigation of 
                                any terrorist incident, threat, 
                                or activity, and
                                  (II) the request sets forth 
                                the specific reason or reasons 
                                why such disclosure may be 
                                relevant to a terrorist 
                                incident, threat, or activity.
                          (iv) Limitation on use of 
                        information.--Information disclosed 
                        under this subparagraph shall be solely 
                        for the use of the officers and 
                        employees to whom such information is 
                        disclosed in such response or 
                        investigation.
                          (v) Taxpayer identity.--For purposes 
                        of this subparagraph, a taxpayer's 
                        identity shall not be treated as 
                        taxpayer return information.
                  (B) Disclosure to intelligence agencies.--
                          (i) In general.--Except as provided 
                        in paragraph (6), upon receipt by the 
                        Secretary of a written request which 
                        meets the requirements of clause (ii), 
                        the Secretary may disclose return 
                        information (other than taxpayer return 
                        information) to those officers and 
                        employees of the Department of Justice, 
                        the Department of the Treasury, and 
                        other Federal intelligence agencies who 
                        are personally and directly engaged in 
                        the collection or analysis of 
                        intelligence and counterintelligence 
                        information or investigation concerning 
                        any terrorist incident, threat, or 
                        activity. For purposes of the preceding 
                        sentence, the information disclosed 
                        under the preceding sentence shall be 
                        solely for the use of such officers and 
                        employees in such investigation, 
                        collection, or analysis.
                          (ii) Requirements.--A request meets 
                        the requirements of this subparagraph 
                        if the request--
                                  (I) is made by an individual 
                                described in clause (iii), and
                                  (II) sets forth the specific 
                                reason or reasons why such 
                                disclosure may be relevant to a 
                                terrorist incident, threat, or 
                                activity.
                          (iii) Requesting individuals.--An 
                        individual described in this 
                        subparagraph is an individual--
                                  (I) who is an officer or 
                                employee of the Department of 
                                Justice or the Department of 
                                the Treasury who is appointed 
                                by the President with the 
                                advice and consent of the 
                                Senate or who is the Director 
                                of the United States Secret 
                                Service, and
                                  (II) who is responsible for 
                                the collection and analysis of 
                                intelligence and 
                                counterintelligence information 
                                concerning any terrorist 
                                incident, threat, or activity.
                          (iv) Taxpayer identity.--For purposes 
                        of this subparagraph, a taxpayer's 
                        identity shall not be treated as 
                        taxpayer return information.
                  (C) Disclosure under ex parte orders.--
                          (i) In general.--Except as provided 
                        in paragraph (6), any return or return 
                        information with respect to any 
                        specified taxable period or periods 
                        shall, pursuant to and upon the grant 
                        of an ex parte order by a Federal 
                        district court judge or magistrate 
                        judge under clause (ii), be open (but 
                        only to the extent necessary as 
                        provided in such order) to inspection 
                        by, or disclosure to, officers and 
                        employees of any Federal law 
                        enforcement agency or Federal 
                        intelligence agency who are personally 
                        and directly engaged in any 
                        investigation, response to, or analysis 
                        of intelligence and counterintelligence 
                        information concerning any terrorist 
                        incident, threat, or activity. Return 
                        or return information opened to 
                        inspection or disclosure pursuant to 
                        the preceding sentence shall be solely 
                        for the use of such officers and 
                        employees in the investigation, 
                        response, or analysis, and in any 
                        judicial, administrative, or grand jury 
                        proceedings, pertaining to such 
                        terrorist incident, threat, or 
                        activity.
                          (ii) Application for order.--The 
                        Attorney General, the Deputy Attorney 
                        General, the Associate Attorney 
                        General, any Assistant Attorney 
                        General, or any United States attorney 
                        may authorize an application to a 
                        Federal district court judge or 
                        magistrate judge for the order referred 
                        to in clause (i). Upon such 
                        application, such judge or magistrate 
                        judge may grant such order if he 
                        determines on the basis of the facts 
                        submitted by the applicant that--
                                  (I) there is reasonable cause 
                                to believe, based upon 
                                information believed to be 
                                reliable, that the return or 
                                return information may be 
                                relevant to a matter relating 
                                to such terrorist incident, 
                                threat, or activity, and
                                  (II) the return or return 
                                information is sought 
                                exclusively for use in a 
                                Federal investigation, 
                                analysis, or proceeding 
                                concerning any terrorist 
                                incident, threat, or activity.
                  (D) Special rule for ex parte disclosure by 
                the IRS.--
                          (i) In general.--Except as provided 
                        in paragraph (6), the Secretary may 
                        authorize an application to a Federal 
                        district court judge or magistrate 
                        judge for the order referred to in 
                        subparagraph (C)(i). Upon such 
                        application, such judge or magistrate 
                        judge may grant such order if he 
                        determines on the basis of the facts 
                        submitted by the applicant that the 
                        requirements of subparagraph (C)(ii)(I) 
                        are met.
                          (ii) Limitation on use of 
                        information.--Information disclosed 
                        under clause (i)--
                                  (I) may be disclosed only to 
                                the extent necessary to apprise 
                                the head of the appropriate 
                                Federal law enforcement agency 
                                responsible for investigating 
                                or responding to a terrorist 
                                incident, threat, or activity, 
                                and
                                  (II) shall be solely for use 
                                in a Federal investigation, 
                                analysis, or proceeding 
                                concerning any terrorist 
                                incident, threat, or activity.
                        The head of such Federal agency may 
                        disclose such information to officers 
                        and employees of such agency to the 
                        extent necessary to investigate or 
                        respond to such terrorist incident, 
                        threat, or activity.
          (8) Comptroller General.--
                  (A) Returns available for inspection.--Except 
                as provided in subparagraph (C), upon written 
                request by the Comptroller General of the 
                United States, returns and return information 
                shall be open to inspection by, or disclosure 
                to, officers and employees of the Government 
                Accountability Office for the purpose of, and 
                to the extent necessary in, making--
                          (i) an audit of the Internal Revenue 
                        Service, the Bureau of Alcohol, 
                        Tobacco, Firearms, and Explosives, 
                        Department of Justice, or the Tax and 
                        Trade Bureau, Department of the 
                        Treasury, which may be required by 
                        section 713 of title 31, United States 
                        Code, or
                          (ii) any audit authorized by 
                        subsection (p)(6),
                except that no such officer or employee shall, 
                except to the extent authorized by subsection 
                (f) or (p)(6), disclose to any person, other 
                than another officer or employee of such office 
                whose official duties require such disclosure, 
                any return or return information described in 
                section 4424(a) in a form which can be 
                associated with, or otherwise identify, 
                directly or indirectly, a particular taxpayer, 
                nor shall such officer or employee disclose any 
                other return or return information, except as 
                otherwise expressly provided by law, to any 
                person other than such other officer or 
                employee of such office in a form which can be 
                associated with, or otherwise identify, 
                directly or indirectly, a particular taxpayer.
                  (B) Audits of other agencies.--
                          (i) In general.--Nothing in this 
                        section shall prohibit any return or 
                        return information obtained under this 
                        title by any Federal agency (other than 
                        an agency referred to in subparagraph 
                        (A)) or by a Trustee as defined in the 
                        District of Columbia Retirement 
                        Protection Act of 1997, for use in any 
                        program or activity from being open to 
                        inspection by, or disclosure to, 
                        officers and employees of the 
                        Government Accountability Office if 
                        such inspection or disclosure is--
                                  (I) for purposes of, and to 
                                the extent necessary in, making 
                                an audit authorized by law of 
                                such program or activity, and
                                  (II) pursuant to a written 
                                request by the Comptroller 
                                General of the United States to 
                                the head of such Federal 
                                agency.
                          (ii) Information from Secretary.--If 
                        the Comptroller General of the United 
                        States determines that the returns or 
                        return information available under 
                        clause (i) are not sufficient for 
                        purposes of making an audit of any 
                        program or activity of a Federal agency 
                        (other than an agency referred to in 
                        subparagraph (A)), upon written request 
                        by the Comptroller General to the 
                        Secretary, returns and return 
                        information (of the type authorized by 
                        subsection (l) or (m) to be made 
                        available to the Federal agency for use 
                        in such program or activity) shall be 
                        open to inspection by, or disclosure 
                        to, officers and employees of the 
                        Government Accountability Office for 
                        the purpose of, and to the extent 
                        necessary in, making such audit.
                          (iii) Requirement of notification 
                        upon completion of audit.--Within 90 
                        days after the completion of an audit 
                        with respect to which returns or return 
                        information were opened to inspection 
                        or disclosed under clause (i) or (ii), 
                        the Comptroller General of the United 
                        States shall notify in writing the 
                        Joint Committee on Taxation of such 
                        completion. Such notice shall include--
                                  (I) a description of the use 
                                of the returns and return 
                                information by the Federal 
                                agency involved,
                                  (II) such recommendations 
                                with respect to the use of 
                                returns and return information 
                                by such Federal agency as the 
                                Comptroller General deems 
                                appropriate, and
                                  (III) a statement on the 
                                impact of any such 
                                recommendations on 
                                confidentiality of returns and 
                                return information and the 
                                administration of this title.
                          (iv) Certain restrictions made 
                        applicable.--The restrictions contained 
                        in subparagraph (A) on the disclosure 
                        of any returns or return information 
                        open to inspection or disclosed under 
                        such subparagraph shall also apply to 
                        returns and return information open to 
                        inspection or disclosed under this 
                        subparagraph.
                  (C) Disapproval by Joint Committee on 
                Taxation.--Returns and return information shall 
                not be open to inspection or disclosed under 
                subparagraph (A) or (B) with respect to an 
                audit--
                          (i) unless the Comptroller General of 
                        the United States notifies in writing 
                        the Joint Committee on Taxation of such 
                        audit, and
                          (ii) if the Joint Committee on 
                        Taxation disapproves such audit by a 
                        vote of at least two-thirds of its 
                        members within the 30-day period 
                        beginning on the day the Joint 
                        Committee on Taxation receives such 
                        notice.
  (j) Statistical Use.--
          (1) Department of Commerce.--Upon request in writing 
        by the Secretary of Commerce, the Secretary shall 
        furnish--
                  (A) such returns, or return information 
                reflected thereon, to officers and employees of 
                the Bureau of the Census, and
                  (B) such return information reflected on 
                returns of corporations to officers and 
                employees of the Bureau of Economic Analysis,
        as the Secretary may prescribe by regulation for the 
        purpose of, but only to the extent necessary in, the 
        structuring of censuses and national economic accounts 
        and conducting related statistical activities 
        authorized by law.
          (2) Federal Trade Commission.--Upon request in 
        writing by the Chairman of the Federal Trade 
        Commission, the Secretary shall furnish such return 
        information reflected on any return of a corporation 
        with respect to the tax imposed by chapter 1 to 
        officers and employees of the Division of Financial 
        Statistics of the Bureau of Economics of such 
        commission as the Secretary may prescribe by regulation 
        for the purpose of, but only to the extent necessary 
        in, administration by such division of legally 
        authorized economic surveys of corporations.
          (3) Department of Treasury.--Returns and return 
        information shall be open to inspection by or 
        disclosure to officers and employees of the Department 
        of the Treasury whose official duties require such 
        inspection or disclosure for the purpose of, but only 
        to the extent necessary in, preparing economic or 
        financial forecasts, projections, analyses, and 
        statistical studies and conducting related activities. 
        Such inspection or disclosure shall be permitted only 
        upon written request which sets forth the specific 
        reason or reasons why such inspection or disclosure is 
        necessary and which is signed by the head of the bureau 
        or office of the Department of the Treasury requesting 
        the inspection or disclosure.
          (4) Anonymous form.--No person who receives a return 
        or return information under this subsection shall 
        disclose such return or return information to any 
        person other than the taxpayer to whom it relates 
        except in a form which cannot be associated with, or 
        otherwise identify, directly or indirectly, a 
        particular taxpayer.
          (5) Department of Agriculture.--Upon request in 
        writing by the Secretary of Agriculture, the Secretary 
        shall furnish such returns, or return information 
        reflected thereon, as the Secretary may prescribe by 
        regulation to officers and employees of the Department 
        of Agriculture whose official duties require access to 
        such returns or information for the purpose of, but 
        only to the extent necessary in, structuring, 
        preparing, and conducting the census of agriculture 
        pursuant to the Census of Agriculture Act of 1997 
        (Public Law 105-113).
          (6) Congressional Budget Office.--Upon written 
        request by the Director of the Congressional Budget 
        Office, the Secretary shall furnish to officers and 
        employees of the Congressional Budget Office return 
        information for the purpose of, but only to the extent 
        necessary for, long-term models of the social security 
        and medicare programs.
  (k) Disclosure of Certain Returns and Return Information for 
Tax Administration Purposes.--
          (1) Disclosure of accepted offers-in-compromise.--
        Return information shall be disclosed to members of the 
        general public to the extent necessary to permit 
        inspection of any accepted offer-in-compromise under 
        section 7122 relating to the liability for a tax 
        imposed by this title.
          (2) Disclosure of amount of outstanding lien.--If a 
        notice of lien has been filed pursuant to section 
        6323(f), the amount of the outstanding obligation 
        secured by such lien may be disclosed to any person who 
        furnishes satisfactory written evidence that he has a 
        right in the property subject to such lien or intends 
        to obtain a right in such property.
          (3) Disclosure of return information to correct 
        misstatements of fact.--The Secretary may, but only 
        following approval by the Joint Committee on Taxation, 
        disclose such return information or any other 
        information with respect to any specific taxpayer to 
        the extent necessary for tax administration purposes to 
        correct a misstatement of fact published or disclosed 
        with respect to such taxpayer's return or any 
        transaction of the taxpayer with the Internal Revenue 
        Service.
          (4) Disclosure of competent authority under income 
        tax convention.--A return or return information may be 
        disclosed to a competent authority of a foreign 
        government which has an income tax or gift and estate 
        tax convention, or other convention or bilateral 
        agreement relating to the exchange of tax information, 
        with the United States but only to the extent provided 
        in, and subject to the terms and conditions of, such 
        convention or bilateral agreement.
          (5) State agencies regulating tax return preparers.--
        Taxpayer identity information with respect to any tax 
        return preparer, and information as to whether or not 
        any penalty has been assessed against such tax return 
        preparer under section 6694, 6695, or 7216, may be 
        furnished to any agency, body, or commission lawfully 
        charged under any State or local law with the 
        licensing, registration, or regulation of tax return 
        preparers. Such information may be furnished only upon 
        written request by the head of such agency, body, or 
        commission designating the officers or employees to 
        whom such information is to be furnished. Information 
        may be furnished and used under this paragraph only for 
        purposes of the licensing, registration, or regulation 
        of tax return preparers.
          (6) Disclosure by certain officers and employees for 
        investigative purposes.--An internal revenue officer or 
        employee and an officer or employee of the Office of 
        Treasury Inspector General for Tax Administration may, 
        in connection with his official duties relating to any 
        audit, collection activity, or civil or criminal tax 
        investigation or any other offense under the internal 
        revenue laws, disclose return information to the extent 
        that such disclosure is necessary in obtaining 
        information, which is not otherwise reasonably 
        available, with respect to the correct determination of 
        tax, liability for tax, or the amount to be collected 
        or with respect to the enforcement of any other 
        provision of this title. Such disclosures shall be made 
        only in such situations and under such conditions as 
        the Secretary may prescribe by regulation.
          (7) Disclosure of excise tax registration 
        information.--To the extent the Secretary determines 
        that disclosure is necessary to permit the effective 
        administration of subtitle D, the Secretary may 
        disclose--
                  (A) the name, address, and registration 
                number of each person who is registered under 
                any provision of subtitle D (and, in the case 
                of a registered terminal operator, the address 
                of each terminal operated by such operator), 
                and
                  (B) the registration status of any person.
          (8) Levies on certain government payments.--
                  (A) Disclosure of return information in 
                levies on financial management service.--In 
                serving a notice of levy, or release of such 
                levy, with respect to any applicable government 
                payment, the Secretary may disclose to officers 
                and employees of the Financial Management 
                Service--
                          (i) return information, including 
                        taxpayer identity information,
                          (ii) the amount of any unpaid 
                        liability under this title (including 
                        penalties and interest), and
                          (iii) the type of tax and tax period 
                        to which such unpaid liability relates.
                  (B) Restriction on use of disclosed 
                information.--Return information disclosed 
                under subparagraph (A) may be used by officers 
                and employees of the Financial Management 
                Service only for the purpose of, and to the 
                extent necessary in, transferring levied funds 
                in satisfaction of the levy, maintaining 
                appropriate agency records in regard to such 
                levy or the release thereof, notifying the 
                taxpayer and the agency certifying such payment 
                that the levy has been honored, or in the 
                defense of any litigation ensuing from the 
                honor of such levy.
                  (C) Applicable government payment.--For 
                purposes of this paragraph, the term 
                ``applicable government payment'' means--
                          (i) any Federal payment (other than a 
                        payment for which eligibility is based 
                        on the income or assets (or both) of a 
                        payee) certified to the Financial 
                        Management Service for disbursement, 
                        and
                          (ii) any other payment which is 
                        certified to the Financial Management 
                        Service for disbursement and which the 
                        Secretary designates by published 
                        notice.
          (9) Disclosure of information to administer section 
        6311.--The Secretary may disclose returns or return 
        information to financial institutions and others to the 
        extent the Secretary deems necessary for the 
        administration of section 6311. Disclosures of 
        information for purposes other than to accept payments 
        by checks or money orders shall be made only to the 
        extent authorized by written procedures promulgated by 
        the Secretary.
          (10) Disclosure of certain returns and return 
        information to certain prison officials.--
                  (A) In general.--Under such procedures as the 
                Secretary may prescribe, the Secretary may 
                disclose to officers and employees of the 
                Federal Bureau of Prisons and of any State 
                agency charged with the responsibility for 
                administration of prisons any returns or return 
                information with respect to individuals 
                incarcerated in Federal or State prison systems 
                whom the Secretary has determined may have 
                filed or facilitated the filing of a false or 
                fraudulent return to the extent that the 
                Secretary determines that such disclosure is 
                necessary to permit effective Federal tax 
                administration.
                  (B) Disclosure to contractor-run prisons.--
                Under such procedures as the Secretary may 
                prescribe, the disclosures authorized by 
                subparagraph (A) may be made to contractors 
                responsible for the operation of a Federal or 
                State prison on behalf of such Bureau or 
                agency.
                  (C) Restrictions on use of disclosed 
                information.--Any return or return information 
                received under this paragraph shall be used 
                only for the purposes of and to the extent 
                necessary in taking administrative action to 
                prevent the filing of false and fraudulent 
                returns, including administrative actions to 
                address possible violations of administrative 
                rules and regulations of the prison facility 
                and in administrative and judicial proceedings 
                arising from such administrative actions.
                  (D) Restrictions on redisclosure and 
                disclosure to legal representatives.--
                Notwithstanding subsection (h)--
                          (i) Restrictions on redisclosure.--
                        Except as provided in clause (ii), any 
                        officer, employee, or contractor of the 
                        Federal Bureau of Prisons or of any 
                        State agency charged with the 
                        responsibility for administration of 
                        prisons shall not disclose any 
                        information obtained under this 
                        paragraph to any person other than an 
                        officer or employee or contractor of 
                        such Bureau or agency personally and 
                        directly engaged in the administration 
                        of prison facilities on behalf of such 
                        Bureau or agency.
                          (ii) Disclosure to legal 
                        representatives.--The returns and 
                        return information disclosed under this 
                        paragraph may be disclosed to the duly 
                        authorized legal representative of the 
                        Federal Bureau of Prisons, State 
                        agency, or contractor charged with the 
                        responsibility for administration of 
                        prisons, or of the incarcerated 
                        individual accused of filing the false 
                        or fraudulent return who is a party to 
                        an action or proceeding described in 
                        subparagraph (C), solely in preparation 
                        for, or for use in, such action or 
                        proceeding.
          (11) Disclosure of return information to Department 
        of State for purposes of passport revocation under 
        section 7345.--
                  (A) In general.--The Secretary shall, upon 
                receiving a certification described in section 
                7345, disclose to the Secretary of State return 
                information with respect to a taxpayer who has 
                a seriously delinquent tax debt described in 
                such section. Such return information shall be 
                limited to--
                          (i) the taxpayer identity information 
                        with respect to such taxpayer, and
                          (ii) the amount of such seriously 
                        delinquent tax debt.
                  (B) Restriction on disclosure.--Return 
                information disclosed under subparagraph (A) 
                may be used by officers and employees of the 
                Department of State for the purposes of, and to 
                the extent necessary in, carrying out the 
                requirements of section 32101 of the FAST Act.
          (12) Qualified tax collection contractors.--Persons 
        providing services pursuant to a qualified tax 
        collection contract under section 6306 may, if speaking 
        to a person who has identified himself or herself as 
        having the name of the taxpayer to which a tax 
        receivable (within the meaning of such section) 
        relates, identify themselves as contractors of the 
        Internal Revenue Service and disclose the business name 
        of the contractor, and the nature, subject, and reason 
        for the contact. Disclosures under this paragraph shall 
        be made only in such situations and under such 
        conditions as have been approved by the Secretary.
  (l) Disclosure of Returns and Return Information for Purposes 
Other Than Tax Administration.--
          (1) Disclosure of certain returns and return 
        information to Social Security Administration and 
        Railroad Retirement Board.--The Secretary may, upon 
        written request, disclose returns and return 
        information with respect to--
                  (A) taxes imposed by chapters 2, 21, and 24, 
                to the Social Security Administration for 
                purposes of its administration of the Social 
                Security Act;
                  (B) a plan to which part I of subchapter D of 
                chapter 1 applies, to the Social Security 
                Administration for purposes of carrying out its 
                responsibility under section 1131 of the Social 
                Security Act, limited, however to return 
                information described in section 6057(d); and
                  (C) taxes imposed by chapter 22, to the 
                Railroad Retirement Board for purposes of its 
                administration of the Railroad Retirement Act.
          (2) Disclosure of returns and return information to 
        the Department of Labor and Pension Benefit Guaranty 
        Corporation.--The Secretary may, upon written request, 
        furnish returns and return information to the proper 
        officers and employees of the Department of Labor and 
        the Pension Benefit Guaranty Corporation for purposes 
        of, but only to the extent necessary in, the 
        administration of titles I and IV of the Employee 
        Retirement Income Security Act of 1974.
          (3) Disclosure that applicant for Federal loan has 
        tax delinquent account.--
                  (A) In general.--Upon written request, the 
                Secretary may disclose to the head of the 
                Federal agency administering any included 
                Federal loan program whether or not an 
                applicant for a loan under such program has a 
                tax delinquent account.
                  (B) Restriction on disclosure.--Any 
                disclosure under subparagraph (A) shall be made 
                only for the purpose of, and to the extent 
                necessary in, determining the creditworthiness 
                of the applicant for the loan in question.
                  (C) Included Federal loan program defined.--
                For purposes of this paragraph, the term 
                ``included Federal loan program'' means any 
                program under which the United States or a 
                Federal agency makes, guarantees, or insures 
                loans.
          (4) Disclosure of returns and return information for 
        use in personnel or claimant representative matters.--
        The Secretary may disclose returns and return 
        information--
                  (A) upon written request--
                          (i) to an employee or former employee 
                        of the Department of the Treasury, or 
                        to the duly authorized legal 
                        representative of such employee or 
                        former employee, who is or may be a 
                        party to any administrative action or 
                        proceeding affecting the personnel 
                        rights of such employee or former 
                        employee; or
                          (ii) to any person, or to the duly 
                        authorized legal representative of such 
                        person, whose rights are or may be 
                        affected by an administrative action or 
                        proceeding under section 330 of title 
                        31, United States Code,
                solely for use in the action or proceeding, or 
                in preparation for the action or proceeding, 
                but only to the extent that the Secretary 
                determines that such returns or return 
                information is or may be relevant and material 
                to the action or proceeding; or
                  (B) to officers and employees of the 
                Department of the Treasury for use in any 
                action or proceeding described in subparagraph 
                (A), or in preparation for such action or 
                proceeding, to the extent necessary to advance 
                or protect the interests of the United States.
          (5) Social Security Administration.--Upon written 
        request by the Commissioner of Social Security, the 
        Secretary may disclose information returns filed 
        pursuant to part III of subchapter A of chapter 61 of 
        this subtitle for the purpose of--
                  (A) carrying out, in accordance with an 
                agreement entered into pursuant to section 232 
                of the Social Security Act, an effective return 
                processing program; or
                  (B) providing information regarding the 
                mortality status of individuals for 
                epidemiological and similar research in 
                accordance with section 1106(d) of the Social 
                Security Act.
          (6) Disclosure of return information to Federal, 
        State, and local child support enforcement agencies.--
                  (A) Return information from Internal Revenue 
                Service.--The Secretary may, upon written 
                request, disclose to the appropriate Federal, 
                State, or local child support enforcement 
                agency--
                          (i) available return information from 
                        the master files of the Internal 
                        Revenue Service relating to the social 
                        security account number (or numbers, if 
                        the individual involved has more than 
                        one such number), address, filing 
                        status, amounts and nature of income, 
                        and the number of dependents reported 
                        on any return filed by, or with respect 
                        to, any individual with respect to whom 
                        child support obligations are sought to 
                        be established or enforced pursuant to 
                        the provisions of part D of title IV of 
                        the Social Security Act and with 
                        respect to any individual to whom such 
                        support obligations are owing, and
                          (ii) available return information 
                        reflected on any return filed by, or 
                        with respect to, any individual 
                        described in clause (i) relating to the 
                        amount of such individual's gross 
                        income (as defined in section 61) or 
                        consisting of the names and addresses 
                        of payors of such income and the names 
                        of any dependents reported on such 
                        return, but only if such return 
                        information is not reasonably available 
                        from any other source.
                  (B) Disclosure to certain agents.--The 
                following information disclosed to any child 
                support enforcement agency under subparagraph 
                (A) with respect to any individual with respect 
                to whom child support obligations are sought to 
                be established or enforced may be disclosed by 
                such agency to any agent of such agency which 
                is under contract with such agency to carry out 
                the purposes described in subparagraph (C):
                          (i) The address and social security 
                        account number (or numbers) of such 
                        individual.
                          (ii) The amount of any reduction 
                        under section 6402(c) (relating to 
                        offset of past-due support against 
                        overpayments) in any overpayment 
                        otherwise payable to such individual.
                  (C) Restriction on disclosure.--Information 
                may be disclosed under this paragraph only for 
                purposes of, and to the extent necessary in, 
                establishing and collecting child support 
                obligations from, and locating, individuals 
                owing such obligations.
          (7) Disclosure of return information to Federal, 
        State, and local agencies administering certain 
        programs under the Social Security Act, the Food and 
        Nutrition Act of 2008 of 1977, or title 38, United 
        States Code, or certain housing assistance programs
                  (A) Return information from Social Security 
                Administration.--The Commissioner of Social 
                Security shall, upon written request, disclose 
                return information from returns with respect to 
                net earnings from self-employment (as defined 
                in section 1402), wages (as defined in section 
                3121(a) or 3401(a)), and payments of retirement 
                income, which have been disclosed to the Social 
                Security Administration as provided by 
                paragraph (1) or (5) of this subsection, to any 
                Federal, State, or local agency administering a 
                program listed in subparagraph (D).
                  (B) Return information from Internal Revenue 
                Service.--The Secretary shall, upon written 
                request, disclose current return information 
                from returns with respect to unearned income 
                from the Internal Revenue Service files to any 
                Federal, State, or local agency administering a 
                program listed in subparagraph (D).
                  (C) Restriction on disclosure.--The 
                Commissioner of Social Security and the 
                Secretary shall disclose return information 
                under subparagraphs (A) and (B) only for 
                purposes of, and to the extent necessary in, 
                determining eligibility for, or the correct 
                amount of, benefits under a program listed in 
                subparagraph (D).
                  (D) Programs to which rule applies.--The 
                programs to which this paragraph applies are:
                          (i) a State program funded under part 
                        A of title IV of the Social Security 
                        Act;
                          (ii) medical assistance provided 
                        under a State plan approved under title 
                        XIX of the Social Security Act or 
                        subsidies provided under section 1860D-
                        14 of such Act;
                          (iii) supplemental security income 
                        benefits provided under title XVI of 
                        the Social Security Act, and federally 
                        administered supplementary payments of 
                        the type described in section 1616(a) 
                        of such Act (including payments 
                        pursuant to an agreement entered into 
                        under section 212(a) of Public Law 93-
                        66);
                          (iv) any benefits provided under a 
                        State plan approved under title I, X, 
                        XIV, or XVI of the Social Security Act 
                        (as those titles apply to Puerto Rico, 
                        Guam, and the Virgin Islands);
                          (v) unemployment compensation 
                        provided under a State law described in 
                        section 3304 of this title;
                          (vi) assistance provided under the 
                        Food and Nutrition Act of 2008;
                          (vii) State-administered 
                        supplementary payments of the type 
                        described in section 1616(a) of the 
                        Social Security Act (including payments 
                        pursuant to an agreement entered into 
                        under section 212(a) of Public Law 93-
                        66);
                          (viii)(I) any needs-based pension 
                        provided under chapter 15 of title 38, 
                        United States Code, or under any other 
                        law administered by the Secretary of 
                        Veterans Affairs;
                                  (II) parents' dependency and 
                                indemnity compensation provided 
                                under section 1315 of title 38, 
                                United States Code;
                                  (III) health-care services 
                                furnished under sections 
                                1710(a)(2)(G), 1710(a)(3), and 
                                1710(b) of such title; and
                                  (IV) compensation paid under 
                                chapter 11 of title 38, United 
                                States Code, at the 100 percent 
                                rate based solely on 
                                unemployability and without 
                                regard to the fact that the 
                                disability or disabilities are 
                                not rated as 100 percent 
                                disabling under the rating 
                                schedule; and
                          (ix) any housing assistance program 
                        administered by the Department of 
                        Housing and Urban Development that 
                        involves initial and periodic review of 
                        an applicant's or participant's income, 
                        except that return information may be 
                        disclosed under this clause only on 
                        written request by the Secretary of 
                        Housing and Urban Development and only 
                        for use by officers and employees of 
                        the Department of Housing and Urban 
                        Development with respect to applicants 
                        for and participants in such programs.
                Only return information from returns with 
                respect to net earnings from self-employment 
                and wages may be disclosed under this paragraph 
                for use with respect to any program described 
                in clause (viii)(IV).
          (8) Disclosure of certain return information by 
        Social Security Administration to Federal, State, and 
        local child support enforcement agencies.--
                  (A) In general.--Upon written request, the 
                Commissioner of Social Security shall disclose 
                directly to officers and employees of a Federal 
                or State or local child support enforcement 
                agency return information from returns with 
                respect to social security account numbers, net 
                earnings from self-employment (as defined in 
                section 1402), wages (as defined in section 
                3121(a) or 3401(a)), and payments of retirement 
                income which have been disclosed to the Social 
                Security Administration as provided by 
                paragraph (1) or (5) of this subsection.
                  (B) Restriction on disclosure.--The 
                Commissioner of Social Security shall disclose 
                return information under subparagraph (A) only 
                for purposes of, and to the extent necessary 
                in, establishing and collecting child support 
                obligations from, and locating, individuals 
                owing such obligations. For purposes of the 
                preceding sentence, the term ``child support 
                obligations'' only includes obligations which 
                are being enforced pursuant to a plan described 
                in section 454 of the Social Security Act which 
                has been approved by the Secretary of Health 
                and Human Services under part D of title IV of 
                such Act.
                  (C) State or local child support enforcement 
                agency.--For purposes of this paragraph, the 
                term ``State or local child support enforcement 
                agency'' means any agency of a State or 
                political subdivision thereof operating 
                pursuant to a plan described in subparagraph 
                (B).
          (9) Disclosure of alcohol fuel producers to 
        administrators of State alcohol laws.--Notwithstanding 
        any other provision of this section, the Secretary may 
        disclose--
                  (A) the name and address of any person who is 
                qualified to produce alcohol for fuel use under 
                section 5181, and
                  (B) the location of any premises to be used 
                by such person in producing alcohol for fuel,
        to any State agency, body, or commission, or its legal 
        representative, which is charged under the laws of such 
        State with responsibility for administration of State 
        alcohol laws solely for use in the administration of 
        such laws.
          (10) Disclosure of certain information to agencies 
        requesting a reduction under subsection (c), (d), (e), 
        or (f) of section 6402.--
                  (A) Return information from Internal Revenue 
                Service.--The Secretary may, upon receiving a 
                written request, disclose to officers and 
                employees of any agency seeking a reduction 
                under subsection (c), (d), (e), or (f) of 
                section 6402, to officers and employees of the 
                Department of Labor for purposes of 
                facilitating the exchange of data in connection 
                with a request made under subsection (f)(5) of 
                section 6402, and to officers and employees of 
                the Department of the Treasury in connection 
                with such reduction--
                          (i) taxpayer identity information 
                        with respect to the taxpayer against 
                        whom such a reduction was made or not 
                        made and with respect to any other 
                        person filing a joint return with such 
                        taxpayer,
                          (ii) the fact that a reduction has 
                        been made or has not been made under 
                        such subsection with respect to such 
                        taxpayer,
                          (iii) the amount of such reduction,
                          (iv) whether such taxpayer filed a 
                        joint return, and
                          (v) the fact that a payment was made 
                        (and the amount of the payment) to the 
                        spouse of the taxpayer on the basis of 
                        a joint return.
                  (B)(i) Restriction on use of disclosed 
                information
                  Any officers and employees of an agency 
                receiving return information under subparagraph 
                (A) shall use such information only for the 
                purposes of, and to the extent necessary in, 
                establishing appropriate agency records, 
                locating any person with respect to whom a 
                reduction under subsection (c), (d), (e), or 
                (f) of section 6402 is sought for purposes of 
                collecting the debt with respect to which the 
                reduction is sought, or in the defense of any 
                litigation or administrative procedure ensuing 
                from a reduction made under subsection (c), 
                (d), (e), or (f) of section 6402 and to 
                officers and employees of the Department of the 
                Treasury in connection with such reduction.
                          (ii) Notwithstanding clause (i), 
                        return information disclosed to 
                        officers and employees of the 
                        Department of Labor may be accessed by 
                        agents who maintain and provide 
                        technological support to the Department 
                        of Labor's Interstate Connection 
                        Network (ICON) solely for the purpose 
                        of providing such maintenance and 
                        support.
          (11) Disclosure of return information to carry out 
        Federal Employees' Retirement System.--
                  (A) In general.--The Commissioner of Social 
                Security shall, on written request, disclose to 
                the Office of Personnel Management return 
                information from returns with respect to net 
                earnings from self-employment (as defined in 
                section 1402), wages (as defined in section 
                3121(a) or 3401(a)), and payments of retirement 
                income, which have been disclosed to the Social 
                Security Administration as provided by 
                paragraph (1) or (5).
                  (B) Restriction on disclosure.--The 
                Commissioner of Social Security shall disclose 
                return information under subparagraph (A) only 
                for purposes of, and to the extent necessary 
                in, the administration of chapters 83 and 84 of 
                title 5, United States Code.
          (12) Disclosure of certain taxpayer identity 
        information for verification of employment status of 
        medicare beneficiary and spouse of medicare 
        beneficiary.--
                  (A) Return information from Internal Revenue 
                Service.--The Secretary shall, upon written 
                request from the Commissioner of Social 
                Security, disclose to the Commissioner 
                available filing status and taxpayer identity 
                information from the individual master files of 
                the Internal Revenue Service relating to 
                whether any medicare beneficiary identified by 
                the Commissioner was a married individual (as 
                defined in section 7703) for any specified year 
                after 1986, and, if so, the name of the spouse 
                of such individual and such spouse's TIN.
                  (B) Return information from Social Security 
                Administration.--The Commissioner of Social 
                Security shall, upon written request from the 
                Administrator of the Centers for Medicare & 
                Medicaid Services, disclose to the 
                Administrator the following information:
                          (i) The name and TIN of each medicare 
                        beneficiary who is identified as having 
                        received wages (as defined in section 
                        3401(a)), above an amount (if any) 
                        specified by the Secretary of Health 
                        and Human Services, from a qualified 
                        employer in a previous year.
                          (ii) For each medicare beneficiary 
                        who was identified as married under 
                        subparagraph (A) and whose spouse is 
                        identified as having received wages, 
                        above an amount (if any) specified by 
                        the Secretary of Health and Human 
                        Services, from a qualified employer in 
                        a previous year--
                                  (I) the name and TIN of the 
                                medicare beneficiary, and
                                  (II) the name and TIN of the 
                                spouse.
                          (iii) With respect to each such 
                        qualified employer, the name, address, 
                        and TIN of the employer and the number 
                        of individuals with respect to whom 
                        written statements were furnished under 
                        section 6051 by the employer with 
                        respect to such previous year.
                  (C) Disclosure by Centers for Medicare & 
                Medicaid Services.--With respect to the 
                information disclosed under subparagraph (B), 
                the Administrator of the Centers for Medicare & 
                Medicaid Services may disclose--
                          (i) to the qualified employer 
                        referred to in such subparagraph the 
                        name and TIN of each individual 
                        identified under such subparagraph as 
                        having received wages from the employer 
                        (hereinafter in this subparagraph 
                        referred to as the ``employee'') for 
                        purposes of determining during what 
                        period such employee or the employee's 
                        spouse may be (or have been) covered 
                        under a group health plan of the 
                        employer and what benefits are or were 
                        covered under the plan (including the 
                        name, address, and identifying number 
                        of the plan),
                          (ii) to any group health plan which 
                        provides or provided coverage to such 
                        an employee or spouse, the name of such 
                        employee and the employee's spouse (if 
                        the spouse is a medicare beneficiary) 
                        and the name and address of the 
                        employer, and, for the purpose of 
                        presenting a claim to the plan--
                                  (I) the TIN of such employee 
                                if benefits were paid under 
                                title XVIII of the Social 
                                Security Act with respect to 
                                the employee during a period in 
                                which the plan was a primary 
                                plan (as defined in section 
                                1862(b)(2)(A) of the Social 
                                Security Act), and
                                  (II) the TIN of such spouse 
                                if benefits were paid under 
                                such title with respect to the 
                                spouse during such period, and
                          (iii) to any agent of such 
                        Administrator the information referred 
                        to in subparagraph (B) for purposes of 
                        carrying out clauses (i) and (ii) on 
                        behalf of such Administrator.
                  (D) Special rules.--
                          (i) Restrictions on disclosure.--
                        Information may be disclosed under this 
                        paragraph only for purposes of, and to 
                        the extent necessary in, determining 
                        the extent to which any medicare 
                        beneficiary is covered under any group 
                        health plan.
                          (ii) Timely response to requests.--
                        Any request made under subparagraph (A) 
                        or (B) shall be complied with as soon 
                        as possible but in no event later than 
                        120 days after the date the request was 
                        made.
                  (E) Definitions.--For purposes of this 
                paragraph--
                          (i) Medicare beneficiary.--The term 
                        ``medicare beneficiary'' means an 
                        individual entitled to benefits under 
                        part A, or enrolled under part B, of 
                        title XVIII of the Social Security Act, 
                        but does not include such an individual 
                        enrolled in part A under section 1818.
                          (ii) Group health plan.--The term 
                        ``group health plan'' means any group 
                        health plan (as defined in section 
                        5000(b)(1)).
                          (iii) Qualified employer.--The term 
                        ``qualified employer'' means, for a 
                        calendar year, an employer which has 
                        furnished written statements under 
                        section 6051 with respect to at least 
                        20 individuals for wages paid in the 
                        year.
          (13) Disclosure of return information to carry out 
        income contingent repayment of student loans.--
                  (A) In general.--The Secretary may, upon 
                written request from the Secretary of 
                Education, disclose to officers and employees 
                of the Department of Education return 
                information with respect to a taxpayer who has 
                received an applicable student loan and whose 
                loan repayment amounts are based in whole or in 
                part on the taxpayer's income. Such return 
                information shall be limited to--
                          (i) taxpayer identity information 
                        with respect to such taxpayer,
                          (ii) the filing status of such 
                        taxpayer, and
                          (iii) the adjusted gross income of 
                        such taxpayer.
                  (B) Restriction on use of disclosed 
                information.--Return information disclosed 
                under subparagraph (A) may be used by officers 
                and employees of the Department of Education 
                only for the purposes of, and to the extent 
                necessary in, establishing the appropriate 
                income contingent repayment amount for an 
                applicable student loan.
                  (C) Applicable student loan.--For purposes of 
                this paragraph, the term ``applicable student 
                loan'' means--
                          (i) any loan made under the program 
                        authorized under part D of title IV of 
                        the Higher Education Act of 1965, and
                          (ii) any loan made under part B or E 
                        of title IV of the Higher Education Act 
                        of 1965 which is in default and has 
                        been assigned to the Department of 
                        Education.
                  (D) Termination.--This paragraph shall not 
                apply to any request made after December 31, 
                2007.
          (14) Disclosure of return information to United 
        States Customs Service.--The Secretary may, upon 
        written request from the Commissioner of the United 
        States Customs Service, disclose to officers and 
        employees of the Department of the Treasury such return 
        information with respect to taxes imposed by chapters 1 
        and 6 as the Secretary may prescribe by regulations, 
        solely for the purpose of, and only to the extent 
        necessary in--
                  (A) ascertaining the correctness of any entry 
                in audits as provided for in section 509 of the 
                Tariff Act of 1930 (19 U.S.C. 1509), or
                  (B) other actions to recover any loss of 
                revenue, or to collect duties, taxes, and fees, 
                determined to be due and owing pursuant to such 
                audits.
          (15) Disclosure of returns filed under section 
        6050I.--The Secretary may, upon written request, 
        disclose to officers and employees of--
                  (A) any Federal agency,
                  (B) any agency of a State or local 
                government, or
                  (C) any agency of the government of a foreign 
                country, information contained on returns filed 
                under section 6050I. Any such disclosure shall 
                be made on the same basis, and subject to the 
                same conditions, as apply to disclosures of 
                information on reports filed under section 5313 
                of title 31, United States Code; except that no 
                disclosure under this paragraph shall be made 
                for purposes of the administration of any tax 
                law.
          (16) Disclosure of return information for purposes of 
        administering the District of Columbia Retirement 
        Protection Act of 1997.--
                  (A) In general.--Upon written request 
                available return information (including such 
                information disclosed to the Social Security 
                Administration under paragraph (1) or (5) of 
                this subsection), relating to the amount of 
                wage income (as defined in section 3121(a) or 
                3401(a)), the name, address, and identifying 
                number assigned under section 6109, of payors 
                of wage income, taxpayer identity (as defined 
                in subsection 6103 (b)(6)), and the 
                occupational status reflected on any return 
                filed by, or with respect to, any individual 
                with respect to whom eligibility for, or the 
                correct amount of, benefits under the District 
                of Columbia Retirement Protection Act of 1997, 
                is sought to be determined, shall be disclosed 
                by the Commissioner of Social Security, or to 
                the extent not available from the Social 
                Security Administration, by the Secretary, to 
                any duly authorized officer or employee of the 
                Department of the Treasury, or a Trustee or any 
                designated officer or employee of a Trustee (as 
                defined in the District of Columbia Retirement 
                Protection Act of 1997), or any actuary engaged 
                by a Trustee under the terms of the District of 
                Columbia Retirement Protection Act of 1997, 
                whose official duties require such disclosure, 
                solely for the purpose of, and to the extent 
                necessary in, determining an individual's 
                eligibility for, or the correct amount of, 
                benefits under the District of Columbia 
                Retirement Protection Act of 1997.
                  (B) Disclosure for use in judicial or 
                administrative proceedings.--Return information 
                disclosed to any person under this paragraph 
                may be disclosed in a judicial or 
                administrative proceeding relating to the 
                determination of an individual's eligibility 
                for, or the correct amount of, benefits under 
                the District of Columbia Retirement Protection 
                Act of 1997.
          (17) Disclosure to National Archives and Records 
        Administration.--The Secretary shall, upon written 
        request from the Archivist of the United States, 
        disclose or authorize the disclosure of returns and 
        return information to officers and employees of the 
        National Archives and Records Administration for 
        purposes of, and only to the extent necessary in, the 
        appraisal of records for destruction or retention. No 
        such officer or employee shall, except to the extent 
        authorized by subsection (f), (i)(8), or (p), disclose 
        any return or return information disclosed under the 
        preceding sentence to any person other than to the 
        Secretary, or to another officer or employee of the 
        National Archives and Records Administration whose 
        official duties require such disclosure for purposes of 
        such appraisal.
          (18) Disclosure of return information for purposes of 
        carrying out a program for advance payment of credit 
        for health insurance costs of eligible individuals.--
        The Secretary may disclose to providers of health 
        insurance for any certified individual (as defined in 
        section 7527(c)) return information with respect to 
        such certified individual only to the extent necessary 
        to carry out the program established by section 7527 
        (relating to advance payment of credit for health 
        insurance costs of eligible individuals).
          (19) Disclosure of return information for purposes of 
        providing transitional assistance under medicare 
        discount card program.--
                  (A) In general.--The Secretary, upon written 
                request from the Secretary of Health and Human 
                Services pursuant to carrying out section 
                1860D-31 of the Social Security Act, shall 
                disclose to officers, employees, and 
                contractors of the Department of Health and 
                Human Services with respect to a taxpayer for 
                the applicable year--
                          (i)(I) whether the adjusted gross 
                        income, as modified in accordance with 
                        specifications of the Secretary of 
                        Health and Human Services for purposes 
                        of carrying out such section, of such 
                        taxpayer and, if applicable, such 
                        taxpayer's spouse, for the applicable 
                        year, exceeds the amounts specified by 
                        the Secretary of Health and Human 
                        Services in order to apply the 100 and 
                        135 percent of the poverty lines under 
                        such section, (II) whether the return 
                        was a joint return, and (III) the 
                        applicable year, or
                          (ii) if applicable, the fact that 
                        there is no return filed for such 
                        taxpayer for the applicable year.
                  (B) Definition of applicable year.--For the 
                purposes of this subsection, the term 
                ``applicable year'' means the most recent 
                taxable year for which information is available 
                in the Internal Revenue Service's taxpayer data 
                information systems, or, if there is no return 
                filed for such taxpayer for such year, the 
                prior taxable year.
                  (C) Restriction on use of disclosed 
                information.--Return information disclosed 
                under this paragraph may be used only for the 
                purposes of determining eligibility for and 
                administering transitional assistance under 
                section 1860D-31 of the Social Security Act.
          (20) Disclosure of return information to carry out 
        Medicare part B premium subsidy adjustment and part D 
        base beneficiary premium increase.--
                  (A) In general.--The Secretary shall, upon 
                written request from the Commissioner of Social 
                Security, disclose to officers, employees, and 
                contractors of the Social Security 
                Administration return information of a taxpayer 
                whose premium (according to the records of the 
                Secretary) may be subject to adjustment under 
                section 1839(i) or increase under section 
                1860D-13(a)(7) of the Social Security Act. Such 
                return information shall be limited to--
                          (i) taxpayer identity information 
                        with respect to such taxpayer,
                          (ii) the filing status of such 
                        taxpayer,
                          (iii) the adjusted gross income of 
                        such taxpayer,
                          (iv) the amounts excluded from such 
                        taxpayer's gross income under sections 
                        135 and 911 to the extent such 
                        information is available,
                          (v) the interest received or accrued 
                        during the taxable year which is exempt 
                        from the tax imposed by chapter 1 to 
                        the extent such information is 
                        available,
                          (vi) the amounts excluded from such 
                        taxpayer's gross income by sections 931 
                        and 933 to the extent such information 
                        is available,
                          (vii) such other information relating 
                        to the liability of the taxpayer as is 
                        prescribed by the Secretary by 
                        regulation as might indicate in the 
                        case of a taxpayer who is an individual 
                        described in subsection (i)(4)(B)(iii) 
                        of section 1839 of the Social Security 
                        Act that the amount of the premium of 
                        the taxpayer under such section may be 
                        subject to adjustment under subsection 
                        (i) of such section or increase under 
                        section 1860D-13(a)(7) of such Act and 
                        the amount of such adjustment, and
                          (viii) the taxable year with respect 
                        to which the preceding information 
                        relates.
                  (B) Restriction on use of disclosed 
                information.--
                          (i) In general.--Return information 
                        disclosed under subparagraph (A) may be 
                        used by officers, employees, and 
                        contractors of the Social Security 
                        Administration only for the purposes 
                        of, and to the extent necessary in, 
                        establishing the appropriate amount of 
                        any premium adjustment under such 
                        section 1839(i) or increase under such 
                        section 1860D-13(a)(7) or for the 
                        purpose of resolving taxpayer appeals 
                        with respect to any such premium 
                        adjustment or increase.
                          (ii) Disclosure to other agencies.--
                        Officers, employees, and contractors of 
                        the Social Security Administration may 
                        disclose--
                                  (I) the taxpayer identity 
                                information and the amount of 
                                the premium subsidy adjustment 
                                or premium increase with 
                                respect to a taxpayer described 
                                in subparagraph (A) to 
                                officers, employees, and 
                                contractors of the Centers for 
                                Medicare and Medicaid Services, 
                                to the extent that such 
                                disclosure is necessary for the 
                                collection of the premium 
                                subsidy amount or the increased 
                                premium amount,
                                  (II) the taxpayer identity 
                                information and the amount of 
                                the premium subsidy adjustment 
                                or the increased premium amount 
                                with respect to a taxpayer 
                                described in subparagraph (A) 
                                to officers and employees of 
                                the Office of Personnel 
                                Management and the Railroad 
                                Retirement Board, to the extent 
                                that such disclosure is 
                                necessary for the collection of 
                                the premium subsidy amount or 
                                the increased premium amount,
                                  (III) return information with 
                                respect to a taxpayer described 
                                in subparagraph (A) to officers 
                                and employees of the Department 
                                of Health and Human Services to 
                                the extent necessary to resolve 
                                administrative appeals of such 
                                premium subsidy adjustment or 
                                increased premium, and
                                  (IV) return information with 
                                respect to a taxpayer described 
                                in subparagraph (A) to officers 
                                and employees of the Department 
                                of Justice for use in judicial 
                                proceedings to the extent 
                                necessary to carry out the 
                                purposes described in clause 
                                (i).
          (21) Disclosure of return information to carry out 
        eligibility requirements for certain programs.--
                  (A) In general.--The Secretary, upon written 
                request from the Secretary of Health and Human 
                Services, shall disclose to officers, 
                employees, and contractors of the Department of 
                Health and Human Services return information of 
                any taxpayer whose income is relevant in 
                determining [any premium tax credit under 
                section 36B or any cost-sharing reduction under 
                section 1402 of the Patient Protection and 
                Affordable Care Act or] any credit under 
                section 36C eligibility for participation in a 
                State medicaid program under title XIX of the 
                Social Security Act[, a State's children's 
                health insurance program under title XXI of the 
                Social Security Act, or a basic health program 
                under section 1331 of Patient Protection and 
                Affordable Care Act] or a State's children's 
                health insurance program under title XXI of the 
                Social Security Act. Such return information 
                shall be limited to--
                          (i) taxpayer identity information 
                        with respect to such taxpayer,
                          (ii) the filing status of such 
                        taxpayer,
                          (iii) the number of individuals for 
                        whom a deduction is allowed under 
                        section 151 with respect to the 
                        taxpayer (including the taxpayer and 
                        the taxpayer's spouse),
                          (iv) the modified adjusted gross 
                        income [(as defined in section 36B)] 
                        (as defined in section 36C(c)(2)(B)) of 
                        such taxpayer and each of the other 
                        individuals included under clause (iii) 
                        who are required to file a return of 
                        tax imposed by chapter 1 for the 
                        taxable year,
                          (v) such other information as is 
                        prescribed by the Secretary by 
                        regulation as might indicate whether 
                        the taxpayer is eligible for such 
                        credit [or reduction] (and the amount 
                        thereof), and
                          (vi) the taxable year with respect to 
                        which the preceding information relates 
                        or, if applicable, the fact that such 
                        information is not available.
                  (B) Information to Exchange and State 
                agencies.--The Secretary of Health and Human 
                Services [may disclose to an Exchange] may 
                disclose--
                          (i) to an Exchange established under 
                        the Patient Protection and Affordable 
                        Care Act or its contractors, or to a 
                        State agency administering a State 
                        program described in subparagraph (A) 
                        or its contractors, any inconsistency 
                        between the information provided by the 
                        Exchange or State agency to the 
                        Secretary and the information provided 
                        to the Secretary under subparagraph 
                        (A)[.], and
                          (ii) in the case of any credit under 
                        section 36C with respect to any health 
                        insurance, the amount of such credit 
                        (or the amount of any advance payment 
                        of such credit) to the provider of such 
                        insurance (or, as the Secretary 
                        determines appropriate, the licensed 
                        agent or broker with respect to such 
                        insurance).
                  (C) Restriction on use of disclosed 
                information.--Return information disclosed 
                under subparagraph (A) or (B) may be used by 
                officers, employees, and contractors of the 
                Department of Health and Human Services, an 
                Exchange, or a State agency only for the 
                purposes of, and to the extent necessary in--
                          (i) establishing eligibility for 
                        participation in the Exchange, and 
                        verifying the appropriate [amount of, 
                        any credit or reduction] amount of any 
                        credit described in subparagraph (A),
                          (ii) determining eligibility for 
                        participation in the State programs 
                        described in subparagraph (A).
          (22) Disclosure of return information to Department 
        of Health and Human Services for purposes of enhancing 
        Medicare program integrity.--
                  (A) In general.--The Secretary shall, upon 
                written request from the Secretary of Health 
                and Human Services, disclose to officers and 
                employees of the Department of Health and Human 
                Services return information with respect to a 
                taxpayer who has applied to enroll, or 
                reenroll, as a provider of services or supplier 
                under the Medicare program under title XVIII of 
                the Social Security Act. Such return 
                information shall be limited to--
                          (i) the taxpayer identity information 
                        with respect to such taxpayer;
                          (ii) the amount of the delinquent tax 
                        debt owed by that taxpayer; and
                          (iii) the taxable year to which the 
                        delinquent tax debt pertains.
                  (B) Restriction on disclosure.--Return 
                information disclosed under subparagraph (A) 
                may be used by officers and employees of the 
                Department of Health and Human Services for the 
                purposes of, and to the extent necessary in, 
                establishing the taxpayer's eligibility for 
                enrollment or reenrollment in the Medicare 
                program, or in any administrative or judicial 
                proceeding relating to, or arising from, a 
                denial of such enrollment or reenrollment, or 
                in determining the level of enhanced oversight 
                to be applied with respect to such taxpayer 
                pursuant to section 1866(j)(3) of the Social 
                Security Act.
                  (C) Delinquent tax debt.--For purposes of 
                this paragraph, the term ``delinquent tax 
                debt'' means an outstanding debt under this 
                title for which a notice of lien has been filed 
                pursuant to section 6323, but the term does not 
                include a debt that is being paid in a timely 
                manner pursuant to an agreement under section 
                6159 or 7122, or a debt with respect to which a 
                collection due process hearing under section 
                6330 is requested, pending, or completed and no 
                payment is required.
  (m) Disclosure of Taxpayer Identity Information.--
          (1) Tax refunds.--The Secretary may disclose taxpayer 
        identity information to the press and other media for 
        purposes of notifying persons entitled to tax refunds 
        when the Secretary, after reasonable effort and lapse 
        of time, has been unable to locate such persons.
          (2) Federal claims.--
                  (A) In general.--Except as provided in 
                subparagraph (B), the Secretary may, upon 
                written request, disclose the mailing address 
                of a taxpayer for use by officers, employees, 
                or agents of a Federal agency for purposes of 
                locating such taxpayer to collect or compromise 
                a Federal claim against the taxpayer in 
                accordance with sections 3711, 3717, and 3718 
                of title 31.
                  (B) Special rule for consumer reporting 
                agency.--In the case of an agent of a Federal 
                agency which is a consumer reporting agency 
                (within the meaning of section 603(f) of the 
                Fair Credit Reporting Act (15 U.S.C. 
                1681a(f))), the mailing address of a taxpayer 
                may be disclosed to such agent under 
                subparagraph (A) only for the purpose of 
                allowing such agent to prepare a commercial 
                credit report on the taxpayer for use by such 
                Federal agency in accordance with sections 
                3711, 3717, and 3718 of title 31.
          (3) National Institute for Occupational Safety and 
        Health.--Upon written request, the Secretary may 
        disclose the mailing address of taxpayers to officers 
        and employees of the National Institute for 
        Occupational Safety and Health solely for the purpose 
        of locating individuals who are, or may have been, 
        exposed to occupational hazards in order to determine 
        the status of their health or to inform them of the 
        possible need for medical care and treatment.
          (4) Individuals who owe an overpayment of Federal 
        Pell Grants or who have defaulted on student loans 
        administered by the Department of Education.--
                  (A) In general.--Upon written request by the 
                Secretary of Education, the Secretary may 
                disclose the mailing address of any taxpayer--
                          (i) who owes an overpayment of a 
                        grant awarded to such taxpayer under 
                        subpart 1 of part A of title IV of the 
                        Higher Education Act of 1965, or
                          (ii) who has defaulted on a loan--
                                  (I) made under part B, D, or 
                                E of title IV of the Higher 
                                Education Act of 1965, or
                                  (II) made pursuant to section 
                                3(a)(1) of the Migration and 
                                Refugee Assistance Act of 1962 
                                to a student at an institution 
                                of higher education,
                for use only by officers, employees, or agents 
                of the Department of Education for purposes of 
                locating such taxpayer for purposes of 
                collecting such overpayment or loan.
                  (B) Disclosure to educational institutions, 
                etc..--Any mailing address disclosed under 
                subparagraph (A)(i) may be disclosed by the 
                Secretary of Education to--
                          (i) any lender, or any State or 
                        nonprofit guarantee agency, which is 
                        participating under part B or D of 
                        title IV of the Higher Education Act of 
                        1965, or
                          (ii) any educational institution with 
                        which the Secretary of Education has an 
                        agreement under subpart 1 of part A, or 
                        part D or E, of title IV of such Act,
                for use only by officers, employees, or agents 
                of such lender, guarantee agency, or 
                institution whose duties relate to the 
                collection of student loans for purposes of 
                locating individuals who have defaulted on 
                student loans made under such loan programs for 
                purposes of collecting such loans.
          (5) Individuals who have defaulted on student loans 
        administered by the Department of Health and Human 
        Services.--
                  (A) In general.--Upon written request by the 
                Secretary of Health and Human Services, the 
                Secretary may disclose the mailing address of 
                any taxpayer who has defaulted on a loan made 
                under part C of title VII of the Public Health 
                Service Act or under subpart II of part B of 
                title VIII of such Act, for use only by 
                officers, employees, or agents of the 
                Department of Health and Human Services for 
                purposes of locating such taxpayer for purposes 
                of collecting such loan.
                  (B) Disclosure to schools and eligible 
                lenders.--Any mailing address disclosed under 
                subparagraph (A) may be disclosed by the 
                Secretary of Health and Human Services to--
                          (i) any school with which the 
                        Secretary of Health and Human Services 
                        has an agreement under subpart II of 
                        part C of title VII of the Public 
                        Health Service Act or subpart II of 
                        part B of title VIII of such Act, or
                          (ii) any eligible lender (within the 
                        meaning of section 737(4) of such Act) 
                        participating under subpart I of part C 
                        of title VII of such Act,
                for use only by officers, employees, or agents 
                of such school or eligible lender whose duties 
                relate to the collection of student loans for 
                purposes of locating individuals who have 
                defaulted on student loans made under such 
                subparts for the purposes of collecting such 
                loans.
          (6) Blood Donor Locator Service.--
                  (A) In general.--Upon written request 
                pursuant to section 1141 of the Social Security 
                Act, the Secretary shall disclose the mailing 
                address of taxpayers to officers and employees 
                of the Blood Donor Locator Service in the 
                Department of Health and Human Services.
                  (B) Restriction on disclosure.--The Secretary 
                shall disclose return information under 
                subparagraph (A) only for purposes of, and to 
                the extent necessary in, assisting under the 
                Blood Donor Locator Service authorized persons 
                (as defined in section 1141(h)(1) of the Social 
                Security Act) in locating blood donors who, as 
                indicated by donated blood or products derived 
                therefrom or by the history of the subsequent 
                use of such blood or blood products, have or 
                may have the virus for acquired immune 
                deficiency syndrome, in order to inform such 
                donors of the possible need for medical care 
                and treatment.
                  (C) Safeguards.--The Secretary shall destroy 
                all related blood donor records (as defined in 
                section 1141(h)(2) of the Social Security Act) 
                in the possession of the Department of the 
                Treasury upon completion of their use in making 
                the disclosure required under subparagraph (A), 
                so as to make such records undisclosable.
          (7) Social security account statement furnished by 
        Social Security Administration.--Upon written request 
        by the Commissioner of Social Security, the Secretary 
        may disclose the mailing address of any taxpayer who is 
        entitled to receive a social security account statement 
        pursuant to section 1143(c) of the Social Security Act, 
        for use only by officers, employees or agents of the 
        Social Security Administration for purposes of mailing 
        such statement to such taxpayer.
  (n) Certain Other Persons.--Pursuant to regulations 
prescribed by the Secretary, returns and return information may 
be disclosed to any person, including any person described in 
section 7513(a), to the extent necessary in connection with the 
processing, storage, transmission, and reproduction of such 
returns and return information, the programming, maintenance, 
repair, testing, and procurement of equipment, and the 
providing of other services, for purposes of tax 
administration.
  (o) Disclosure of Returns and Return Information With Respect 
to Certain Taxes.--
          (1) Taxes imposed by subtitle E.--
                  (A) In general.--Returns and return 
                information with respect to taxes imposed by 
                subtitle E (relating to taxes on alcohol, 
                tobacco, and firearms) shall be open to 
                inspection by or disclosure to officers and 
                employees of a Federal agency whose official 
                duties require such inspection or disclosure.
                  (B) Use in certain proceedings.--Returns and 
                return information disclosed to a Federal 
                agency under subparagraph (A) may be used in an 
                action or proceeding (or in preparation for 
                such action or proceeding) brought under 
                section 625 of the American Jobs Creation Act 
                of 2004 for the collection of any unpaid 
                assessment or penalty arising under such Act.
          (2) Taxes imposed by chapter 35.--Returns and return 
        information with respect to taxes imposed by chapter 35 
        (relating to taxes on wagering) shall, notwithstanding 
        any other provision of this section, be open to 
        inspection by or disclosure only to such person or 
        persons and for such purpose or purposes as are 
        prescribed by section 4424.
  (p) Procedure and Recordkeeping.--
          (1) Manner, time, and place of inspections.--Requests 
        for the inspection or disclosure of a return or return 
        information and such inspection or disclosure shall be 
        made in such manner and at such time and place as shall 
        be prescribed by the Secretary.
          (2) Procedure.--
                  (A) Reproduction of returns.--A reproduction 
                or certified reproduction of a return shall, 
                upon written request, be furnished to any 
                person to whom disclosure or inspection of such 
                return is authorized under this section. A 
                reasonable fee may be prescribed for furnishing 
                such reproduction or certified reproduction.
                  (B) Disclosure of return information.--Return 
                information disclosed to any person under the 
                provisions of this title may be provided in the 
                form of written documents, reproductions of 
                such documents, films or photoimpressions, or 
                electronically produced tapes, disks, or 
                records, or by any other mode or means which 
                the Secretary determines necessary or 
                appropriate. A reasonable fee may be prescribed 
                for furnishing such return information.
                  (C) Use of reproductions.--Any reproduction 
                of any return, document, or other matter made 
                in accordance with this paragraph shall have 
                the same legal status as the original, and any 
                such reproduction shall, if properly 
                authenticated, be admissible in evidence in any 
                judicial or administrative proceeding as if it 
                were the original, whether or not the original 
                is in existence.
          (3) Records of inspection and disclosure.--
                  (A) System of recordkeeping.--Except as 
                otherwise provided by this paragraph, the 
                Secretary shall maintain a permanent system of 
                standardized records or accountings of all 
                requests for inspection or disclosure of 
                returns and return information (including the 
                reasons for and dates of such requests) and of 
                returns and return information inspected or 
                disclosed under this section and section 
                6104(c). Notwithstanding the provisions of 
                section 552a(c) of title 5, United States Code, 
                the Secretary shall not be required to maintain 
                a record or accounting of requests for 
                inspection or disclosure of returns and return 
                information, or of returns and return 
                information inspected or disclosed, under the 
                authority of subsections (c), (e), (f)(5), 
                (h)(1), (3)(A), or (4), (i)(4), or 
                (8)(A)(ii),(k)(1), (2),(6), (8), or (9), 
                (l)(1), (4)(B), (5), (7), (8), (9), (10), (11), 
                (12), (13), (14), (15), (16), (17), or (18), 
                (m), or (n). The records or accountings 
                required to be maintained under this paragraph 
                shall be available for examination by the Joint 
                Committee on Taxation or the Chief of Staff of 
                such joint committee. Such record or accounting 
                shall also be available for examination by such 
                person or persons as may be, but only to the 
                extent, authorized to make such examination 
                under section 552a(c)(3) of title 5, United 
                States Code.
                  (B) Report by the Secretary.--The Secretary 
                shall, within 90 days after the close of each 
                calendar year, furnish to the Joint Committee 
                on Taxation a report with respect to, or 
                summary of, the records or accountings 
                described in subparagraph (A) in such form and 
                containing such information as such joint 
                committee or the Chief of Staff of such joint 
                committee may designate. Such report or summary 
                shall not, however, include a record or 
                accounting of any request by the President 
                under subsection (g) for, or the disclosure in 
                response to such request of, any return or 
                return information with respect to any 
                individual who, at the time of such request, 
                was an officer or employee of the executive 
                branch of the Federal Government. Such report 
                or summary, or any part thereof, may be 
                disclosed by such joint committee to such 
                persons and for such purposes as the joint 
                committee may, by record vote of a majority of 
                the members of the joint committee, determine.
                  (C) Public report on disclosures.--The 
                Secretary shall, within 90 days after the close 
                of each calendar year, furnish to the Joint 
                Committee on Taxation for disclosure to the 
                public a report with respect to the records or 
                accountings described in subparagraph (A) 
                which--
                          (i) provides with respect to each 
                        Federal agency, each agency, body, or 
                        commission described in subsection (d), 
                        (i)(3)(B)(i) or (7)(A)(ii), or (l)(6), 
                        and the Government Accountability 
                        Office the number of--
                                  (I) requests for disclosure 
                                of returns and return 
                                information,
                                  (II) instances in which 
                                returns and return information 
                                were disclosed pursuant to such 
                                requests or otherwise,
                                  (III) taxpayers whose 
                                returns, or return information 
                                with respect to whom, were 
                                disclosed pursuant to such 
                                requests, and
                          (ii) describes the general purposes 
                        for which such requests were made,
          (4) Safeguards.--Any Federal agency described in 
        subsection (h)(2), (h)(5), (i)(1), (2), (3), (5), or 
        (7), (j)(1), (2), or (5), (k)(8), (10), or (11), 
        (l)(1), (2), (3), (5), (10), (11), (13), (14), (17), or 
        (22) or (o)(1)(A), the Government Accountability 
        Office, the Congressional Budget Office, or any agency, 
        body, or commission described in subsection (d), 
        (i)(1)(C), (3)(B)(i), or 7(A)(ii), or (k)(10), (l)(6), 
        (7), (8), (9), (12), (15), or (16), any appropriate 
        State officer (as defined in section 6104(c)), or any 
        other person described in subsection (k)(10), 
        subsection (l)(10), (16), (18), (19), or (20), or any 
        entity described in subsection (l)(21), shall, as a 
        condition for receiving returns or return information--
                  (A) establish and maintain, to the 
                satisfaction of the Secretary, a permanent 
                system of standardized records with respect to 
                any request, the reason for such request, and 
                the date of such request made by or of it and 
                any disclosure of return or return information 
                made by or to it;
                  (B) establish and maintain, to the 
                satisfaction of the Secretary, a secure area or 
                place in which such returns or return 
                information shall be stored;
                  (C) restrict, to the satisfaction of the 
                Secretary, access to the returns or return 
                information only to persons whose duties or 
                responsibilities require access and to whom 
                disclosure may be made under the provisions of 
                this title;
                  (D) provide such other safeguards which the 
                Secretary determines (and which he prescribes 
                in regulations) to be necessary or appropriate 
                to protect the confidentiality of the returns 
                or return information;
                  (E) furnish a report to the Secretary, at 
                such time and containing such information as 
                the Secretary may prescribe, which describes 
                the procedures established and utilized by such 
                agency, body, or commission, the Government 
                Accountability Office, or the Congressional 
                Budget Office for ensuring the confidentiality 
                of returns and return information required by 
                this paragraph; and
                  (F) upon completion of use of such returns or 
                return information--
                          (i) in the case of an agency, body, 
                        or commission described in subsection 
                        (d), (i)(3)(B)(i), (k)(10), or (l)(6), 
                        (7), (8), (9), or (16), any appropriate 
                        State officer (as defined in section 
                        6104(c)), or any other person described 
                        in subsection (k)(10) or subsection 
                        (l)(10), (16), (18), (19), or (20) 
                        return to the Secretary such returns or 
                        return information (along with any 
                        copies made therefrom) or make such 
                        returns or return information 
                        undisclosable in any manner and furnish 
                        a written report to the Secretary 
                        describing such manner,
                          (ii) in the case of an agency 
                        described in subsections (h)(2), 
                        (h)(5), (i)(1), (2), (3), (5) or (7), 
                        (j)(1), (2), or (5), (k)(8), (10), or 
                        (11), (l)(1), (2), (3), (5), (10), 
                        (11), (12), (13), (14), (15), (17), or 
                        (22), or (o)(1)(A) or any entity 
                        described in subsection (l)(21),,, the 
                        Government Accountability Office, or 
                        the Congressional Budget Office, 
                        either--
                                  (I) return to the Secretary 
                                such returns or return 
                                information (along with any 
                                copies made therefrom),
                                  (II) otherwise make such 
                                returns or return information 
                                undisclosable, or
                                  (III) to the extent not so 
                                returned or made undisclosable, 
                                ensure that the conditions of 
                                subparagraphs (A), (B), (C), 
                                (D), and (E) of this paragraph 
                                continue to be met with respect 
                                to such returns or return 
                                information, and
                          (iii) in the case of the Department 
                        of Health and Human Services for 
                        purposes of subsection (m)(6), destroy 
                        all such return information upon 
                        completion of its use in providing the 
                        notification for which the information 
                        was obtained, so as to make such 
                        information undisclosable;
        except that the conditions of subparagraphs (A), (B), 
        (C), (D), and (E) shall cease to apply with respect to 
        any return or return information if, and to the extent 
        that, such return or return information is disclosed in 
        the course of any judicial or administrative proceeding 
        and made a part of the public record thereof. If the 
        Secretary determines that any such agency, body, or 
        commission, including an agency, an appropriate State 
        officer (as defined in section 6104(c)), or any other 
        person described in subsection (k)(10) or subsection 
        (l)(10), (16), (18), (19), or (20) or any entity 
        described in subsection (l)(21),, or the Government 
        Accountability Office or the Congressional Budget 
        Office, has failed to, or does not, meet the 
        requirements of this paragraph, he may, after any 
        proceedings for review established under paragraph (7), 
        take such actions as are necessary to ensure such 
        requirements are met, including refusing to disclose 
        returns or return information to such agency, body, or 
        commission, including an agency, an appropriate State 
        officer (as defined in section 6104(c)), or any other 
        person described in subsection (k)(10) or subsection 
        (l)(10), (16), (18), (19), or (20) or any entity 
        described in subsection (l)(21),, or the Government 
        Accountability Office or the Congressional Budget 
        Office, until he determines that such requirements have 
        been or will be met. In the case of any agency which 
        receives any mailing address under paragraph (2), (4), 
        (6), or (7) of subsection (m) and which discloses any 
        such mailing address to any agent or which receives any 
        information under paragraph (6)(A), (10), (12)(B), or 
        (16) of subsection (l) and which discloses any such 
        information to any agent, or any person including an 
        agent described in subsection (l)(10) or (16), this 
        paragraph shall apply to such agency and each such 
        agent or other person (except that, in the case of an 
        agent, or any person including an agent described in 
        subsection (l)(10) or (16), any report to the Secretary 
        or other action with respect to the Secretary shall be 
        made or taken through such agency). For purposes of 
        applying this paragraph in any case to which subsection 
        (m)(6) applies, the term ``return information'' 
        includes related blood donor records (as defined in 
        section 1141(h)(2) of the Social Security Act).
          (5) Report on procedures and safeguards.--After the 
        close of each calendar year, the Secretary shall 
        furnish to each committee described in subsection 
        (f)(1) a report which describes the procedures and 
        safeguards established and utilized by such agencies, 
        bodies, or commissions, the Government Accountability 
        Office, and the Congressional Budget Office for 
        ensuring the confidentiality of returns and return 
        information as required by this subsection. Such report 
        shall also describe instances of deficiencies in, and 
        failure to establish or utilize, such procedures.
          (6) Audit of procedures and safeguards.--
                  (A) Audit by Comptroller General.--The 
                Comptroller General may audit the procedures 
                and safeguards established by such agencies, 
                bodies, or commissions and the Congressional 
                Budget Office pursuant to this subsection to 
                determine whether such safeguards and 
                procedures meet the requirements of this 
                subsection and ensure the confidentiality of 
                returns and return information. The Comptroller 
                General shall notify the Secretary before any 
                such audit is conducted.
                  (B) Records of inspection and reports by the 
                Comptroller General.--The Comptroller General 
                shall--
                          (i) maintain a permanent system of 
                        standardized records and accountings of 
                        returns and return information 
                        inspected by officers and employees of 
                        the Government Accountability Office 
                        under subsection (i)(8)(A)(ii) and 
                        shall, within 90 days after the close 
                        of each calendar year, furnish to the 
                        Secretary a report with respect to, or 
                        summary of, such records or accountings 
                        in such form and containing such 
                        information as the Secretary may 
                        prescribe, and
                          (ii) furnish an annual report to each 
                        committee described in subsection (f) 
                        and to the Secretary setting forth his 
                        findings with respect to any audit 
                        conducted pursuant to subparagraph (A).
                The Secretary may disclose to the Joint 
                Committee any report furnished to him under 
                clause (i).
          (7) Administrative review.--The Secretary shall by 
        regulations prescribe procedures which provide for 
        administrative review of any determination under 
        paragraph (4) that any agency, body, or commission 
        described in subsection (d) has failed to meet the 
        requirements of such paragraph.
          (8) State law requirements.--
                  (A) Safeguards.--Notwithstanding any other 
                provision of this section, no return or return 
                information shall be disclosed after December 
                31, 1978, to any officer or employee of any 
                State which requires a taxpayer to attach to, 
                or include in, any State tax return a copy of 
                any portion of his Federal return, or 
                information reflected on such Federal return, 
                unless such State adopts provisions of law 
                which protect the confidentiality of the copy 
                of the Federal return (or portion thereof) 
                attached to, or the Federal return information 
                reflected on, such State tax return.
                  (B) Disclosure of returns or return 
                information in State returns.--Nothing in 
                subparagraph (A) shall be construed to prohibit 
                the disclosure by an officer or employee of any 
                State of any copy of any portion of a Federal 
                return or any information on a Federal return 
                which is required to be attached or included in 
                a State return to another officer or employee 
                of such State (or political subdivision of such 
                State) if such disclosure is specifically 
                authorized by State law.
  (q) Regulations.--The Secretary is authorized to prescribe 
such other regulations as are necessary to carry out the 
provisions of this section.

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 CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE 
PENALTIES

           *       *       *       *       *       *       *


Subchapter B--Assessable Penalties

           *       *       *       *       *       *       *


PART I--GENERAL PROVISIONS

           *       *       *       *       *       *       *


SEC. 6676. ERRONEOUS CLAIM FOR REFUND OR CREDIT.

  (a) Civil Penalty.--If a claim for refund or credit with 
respect to income tax is made for an excessive amount, unless 
it is shown that the claim for such excessive amount is due to 
reasonable cause, the person making such claim shall be liable 
for a penalty in an amount equal to 20 percent (25 percent in 
the case of a claim for refund or credit relating to the health 
insurance coverage credit under section 36C) of the excessive 
amount.
  (b) Excessive Amount.--For purposes of this section, the term 
``excessive amount'' means in the case of any person the amount 
by which the amount of the claim for refund or credit for any 
taxable year exceeds the amount of such claim allowable under 
this title for such taxable year.
  (c) Noneconomic Substance Transactions Treated as Lacking 
Reasonable Basis.--For purposes of this section, any excessive 
amount which is attributable to any transaction described in 
section 6662(b)(6) shall not be treated as due to reasonable 
cause.
  (d) Coordination With Other Penalties.--This section shall 
not apply to any portion of the excessive amount of a claim for 
refund or credit which is subject to a penalty imposed under 
part II of subchapter A of chapter 68.

           *       *       *       *       *       *       *


     PART II--FAILURE TO COMPLY WITH CERTAIN INFORMATION REPORTING 
REQUIREMENTS

           *       *       *       *       *       *       *


SEC. 6724. WAIVER; DEFINITIONS AND SPECIAL RULES.

  (a) Reasonable Cause Waiver.--No penalty shall be imposed 
under this part with respect to any failure if it is shown that 
such failure is due to reasonable cause and not to willful 
neglect.
  (b) Payment of Penalty.--Any penalty imposed by this part 
shall be paid on notice and demand by the Secretary and in the 
same manner as tax.
  (c) Special Rule for Failure to Meet Magnetic Media 
Requirements.--No penalty shall be imposed under section 6721 
solely by reason of any failure to comply with the requirements 
of the regulations prescribed under section 6011(e)(2), except 
to the extent that such a failure occurs with respect to more 
than 250 information returns (more than 100 information returns 
in the case of a partnership having more than 100 partners) or 
with respect to a return described in section 6011(e)(4).
  (d) Definitions.--For purposes of this part--
          (1) Information return.--The term ``information 
        return'' means--
                  (A) any statement of the amount of payments 
                to another person required by--
                          (i) section 6041(a) or (b) (relating 
                        to certain information at source),
                          (ii) section 6042(a)(1) (relating to 
                        payments of dividends),
                          (iii) section 6044(a)(1) (relating to 
                        payments of patronage dividends),
                          (iv) section 6049(a) (relating to 
                        payments of interest),
                          (v) section 6050A(a) (relating to 
                        reporting requirements of certain 
                        fishing boat operators),
                          (vi) section 6050N(a) (relating to 
                        payments of royalties),
                          (vii) section 6051(d) (relating to 
                        information returns with respect to 
                        income tax withheld),
                          (viii) section 6050R (relating to 
                        returns relating to certain purchases 
                        of fish), or
                          (ix) section 110(d) (relating to 
                        qualified lessee construction 
                        allowances for short-term leases),
                  (B) any return required by--
                          (i) section 6041A(a) or (b) (relating 
                        to returns of direct sellers),
                          (ii) section 6043A(a) (relating to 
                        returns relating to taxable mergers and 
                        acquisitions),
                          (iii) section 6045(a) or (d) 
                        (relating to returns of brokers),
                          (iv) section 6045B(a) (relating to 
                        returns relating to actions affecting 
                        basis of specified securities),
                          (v) section 6050H(a) or (h)(1) 
                        (relating to mortgage interest received 
                        in trade or business from individuals),
                          (vi) section 6050I(a) or (g)(1) 
                        (relating to cash received in trade or 
                        business, etc.),
                          (vii) section 6050J(a) (relating to 
                        foreclosures and abandonments of 
                        security),
                          (viii) section 6050K(a) (relating to 
                        exchanges of certain partnership 
                        interests),
                          (ix) section 6050L(a) (relating to 
                        returns relating to certain 
                        dispositions of donated property),
                          (x) section 6050P (relating to 
                        returns relating to the cancellation of 
                        indebtedness by certain financial 
                        entities),
                          (xi) section 6050Q (relating to 
                        certain long-term care benefits),
                          (xii) section 6050S (relating to 
                        returns relating to payments for 
                        qualified tuition and related 
                        expenses),
                          (xiii) section 6050T (relating to 
                        returns relating to credit for health 
                        insurance costs of eligible 
                        individuals),
                          (xiv) section 6052(a) (relating to 
                        reporting payment of wages in the form 
                        of group-life insurance),
                          (xv) section 6050V (relating to 
                        returns relating to applicable 
                        insurance contracts in which certain 
                        exempt organizations hold interests),
                          (xvi) section 6053(c)(1) (relating to 
                        reporting with respect to certain 
                        tips),
                          (xvii) subsection (b) or (e) of 
                        section 1060 (relating to reporting 
                        requirements of transferors and 
                        transferees in certain asset 
                        acquisitions),
                          (xviii) section 4101(d) (relating to 
                        information reporting with respect to 
                        fuels taxes),
                          (xix) subparagraph (C) of section 
                        338(h)(10) (relating to information 
                        required to be furnished to the 
                        Secretary in case of elective 
                        recognition of gain or loss),
                          (xx) section 264(f)(5)(A)(iv) 
                        (relating to reporting with respect to 
                        certain life insurance and annuity 
                        contracts), or
                          (xxi) section 6050U (relating to 
                        charges or payments for qualified long-
                        term care insurance contracts under 
                        combined arrangements), and
                          (xxii) section 6039(a) (relating to 
                        returns required with respect to 
                        certain options),
                          (xxiii) section 6050W (relating to 
                        returns to payments made in settlement 
                        of payment card transactions),
                          (xxiv) section 6055 (relating to 
                        returns relating to information 
                        regarding health insurance coverage), 
                        [or]
                          (xxv) section 6056 (relating to 
                        returns relating to certain employers 
                        required to report on health insurance 
                        coverage), or
                          (xxvi) section 6050X (relating to 
                        returns relating to health insurance 
                        coverage credit),
                  (C) any statement of the amount of payments 
                to another person required to be made to the 
                Secretary under--
                          (i) section 408(i) (relating to 
                        reports with respect to individual 
                        retirement accounts or annuities), or
                          (ii) section 6047(d) (relating to 
                        reports by employers, plan 
                        administrators, etc.), and
                  (D) any statement required to be filed with 
                the Secretary under section 6035.
                Such term also includes any form, statement, or 
                schedule required to be filed with the 
                Secretary under chapter 4 or with respect to 
                any amount from which tax was required to be 
                deducted and withheld under chapter 3 (or from 
                which tax would be required to be so deducted 
                and withheld but for an exemption under this 
                title or any treaty obligation of the United 
                States).
          (2) Payee statement.--The term ``payee statement'' 
        means any statement required to be furnished under--
                  (A) section 6031(b) or (c), 6034A, or 6037(b) 
                (relating to statements furnished by certain 
                pass-thru entities),
                  (B) section 6039(b) (relating to information 
                required in connection with certain options),
                  (C) section 6041(d) (relating to information 
                at source),
                  (D) section 6041A(e) (relating to returns 
                regarding payments of remuneration for services 
                and direct sales),
                  (E) section 6042(c) (relating to returns 
                regarding payments of dividends and corporate 
                earnings and profits),
                  (F) subsections (b) and (d) of section 6043A 
                (relating to returns relating to taxable 
                mergers and acquisitions).
                  (G) section 6044(e) (relating to returns 
                regarding payments of patronage dividends),
                  (H) section 6045(b) or (d) (relating to 
                returns of brokers),
                  (I) section 6045A (relating to information 
                required in connection with transfers of 
                covered securities to brokers),
                  (J) subsections (c) and (e) of section 6045B 
                (relating to returns relating to actions 
                affecting basis of specified securities),
                  (K) section 6049(c) (relating to returns 
                regarding payments of interest),
                  (L) section 6050A(b) (relating to reporting 
                requirements of certain fishing boat 
                operators),
                  (M) section 6050H(d) or (h)(2) relating to 
                returns relating to mortgage interest received 
                in trade or business from individuals),
                  (N) section 6050I(e) or paragraph (4) or (5) 
                of section 6050I(g) (relating to cash received 
                in trade or business, etc.),
                  (O) section 6050J(e) (relating to returns 
                relating to foreclosures and abandonments of 
                security),
                  (P) section 6050K(b) (relating to returns 
                relating to exchanges of certain partnership 
                interests),
                  (Q) section 6050L(c) (relating to returns 
                relating to certain dispositions of donated 
                property),
                  (R) section 6050N(b) (relating to returns 
                regarding payments of royalties),
                  (S) section 6050P(d) (relating to returns 
                relating to the cancellation of indebtedness by 
                certain financial entities),
                  (T) section 6050Q (relating to certain long-
                term care benefits),
                  (U) section 6050R(c) (relating to returns 
                relating to certain purchases of fish),
                  (V) section 6051 (relating to receipts for 
                employees),
                  (W) section 6052(b) (relating to returns 
                regarding payment of wages in the form of 
                group-term life insurance),
                  (X) section 6053(b) or (c) (relating to 
                reports of tips),
                  (Y) section 6048(b)(1)(B) (relating to 
                foreign trust reporting requirements),
                  (Z) section 408(i) (relating to reports with 
                respect to individual retirement plans) to any 
                person other than the Secretary with respect to 
                the amount of payments made to such person,
                  (AA) section 6047(d) (relating to reports by 
                plan administrators) to any person other than 
                the Secretary with respect to the amount of 
                payments made to such person,
                  (BB) section 6050S(d) (relating to returns 
                relating to qualified tuition and related 
                expenses),
                  (CC) section 264(f)(5)(A)(iv) (relating to 
                reporting with respect to certain life 
                insurance and annuity contracts),
                  (DD) section 6050T (relating to returns 
                relating to credit for health insurance costs 
                of eligible individuals)
                  (EE) section 6050U (relating to charges or 
                payments for qualified long-term care insurance 
                contracts under combined arrangements),
                  (FF) section 6050W(f) (relating to returns 
                relating to payments made in settlement of 
                payment card transactions),
                  (GG) section 6055(c) (relating to statements 
                relating to information regarding health 
                insurance coverage),
                  (HH) section 6056(c) (relating to statements 
                relating to certain employers required to 
                report on health insurance coverage), [or]
                  (II) section 6035 (other than a statement 
                described in paragraph (1)(D))[.],
                  (JJ) section 6050X (relating to returns 
                relating to health insurance coverage credit), 
                or
                  (KK) section 7529(c)(3) (relating to 
                documentation regarding other specified 
                coverage).
        Such term also includes any form, statement, or 
        schedule required to be furnished to the recipient of 
        any amount from which tax was required to be deducted 
        and withheld under chapter 3 or 4 (or from which tax 
        would be required to be so deducted and withheld but 
        for an exemption under this title or any treaty 
        obligation of the United States).
          (3) Specified information reporting requirement.--The 
        term ``specified information reporting requirement'' 
        means--
                  (A) the notice required by section 
                6050K(c)(1) (relating to requirement that 
                transferor notify partnership of exchange),
                  (B) any requirement contained in the 
                regulations prescribed under section 6109 that 
                a person--
                          (i) include his TIN on any return, 
                        statement, or other document (other 
                        than an information return or payee 
                        statement),
                          (ii) furnish his TIN to another 
                        person, or
                          (iii) include on any return, 
                        statement, or other document (other 
                        than an information return or payee 
                        statement) made with respect to another 
                        person the TIN of such person,
                  (C) any requirement contained in the 
                regulations prescribed under section 215 that a 
                person--
                          (i) furnish his TIN to another 
                        person, or
                          (ii) include on his return the TIN of 
                        another person, and
                  (D) any requirement under section 6109(h) 
                that--
                          (i) a person include on his return 
                        the name, address, and TIN of another 
                        person, or
                          (ii) a person furnish his TIN to 
                        another person.
          (4) Required filing date.--The term ``required filing 
        date'' means the date prescribed for filing an 
        information return with the Secretary (determined with 
        regard to any extension of time for filing).
  (e) Special Rule for Certain Partnership Returns.--If any 
partnership return under section 6031(a) is required under 
section 6011(e) to be filed on magnetic media or in other 
machine-readable form, for purposes of this part, each schedule 
required to be included with such return with respect to each 
partner shall be treated as a separate information return.
  (f) Special Rule for Returns of Educational Institutions 
Related to Higher Education Tuition and Related Expenses.--No 
penalty shall be imposed under section 6721 or 6722 solely by 
reason of failing to provide the TIN of an individual on a 
return or statement required by section 6050S(a)(1) if the 
eligible educational institution required to make such return 
contemporaneously makes a true and accurate certification under 
penalty of perjury (and in such form and manner as may be 
prescribed by the Secretary) that it has complied with 
standards promulgated by the Secretary for obtaining such 
individual's TIN.

           *       *       *       *       *       *       *


                  CHAPTER 77--MISCELLANEOUS PROVISIONS

Sec. 7501. Liability for taxes withheld or collected.
     * * * * * * *
Sec. 7529. Advance payment of health insurance coverage credit.
Sec. 7530. Excess health insurance coverage credit payable to health 
          savings account.

           *       *       *       *       *       *       *


SEC. 7529. ADVANCE PAYMENT OF HEALTH INSURANCE COVERAGE CREDIT.

  (a) General Rule.--Not later than January 1, 2020, the 
Secretary, in consultation with the Secretary of Health and 
Human Services, the Secretary of Homeland Security, and the 
Commissioner of Social Security, shall establish a program 
(hereafter in this section referred to as the ``advance payment 
program'') for making payments to providers of eligible health 
insurance on behalf of taxpayers eligible for the credit under 
section 36C.
  (b) Limitation.--The aggregate payments made under this 
section with respect to any taxpayer, determined as of any time 
during any calendar year, shall not exceed the monthly credit 
amounts determined with respect to such taxpayer under section 
36C for months during such calendar year which have ended as of 
such time.
  (c) Administration.--
          (1) In general.--The advance payment program shall, 
        to the greatest extent practicable, use the methods and 
        procedures used to administer the programs created 
        under sections 1411 and 1412 of the Patient Protection 
        and Affordable Care Act (determined without regard to 
        section 1412(f) of such Act) and each entity that is 
        authorized to take any actions under the programs 
        created under such sections (as so determined) shall, 
        at the request of the Secretary, take such actions to 
        the extent necessary to carry out this section.
          (2) Application to off-exchange coverage.--Except as 
        otherwise provided by the Secretary, for purposes of 
        applying this subsection in the case of eligible health 
        insurance which is not enrolled in through an Exchange 
        established under title I of the Patient Protection and 
        Affordable Care Act, the sections referred to in 
        paragraph (1) shall be applied by treating references 
        in such sections to an Exchange as references to the 
        provider of such eligible health insurance (or, as the 
        Secretary determines appropriate, to the licensed agent 
        or broker with respect to such insurance), except that 
        the Secretary of Health and Human Services shall carry 
        out the responsibilities of the Exchange under section 
        1411(e)(4) of the Patient Protection and Affordable 
        Care Act (determined without regard to section 1412(f) 
        of such Act) in the case of such insurance.
          (3) Documentation regarding other specified 
        coverage.--
                  (A) In general.--The advance payment program 
                shall provide that any individual applying to 
                have payments made on their behalf under such 
                program shall, if such individual (or any 
                qualifying family member of such individual 
                taken into account in determining the amount of 
                the credit allowable under section 36C) is 
                employed, submit a written statement from each 
                employer of such individual or such qualifying 
                family member stating whether such individual 
                or qualifying family member (as the case may 
                be) is eligible for other specified coverage in 
                connection with such employment.
                  (B) Issuance of statements.--An employer 
                shall, at the request of any employee, provide 
                the statement under subparagraph (A) at such 
                time, and in such form and manner, as the 
                Secretary may provide.
  (d) Definitions.--For purposes of this section, terms used in 
this section which are also used in section 36C shall have the 
same meaning as when used in section 36C.

SEC. 7530. EXCESS HEALTH INSURANCE COVERAGE CREDIT PAYABLE TO HEALTH 
                    SAVINGS ACCOUNT.

  (a) In General.--At the request of an eligible taxpayer, the 
Secretary shall make a payment to the trustee of the designated 
health savings account with respect to such taxpayer in an 
amount equal to the sum of the excesses (if any) described in 
subsection (c)(2) with respect to months in the taxable year.
  (b) Designated Health Savings Account.--The term ``designated 
health savings account'' means a health savings account of an 
individual described in subsection (c)(3) which is identified 
by the eligible taxpayer for purposes of this section.
  (c) Eligible Taxpayer.--The term ``eligible taxpayer'' means, 
with respect to any taxable year, any taxpayer if--
          (1) such taxpayer is allowed a credit under section 
        36C for such taxable year,
          (2) the amount described in subparagraph (A) of 
        section 36C(b)(1) exceeds the amount described in 
        subparagraph (B) of such section with respect to such 
        taxpayer applied with respect to any month during such 
        taxable year, and
          (3) the taxpayer or one or more of the taxpayer's 
        qualifying family members (as defined in section 
        36C(e)) were eligible individuals (as defined in 
        section 223(c)(1)) for one or more months during such 
        taxable year.
  (d) Contributions Treated as Rollovers, Etc.--
          (1) In general.--Any amount paid the Secretary to a 
        health savings account under this section shall be 
        treated for purposes of this title in the same manner 
        as a rollover contribution described in section 
        223(f)(5).
          (2) Coordination with limitation on rollovers.--Any 
        amount described in paragraph (1) shall not be taken 
        into account in applying section 223(f)(5)(B) with 
        respect to any other amount and the limitation of 
        section 223(f)(5)(B) shall not apply with respect to 
        the application of paragraph (1).
  (e) Form and Manner of Request.--The request referred to in 
subsection (a) shall be made at such time and in such form and 
manner as the Secretary may provide. To the extent that the 
Secretary determines feasible, such request may identify more 
than one designated health savings account (and the amount to 
be paid to each such account) provided that the aggregate of 
such payments with respect to any taxpayer for any taxable year 
do not exceed the excess described in subsection (c)(2).
  (f) Taxpayers With Seriously Delinquent Tax Debt.--In the 
case of an individual who has a seriously delinquent tax debt 
(as defined in section 7345(b)) which has not been fully 
satisfied--
          (1) if such individual is the eligible taxpayer (or, 
        in the case of a joint return, either spouse), the 
        Secretary shall not make any payment under this section 
        with respect to such taxpayer, and
          (2) if such individual is the account beneficiary (as 
        defined in section 223(d)(3)) of any health savings 
        account, the Secretary shall not make any payment under 
        this section to such health savings account.
  (g) Advance Payment.--To the extent that the Secretary 
determines feasible, payment under this section may be made in 
advance on a monthly basis under rules similar to the rules of 
sections 7529 and 36C(i)(5)(B).

           *       *       *       *       *       *       *

                              ----------                              


PATIENT PROTECTION AND AFFORDABLE CARE ACT

           *       *       *       *       *       *       *


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

           *       *       *       *       *       *       *


       Subtitle E--Affordable Coverage Choices for All Americans

PART I--PREMIUM TAX CREDITS AND COST-SHARING REDUCTIONS

           *       *       *       *       *       *       *


Subpart B--Eligibility Determinations

           *       *       *       *       *       *       *


SEC. 1412. ADVANCE DETERMINATION AND PAYMENT OF PREMIUM TAX CREDITS AND 
                    COST-SHARING REDUCTIONS.

  (a) In General.--The Secretary, in consultation with the 
Secretary of the Treasury, shall establish a program under 
which--
          (1) upon request of an Exchange, advance 
        determinations are made under section 1411 with respect 
        to the income eligibility of individuals enrolling in a 
        qualified health plan in the individual market through 
        the Exchange for the premium tax credit allowable under 
        section 36B of the Internal Revenue Code of 1986 and 
        the cost-sharing reductions under section 1402;
          (2) the Secretary notifies--
                  (A) the Exchange and the Secretary of the 
                Treasury of the advance determinations; and
                  (B) the Secretary of the Treasury of the name 
                and employer identification number of each 
                employer with respect to whom 1 or more 
                employee of the employer were determined to be 
                eligible for the premium tax credit under 
                section 36B of the Internal Revenue Code of 
                1986 and the cost-sharing reductions under 
                section 1402 because--
                          (i) the employer did not provide 
                        minimum essential coverage; or
                          (ii) the employer provided such 
                        minimum essential coverage but it was 
                        determined under section 36B(c)(2)(C) 
                        of such Code to either be unaffordable 
                        to the employee or not provide the 
                        required minimum actuarial value; and
          (3) the Secretary of the Treasury makes advance 
        payments of such credit or reductions to the issuers of 
        the qualified health plans in order to reduce the 
        premiums payable by individuals eligible for such 
        credit.
  (b) Advance Determinations.--
          (1) In general.--The Secretary shall provide under 
        the program established under subsection (a) that 
        advance determination of eligibility with respect to 
        any individual shall be made--
                  (A) during the annual open enrollment period 
                applicable to the individual (or such other 
                enrollment period as may be specified by the 
                Secretary); and
                  (B) on the basis of the individual's 
                household income for the most recent taxable 
                year for which the Secretary, after 
                consultation with the Secretary of the 
                Treasury, determines information is available.
          (2) Changes in circumstances.--The Secretary shall 
        provide procedures for making advance determinations on 
        the basis of information other than that described in 
        paragraph (1)(B) in cases where information included 
        with an application form demonstrates substantial 
        changes in income, changes in family size or other 
        household circumstances, change in filing status, the 
        filing of an application for unemployment benefits, or 
        other significant changes affecting eligibility, 
        including--
                  (A) allowing an individual claiming a 
                decrease of 20 percent or more in income, or 
                filing an application for unemployment 
                benefits, to have eligibility for the credit 
                determined on the basis of household income for 
                a later period or on the basis of the 
                individual's estimate of such income for the 
                taxable year; and
                  (B) the determination of household income in 
                cases where the taxpayer was not required to 
                file a return of tax imposed by this chapter 
                for the second preceding taxable year.
  (c) Payment of Premium Tax Credits and Cost-Sharing 
Reductions.--
          (1) In general.--The Secretary shall notify the 
        Secretary of the Treasury and the Exchange through 
        which the individual is enrolling of the advance 
        determination under section 1411.
          (2) Premium tax credit.--
                  (A) In general.--The Secretary of the 
                Treasury shall make the advance payment under 
                this section of any premium tax credit allowed 
                under section 36B of the Internal Revenue Code 
                of 1986 to the issuer of a qualified health 
                plan on a monthly basis (or such other periodic 
                basis as the Secretary may provide).
                  (B) Issuer responsibilities.--An issuer of a 
                qualified health plan receiving an advance 
                payment with respect to an individual enrolled 
                in the plan shall--
                          (i) reduce the premium charged the 
                        insured for any period by the amount of 
                        the advance payment for the period;
                          (ii) notify the Exchange and the 
                        Secretary of such reduction;
                          (iii) include with each billing 
                        statement the amount by which the 
                        premium for the plan has been reduced 
                        by reason of the advance payment; and
                          (iv) in the case of any nonpayment of 
                        premiums by the insured--
                                  (I) notify the Secretary of 
                                such nonpayment; and
                                  (II) allow a 3-month grace 
                                period for nonpayment of 
                                premiums before discontinuing 
                                coverage.
          (3) Cost-sharing reductions.--The Secretary shall 
        also notify the Secretary of the Treasury and the 
        Exchange under paragraph (1) if an advance payment of 
        the cost-sharing reductions under section 1402 is to be 
        made to the issuer of any qualified health plan with 
        respect to any individual enrolled in the plan. The 
        Secretary of the Treasury shall make such advance 
        payment at such time and in such amount as the 
        Secretary specifies in the notice.
  (d) No Federal Payments for Individuals Not Lawfully 
Present.--Nothing in this subtitle or the amendments made by 
this subtitle allows Federal payments, credits, or cost-sharing 
reductions for individuals who are not lawfully present in the 
United States.
  (e) State Flexibility.--Nothing in this subtitle or the 
amendments made by this subtitle shall be construed to prohibit 
a State from making payments to or on behalf of an individual 
for coverage under a qualified health plan offered through an 
Exchange that are in addition to any credits or cost-sharing 
reductions allowable to the individual under this subtitle and 
such amendments.
  (f) Exclusion of Off-Exchange Coverage.--Advance payments 
under this section, and advance determinations under section 
1411, with respect to any credit allowed under section 36B 
shall not be made with respect to any health plan which is not 
enrolled in through an Exchange.
  (g) Termination With Respect to Premium Tax Credit.--
Effective January 1, 2020, no provision of this section or 
section 1411 shall apply to the credit allowed under section 
36B of the Internal Revenue Code of 1986 (or to the advance 
payment of, or determination of eligibility for, such credit or 
payment).

           *       *       *       *       *       *       *


                      TITLE IX--REVENUE PROVISIONS

Subtitle A--Revenue Offset Provisions

           *       *       *       *       *       *       *


SEC. 9008. IMPOSITION OF ANNUAL FEE ON BRANDED PRESCRIPTION 
                    PHARMACEUTICAL MANUFACTURERS AND IMPORTERS.

  (a) Imposition of Fee.--
          (1) In general.--Each covered entity engaged in the 
        business of manufacturing or importing branded 
        prescription drugs shall pay to the Secretary of the 
        Treasury not later than the annual payment date of each 
        calendar year beginning after 2010 a fee in an amount 
        determined under subsection (b).
          (2) Annual payment date.--For purposes of this 
        section, the term ``annual payment date'' means with 
        respect to any calendar year the date determined by the 
        Secretary, but in no event later than September 30 of 
        such calendar year.
  (b) Determination of Fee Amount.--
          (1) In general.--With respect to each covered entity, 
        the fee under this section for any calendar year shall 
        be equal to an amount that bears the same ratio to the 
        applicable amount as--
                  (A) the covered entity's branded prescription 
                drug sales taken into account during the 
                preceding calendar year, bear to
                  (B) the aggregate branded prescription drug 
                sales of all covered entities taken into 
                account during such preceding calendar year.
          (2) Sales taken into account.--For purposes of 
        paragraph (1), the branded prescription drug sales 
        taken into account during any calendar year with 
        respect to any covered entity shall be determined in 
        accordance with the following table:


 
  Not more than $5,000,000.............  0 percent
  More than $5,000,000 but not more      10 percent
   than $125,000,000.
  More than $125,000,000 but not more    40 percent
   than $225,000,000.
  More than $225,000,000 but not more    75 percent
   than $400,000,000.
  More than $400,000,000...............  100 percent.

          (3) Secretarial determination.--The Secretary of the 
        Treasury shall calculate the amount of each covered 
        entity's fee for any calendar year under paragraph (1). 
        In calculating such amount, the Secretary of the 
        Treasury shall determine such covered entity's branded 
        prescription drug sales on the basis of reports 
        submitted under subsection (g) and through the use of 
        any other source of information available to the 
        Secretary of the Treasury.
          (4) Applicable amount.--For purposes of paragraph 
        (1), the applicable amount shall be determined in 
        accordance with the following table:


 
Calendar year                            Applicable amount
  2011.................................  $2,500,000,000
  2012.................................  $2,800,000,000
  2013.................................  $2,800,000,000
  2014.................................  $3,000,000,000
  2015.................................  $3,000,000,000
  2016.................................  $3,000,000,000
  2017.................................  $4,000,000,000
  2018.................................  $4,100,000,000
  2019 and thereafter..................  $2,800,000,000.

  (c) Transfer of Fees to Medicare Part B Trust Fund.--There is 
hereby appropriated to the Federal Supplementary Medical 
Insurance Trust Fund established under section 1841 of the 
Social Security Act an amount equal to the fees received by the 
Secretary of the Treasury under subsection (a).
  (d) Covered Entity.--
          (1) In general.--For purposes of this section, the 
        term ``covered entity'' means any manufacturer or 
        importer with gross receipts from branded prescription 
        drug sales.
          (2) Controlled groups.--
                  (A) In general.--For purposes of this 
                subsection, all persons treated as a single 
                employer under subsection (a) or (b) of section 
                52 of the Internal Revenue Code of 1986 or 
                subsection (m) or (o) of section 414 of such 
                Code shall be treated as a single covered 
                entity.
                  (B) Inclusion of foreign corporations.--For 
                purposes of subparagraph (A), in applying 
                subsections (a) and (b) of section 52 of such 
                Code to this section, section 1563 of such Code 
                shall be applied without regard to subsection 
                (b)(2)(C) thereof.
          (3) Joint and several liability.--If more than one 
        person is liable for payment of the fee under 
        subsection (a) with respect to a single covered entity 
        by reason of the application of paragraph (2), all such 
        persons shall be jointly and severally liable for 
        payment of such fee.
  (e) Branded Prescription Drug Sales.--For purposes of this 
section--
          (1) In general.--The term ``branded prescription drug 
        sales'' means sales of branded prescription drugs to 
        any specified government program or pursuant to 
        coverage under any such program.
          (2) Branded prescription drugs.--
                  (A) In general.--The term ``branded 
                prescription drug'' means--
                          (i) any prescription drug the 
                        application for which was submitted 
                        under section 505(b) of the Federal 
                        Food, Drug, and Cosmetic Act (21 U.S.C. 
                        355(b)), or
                          (ii) any biological product the 
                        license for which was submitted under 
                        section 351(a) of the Public Health 
                        Service Act (42 U.S.C. 262(a)).
                  (B) Prescription drug.--For purposes of 
                subparagraph (A)(i), the term ``prescription 
                drug'' means any drug which is subject to 
                section 503(b) of the Federal Food, Drug, and 
                Cosmetic Act (21 U.S.C. 353(b)).
          (3) Exclusion of orphan drug sales.--The term 
        ``branded prescription drug sales'' shall not include 
        sales of any drug or biological product with respect to 
        which a credit was allowed for any taxable year under 
        section 45C of the Internal Revenue Code of 1986. The 
        preceding sentence shall not apply with respect to any 
        such drug or biological product after the date on which 
        such drug or biological product is approved by the Food 
        and Drug Administration for marketing for any 
        indication other than the treatment of the rare disease 
        or condition with respect to which such credit was 
        allowed.
          (4) Specified government program.--The term 
        ``specified government program'' means--
                  (A) the Medicare Part D program under part D 
                of title XVIII of the Social Security Act,
                  (B) the Medicare Part B program under part B 
                of title XVIII of the Social Security Act,
                  (C) the Medicaid program under title XIX of 
                the Social Security Act,
                  (D) any program under which branded 
                prescription drugs are procured by the 
                Department of Veterans Affairs,
                  (E) any program under which branded 
                prescription drugs are procured by the 
                Department of Defense, or
                  (F) the TRICARE retail pharmacy program under 
                section 1074g of title 10, United States Code.
  (f) Tax Treatment of Fees.--The fees imposed by this 
section--
          (1) for purposes of subtitle F of the Internal 
        Revenue Code of 1986, shall be treated as excise taxes 
        with respect to which only civil actions for refund 
        under procedures of such subtitle shall apply, and
          (2) for purposes of section 275 of such Code, shall 
        be considered to be a tax described in section 
        275(a)(6).
  (g) Reporting Requirement.--Not later than the date 
determined by the Secretary of the Treasury following the end 
of any calendar year, the Secretary of Health and Human 
Services, the Secretary of Veterans Affairs, and the Secretary 
of Defense shall report to the Secretary of the Treasury, in 
such manner as the Secretary of the Treasury prescribes, the 
total branded prescription drug sales for each covered entity 
with respect to each specified government program under such 
Secretary's jurisdiction using the following methodology:
          (1) Medicare Part D program.--The Secretary of Health 
        and Human Services shall report, for each covered 
        entity and for each branded prescription drug of the 
        covered entity covered by the Medicare Part D program, 
        the product of--
                  (A) the per-unit ingredient cost, as reported 
                to the Secretary of Health and Human Services 
                by prescription drug plans and Medicare 
                Advantage prescription drug plans, minus any 
                per-unit rebate, discount, or other price 
                concession provided by the covered entity, as 
                reported to the Secretary of Health and Human 
                Services by the prescription drug plans and 
                Medicare Advantage prescription drug plans, and
                  (B) the number of units of the branded 
                prescription drug paid for under the Medicare 
                Part D program.
          (2) Medicare Part B program.--The Secretary of Health 
        and Human Services shall report, for each covered 
        entity and for each branded prescription drug of the 
        covered entity covered by the Medicare Part B program 
        under section 1862(a) of the Social Security Act, the 
        product of--
                  (A) the per-unit average sales price (as 
                defined in section 1847A(c) of the Social 
                Security Act) or the per-unit Part B payment 
                rate for a separately paid branded prescription 
                drug without a reported average sales price, 
                and
                  (B) the number of units of the branded 
                prescription drug paid for under the Medicare 
                Part B program.
        The Centers for Medicare and Medicaid Services shall 
        establish a process for determining the units and the 
        allocated price for purposes of this section for those 
        branded prescription drugs that are not separately 
        payable or for which National Drug Codes are not 
        reported.
          (3) Medicaid program.--The Secretary of Health and 
        Human Services shall report, for each covered entity 
        and for each branded prescription drug of the covered 
        entity covered under the Medicaid program, the product 
        of--
                  (A) the per-unit ingredient cost paid to 
                pharmacies by States for the branded 
                prescription drug dispensed to Medicaid 
                beneficiaries, minus any per-unit rebate paid 
                by the covered entity under section 1927 of the 
                Social Security Act and any State supplemental 
                rebate, and
                  (B) the number of units of the branded 
                prescription drug paid for under the Medicaid 
                program.
          (4) Department of Veterans Affairs programs.--The 
        Secretary of Veterans Affairs shall report, for each 
        covered entity and for each branded prescription drug 
        of the covered entity the total amount paid for each 
        such branded prescription drug procured by the 
        Department of Veterans Affairs for its beneficiaries.
          (5) Department of Defense programs and TRICARE.--The 
        Secretary of Defense shall report, for each covered 
        entity and for each branded prescription drug of the 
        covered entity, the sum of--
                  (A) the total amount paid for each such 
                branded prescription drug procured by the 
                Department of Defense for its beneficiaries, 
                and
                  (B) for each such branded prescription drug 
                dispensed under the TRICARE retail pharmacy 
                program, the product of--
                          (i) the per-unit ingredient cost, 
                        minus any per-unit rebate paid by the 
                        covered entity, and
                          (ii) the number of units of the 
                        branded prescription drug dispensed 
                        under such program.
  (h) Secretary.--For purposes of this section, the term 
``Secretary'' includes the Secretary's delegate.
  (i) Guidance.--The Secretary of the Treasury shall publish 
guidance necessary to carry out the purposes of this section.
  (j) Effective Date.--This section shall apply to calendar 
years beginning after December 31, 2010.
  (k) Conforming Amendment.--Section 1841(a) of the Social 
Security Act is amended by inserting ``or section 9008(c) of 
the Patient Protection and Affordable Care Act of 2009'' after 
``this part''.
  (l) Termination.--No fee shall be imposed under subsection 
(a)(1) with respect to any calendar year beginning after 
December 31, 2017.

SEC. 9010. IMPOSITION OF ANNUAL FEE ON HEALTH INSURANCE PROVIDERS.

  (a) Imposition of Fee.--
          (1) In general.--Each covered entity engaged in the 
        business of providing health insurance shall pay to the 
        Secretary not later than the annual payment date of 
        each calendar year beginning after 2013 a fee in an 
        amount determined under subsection (b).
          (2) Annual payment date.--For purposes of this 
        section, the term ``annual payment date'' means with 
        respect to any calendar year the date determined by the 
        Secretary, but in no event later than September 30 of 
        such calendar year.
  (b) Determination of Fee Amount.--
          (1) In general.--With respect to each covered entity, 
        the fee under this section for any calendar year shall 
        be equal to an amount that bears the same ratio to the 
        applicable amount as--
                  (A) the covered entity's net premiums written 
                with respect to health insurance for any United 
                States health risk that are taken into account 
                during the preceding calendar year, bears to
                  (B) the aggregate net premiums written with 
                respect to such health insurance of all covered 
                entities that are taken into account during 
                such preceding calendar year.
          (2) Amounts taken into account.--For purposes of 
        paragraph (1)--
                  (A) In general.--The net premiums written 
                with respect to health insurance for any United 
                States health risk that are taken into account 
                during any calendar year with respect to any 
                covered entity shall be determined in 
                accordance with the following table:


 
  Not more than $25,000,000............  0 percent
  More than $25,000,000 but not more     50 percent
   than $50,000,000.
  More than $50,000,000................  100 percent.

                  (B) Partial exclusion for certain exempt 
                activities.--After the application of 
                subparagraph (A), only 50 percent of the 
                remaining net premiums written with respect to 
                health insurance for any United States health 
                risk that are attributable to the activities 
                (other than activities of an unrelated trade or 
                business as defined in section 513 of the 
                Internal Revenue Code of 1986) of any covered 
                entity qualifying under paragraph (3), (4), 
                (26), or (29) of section 501(c) of such Code 
                and exempt from tax under section 501(a) of 
                such Code shall be taken into account.
          (3) Secretarial determination.--The Secretary shall 
        calculate the amount of each covered entity's fee for 
        any calendar year under paragraph (1). In calculating 
        such amount, the Secretary shall determine such covered 
        entity's net premiums written with respect to any 
        United States health risk on the basis of reports 
        submitted by the covered entity under subsection (g) 
        and through the use of any other source of information 
        available to the Secretary.
  (c) Covered Entity.--
          (1) In general.--For purposes of this section, the 
        term ``covered entity'' means any entity which provides 
        health insurance for any United States health risk 
        during the calendar year in which the fee under this 
        section is due.
          (2) Exclusion.--Such term does not include--
                  (A) any employer to the extent that such 
                employer self-insures its employees' health 
                risks,
                  (B) any governmental entity,
                  (C) any entity--
                          (i) which is incorporated as a 
                        nonprofit corporation under a State 
                        law,
                          (ii) no part of the net earnings of 
                        which inures to the benefit of any 
                        private shareholder or individual, no 
                        substantial part of the activities of 
                        which is carrying on propaganda, or 
                        otherwise attempting, to influence 
                        legislation (except as otherwise 
                        provided in section 501(h) of the 
                        Internal Revenue Code of 1986), and 
                        which does not participate in, or 
                        intervene in (including the publishing 
                        or distributing of statements), any 
                        political campaign on behalf of (or in 
                        opposition to) any candidate for public 
                        office, and
                          (iii) more than 80 percent of the 
                        gross revenues of which is received 
                        from government programs that target 
                        low-income, elderly, or disabled 
                        populations under titles XVIII, XIX, 
                        and XXI of the Social Security Act, and
                  (D) any entity which is described in section 
                501(c)(9) of such Code and which is established 
                by an entity (other than by an employer or 
                employers) for purposes of providing health 
                care benefits.
          (3) Controlled groups.--
                  (A) In general.--For purposes of this 
                subsection, all persons treated as a single 
                employer under subsection (a) or (b) of section 
                52 of the Internal Revenue Code of 1986 or 
                subsection (m) or (o) of section 414 of such 
                Code shall be treated as a single covered 
                entity (or employer for purposes of paragraph 
                (2)).
                  (B) Inclusion of foreign corporations.--For 
                purposes of subparagraph (A), in applying 
                subsections (a) and (b) of section 52 of such 
                Code to this section, section 1563 of such Code 
                shall be applied without regard to subsection 
                (b)(2)(C) thereof.
        If any entity described in subparagraph (C) or (D) of 
        paragraph (2) is treated as a covered entity by reason 
        of the application of the preceding sentence, the net 
        premiums written with respect to health insurance for 
        any United States health risk of such entity shall not 
        be taken into account for purposes of this section.
          (4) Joint and several liability.--If more than one 
        person is liable for payment of the fee under 
        subsection (a) with respect to a single covered entity 
        by reason of the application of paragraph (3), all such 
        persons shall be jointly and severally liable for 
        payment of such fee.
  (d) United States Health Risk.--For purposes of this section, 
the term ``United States health risk'' means the health risk of 
any individual who is--
          (1) a United States citizen,
          (2) a resident of the United States (within the 
        meaning of section 7701(b)(1)(A) of the Internal 
        Revenue Code of 1986), or
          (3) located in the United States, with respect to the 
        period such individual is so located.
  (e) Applicable Amount.--For purposes of subsection (b)(1)--
          (1) Years before 2019.--In the case of calendar years 
        beginning before 2019, the applicable amount shall be 
        determined in accordance with the following table:


 
Calendar year                            Applicable amount
  2014.................................  $8,000,000,000
  2015.................................  $11,300,000,000
  2016.................................  $11,300,000,000
  2017.................................  $13,900,000,000
  2018.................................  $14,300,000,000.

          (2) Years after 2018.--In the case of any calendar 
        year beginning after 2018, the applicable amount shall 
        be the applicable amount for the preceding calendar 
        year increased by the rate of premium growth (within 
        the meaning of section 36B(b)(3)(A)(ii) of the Internal 
        Revenue Code of 1986) for such preceding calendar year.
  (f) Tax Treatment of Fees.--The fees imposed by this 
section--
          (1) for purposes of subtitle F of the Internal 
        Revenue Code of 1986, shall be treated as excise taxes 
        with respect to which only civil actions for refund 
        under procedures of such subtitle shall apply, and
          (2) for purposes of section 275 of such Code shall be 
        considered to be a tax described in section 275(a)(6).
  (g) Reporting Requirement.--
          (1) In general.--Not later than the date determined 
        by the Secretary following the end of any calendar 
        year, each covered entity shall report to the 
        Secretary, in such manner as the Secretary prescribes, 
        the covered entity's net premiums written with respect 
        to health insurance for any United States health risk 
        for such calendar year.
          (2) Penalty for failure to report.--
                  (A) In general.--In the case of any failure 
                to make a report containing the information 
                required by paragraph (1) on the date 
                prescribed therefor (determined with regard to 
                any extension of time for filing), unless it is 
                shown that such failure is due to reasonable 
                cause, there shall be paid by the covered 
                entity failing to file such report, an amount 
                equal to--
                          (i) $10,000, plus
                          (ii) the lesser of--
                                  (I) an amount equal to 
                                $1,000, multiplied by the 
                                number of days during which 
                                such failure continues, or
                                  (II) the amount of the fee 
                                imposed by this section for 
                                which such report was required.
                  (B) Treatment of penalty.--The penalty 
                imposed under subparagraph (A)--
                          (i) shall be treated as a penalty for 
                        purposes of subtitle F of the Internal 
                        Revenue Code of 1986,
                          (ii) shall be paid on notice and 
                        demand by the Secretary and in the same 
                        manner as tax under such Code, and
                          (iii) with respect to which only 
                        civil actions for refund under 
                        procedures of such subtitle F shall 
                        apply.
          (3) Accuracy-related penalty.--
                  (A) In general.--In the case of any 
                understatement of a covered entity's net 
                premiums written with respect to health 
                insurance for any United States health risk for 
                any calendar year, there shall be paid by the 
                covered entity making such understatement, an 
                amount equal to the excess of--
                          (i) the amount of the covered 
                        entity's fee under this section for the 
                        calendar year the Secretary determines 
                        should have been paid in the absence of 
                        any such understatement, over
                          (ii) the amount of such fee the 
                        Secretary determined based on such 
                        understatement.
                  (B) Understatement.--For purposes of this 
                paragraph, an understatement of a covered 
                entity's net premiums written with respect to 
                health insurance for any United States health 
                risk for any calendar year is the difference 
                between the amount of such net premiums written 
                as reported on the return filed by the covered 
                entity under paragraph (1) and the amount of 
                such net premiums written that should have been 
                reported on such return.
                  (C) Treatment of penalty.--The penalty 
                imposed under subparagraph (A) shall be subject 
                to the provisions of subtitle F of the Internal 
                Revenue Code of 1986 that apply to assessable 
                penalties imposed under chapter 68 of such 
                Code.
          (4) Treatment of information.--Section 6103 of the 
        Internal Revenue Code of 1986 shall not apply to any 
        information reported under this subsection.
  (h) Additional Definitions.--For purposes of this section--
          (1) Secretary.--The term ``Secretary'' means the 
        Secretary of the Treasury or the Secretary's delegate.
          (2) United States.--The term ``United States'' means 
        the several States, the District of Columbia, the 
        Commonwealth of Puerto Rico, and the possessions of the 
        United States.
          (3) Health insurance.--The term ``health insurance'' 
        shall not include--
                  (A) any insurance coverage described in 
                paragraph (1)(A) or (3) of section 9832(c) of 
                the Internal Revenue Code of 1986,
                  (B) any insurance for long-term care, or
                  (C) any medicare supplemental health 
                insurance (as defined in section 1882(g)(1) of 
                the Social Security Act).
  (i) Guidance.--The Secretary shall publish guidance necessary 
to carry out the purposes of this section and shall prescribe 
such regulations as are necessary or appropriate to prevent 
avoidance of the purposes of this section, including 
inappropriate actions taken to qualify as an exempt entity 
under subsection (c)(2).
  (j) Effective Date.--This section shall apply to calendar 
years--
          (1) beginning after December 31, 2013, and ending 
        before January 1, 2017, and
          (2) beginning after December 31, 2017.
  (k) Termination.--No fee shall be imposed under subsection 
(a)(1) with respect to any calendar year beginning after 
December 31, 2017.

           *       *       *       *       *       *       *

                              ----------                              


TITLE 31, UNITED STATES CODE

           *       *       *       *       *       *       *


SUBTITLE II--THE BUDGET PROCESS

           *       *       *       *       *       *       *


CHAPTER 13--APPROPRIATIONS

           *       *       *       *       *       *       *


SUBCHAPTER II--TRUST FUNDS AND REFUNDS

           *       *       *       *       *       *       *


Sec. 1324. Refund of internal revenue collections

  (a) Necessary amounts are appropriated to the Secretary of 
the Treasury for refunding internal revenue collections as 
provided by law, including payment of--
          (1) claims for prior fiscal years; and
          (2) accounts arising under--
                  (A) ``Allowance or drawback (Internal 
                Revenue)'';
                  (B) ``Redemption of stamps (Internal 
                Revenue)'';
                  (C) ``Refunding legacy taxes, Act of March 
                30, 1928'';
                  (D) ``Repayment of taxes on distilled spirits 
                destroyed by casualty''; and
                  (E) ``Refunds and payments of processing and 
                related taxes''.
  (b) Disbursements may be made from the appropriation made by 
this section only for--
          (1) refunds to the limit of liability of an 
        individual tax account; and
          (2) refunds due from credit provisions of the 
        Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.) 
        enacted before January 1, 1978, or enacted by the 
        Taxpayer Relief Act of 1997, or from section 25A, 35, 
        36, 36A, 36B, 36C, 168(k)(4)(F), 53(e), 54B(h), [or 
        6431] 6431, or 7530 of such Code, or due under section 
        3081(b)(2) of the Housing Assistance Tax Act of 2008.

           *       *       *       *       *       *       *


                         VII. DISSENTING VIEWS

DISSENTING VIEWS ON RECOMMENDATION TO REPEAL THE NET INVESTMENT INCOME 
                         TAX, COMMITTEE PRINT 4

    1. Donald Trump promised that ``we're going to have 
insurance for everybody . . . [but it will be] much less 
expensive and much better.'' This bill reveals those promises 
for what they always were: empty campaign rhetoric.''-- 
Families USA\1\
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    \1\http://familieusa.org/blog/2017/03/healthy-and-wealthy-benefit-
under-house-republican-affordable-care-act-repeal-plan
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    2. ``We cannot support the AHCA as drafted because of the 
expected decline in health insurance coverage and the potential 
harm it would cause to vulnerable patient populations.''--
American Medical Association\2\
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    \2\https://www.ama.-assn.org.sites/default/files/media-browser/
public/washington/ama-letter-on-ahca.pdf
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    3. ``Repeal-and-replace is a gigantic transfer of wealth 
from the lowest-income Americans to the highest-income 
Americans.''--Edward D. Kleinbard, former chief of staff for 
the Joint Committee on Taxation and professor, University of 
Southern California School of Law.\3\
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    \3\https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-
care-act-repeal.html?_r=1.
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    The five reconciliation legislative recommendations 
considered by the Committee on Ways and Means (the 
``Committee'') and referred to the Committee on Budget 
(collectively, the Ways and Means reconciliation package or the 
``reconciliation package'') was a far-reaching attempt to 
undermine our health systems from Medicare to employer 
sponsored health insurance in order to give tax cuts to the 
wealthiest and corporations. After almost 18 hours of debate, 
the Committee mark-up ended with a party-line vote on the 
reconciliation package, which is likely to take health 
insurance away from millions of Americans. This reconciliation 
package, coupled with what was passed out of the Energy and 
Commerce Committee, would harm access to health care for 
middle-class Americans and undermine Medicare's long-term 
viability while cutting taxes for corporations and the 
wealthiest Americans.
    The Committee moved forward irresponsibly, without any 
official accounting about the estimated effect of the 
reconciliation package on health insurance coverage, out-of-
pocket costs, or premium increases. While the Joint Committee 
on Taxation (JCT) estimated that the reconciliation package 
includes nearly $600 billion worth of tax breaks, as of the 
mark-up, the Congressional Budget Office (CBO) was unable to 
provide estimates about the package's effect on American 
families. Additionally the JCT score was incomplete as of the 
mark-up and did not provide an official accounting of all of 
the provisions considered by the Committee. Both the Ways and 
Means and Energy and Commerce Committees moved forward to pass 
recommendations out of each Committee without any sense from 
CBO of coverage losses due to the severe cuts to Medicaid, the 
repeal of the individual and employer-shared responsibility 
provisions of current law, or the changes in the tax credits 
available to help purchase health insurance on the individual 
market.
    CBO provided the Committee an estimate of the effects after 
the reconciliation package was reported to the Committee on 
Budget from the Ways and Means and Energy and Commerce 
Committees. This estimate showed that 24 million Americans 
would lose coverage, with 14 million Americans losing coverage 
in the first year alone.
    The Committee's reconciliation package provided generous 
tax cuts to the wealthiest, while reducing health insurance 
assistance for middle-class Americans. The tax breaks 
considered by the Committee are focused on the wealthy 
individuals and corporations, instead of middle-class 
Americans. About $275 billion in tax breaks would benefit high-
income earners; about 62% of the tax breaks would go to 
millionaires in 2020. Businesses and corporations are to 
receive nearly $192 billion in tax cuts. These and other tax 
breaks add up to nearly $600 billion in lost revenue.
    Democrats objected strenuously to the Republican approach 
and instead believe the Committee should focus on policies that 
matter to middle-class Americans under the jurisdiction of this 
Committee, including financing long-term infrastructure, 
reforming the tax system to address income inequality, and 
further building on President Obama's record of job creation. 
Democrats believe that the reconciliation package will 
destabilize the health insurance market, which represents 18 
percent of our gross domestic product.
    The reconciliation package continues Republican efforts to 
undermine and destabilize the health insurance market. It 
undermines current law and the stability of both the individual 
and group health insurance markets by gutting individual and 
employer-shared responsibility provisions. The reconciliation 
package would reduce the uptake of the premium tax credits and 
the Medicaid expansion established in the Affordable Care Act 
(ACA), which have made health care affordable for millions of 
individuals. Reduced uptake of the Medicaid expansion and the 
tax credits disproportionately impacts low- and middle-income 
Americans and places them at risk for health insecurity and 
unexpected medical expenses. Based on independent estimates, 
roughly 24 million Americans would lose their insurance 
coverage because of this reconciliation package when taken 
together with the reconciliation recommendations passed by the 
Energy and Commerce Committee.\4\ Further, this reconciliation 
package reduces the life of the Medicare Trust Fund by three 
years by reducing $170 billion from the Medicare Trust Fund, 
which puts Medicare at risk for 57 million seniors and 
individuals with disabilities.
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    \4\https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-
cbo-to-estimate-large-coverage-losses-from-the-gop-health-care-plan/
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    Individual and employer-shared responsibility provisions 
are key to maintaining the robust and healthy risk pools that 
allow the ACA health insurance reforms to improve consumer 
protections while controlling health care costs. This is 
because well-functioning insurance markets rely on 
participation of both healthy and sick individuals to spread 
risk across the pool. The reconciliation package effectively 
would repeal the individual and employer-shared responsibility 
penalty, leading to premium increases of an estimated 20 
percent in the individual market alone. In spite of President 
Trump and Congressional Republicans' efforts to sabotage the 
ACA, millions of Americans have enrolled in the health 
insurance Marketplaces, many using the available financial 
assistance, and millions more have enrolled in expanded 
Medicaid programs.
    Despite promises made by President Trump, the 
reconciliation package would not cover more people or offer 
more affordable coverage with comparable benefits. Instead, 
this package leads to an estimated coverage loss of 24 million 
people while gutting benefits and consumer protections as a 
mechanism for affordability. When coupled with the legislation 
passed out of the Energy and Commerce Committee, the 
reconciliation package would return to a time when the market 
once again discriminates against those with pre-existing 
conditions and leaves those that might need medical care in the 
future without meaningful coverage. The reconciliation package 
provides for tax credits less generous than current law with no 
assistance with out-of-pocket expenses. Instead, the 
reconciliation package enshrines high deductible health plans 
that would increase out-of-pocket expenses. However, these 
plans do not address the underlying issues of access to quality 
services and the cost of care.
    Since January of 2009, the Republicans voted to repeal or 
undermine the ACA more than 65 times. Democrats offered a 
number of amendments in Committee to point out serious flaws 
with the reconciliation package. For example, at the beginning 
of the mark up, Democrats asked Republicans to postpone mark up 
until CBO could provide a comprehensive report on costs, 
coverage losses, and premium effects of the reconciliation 
package.
    In that regard, Congressman Lloyd Doggett (D-TX) offered a 
motion to postpone the markup for one week to allow time for 
review of the bill and the CBO estimate that was not available 
prior to or during the mark up. For over four decades, CBO has 
been recognized as the official referee of costs and effects of 
legislation passed in the House and Senate. Congress relies on 
CBO's non-partisan estimates to evaluate legislative proposals. 
Democrats were concerned that Republicans deliberately moved 
forward with the reconciliation package without a CBO score in 
an effort to conceal the harmful effects of the reconciliation 
package on nearly all Americans.
    The contrast of this rushed process versus the lengthy and 
transparent process of enacting the ACA is striking. In 2009, 
House Committees posted a draft of the ACA legislation for 
review and comment a month before the mark-up process began, 
holding multiple hearings and providing the public with two 
preliminary CBO estimates on July 8th and July 14th. Democrats 
maintain that there is no reason to rush to mark-up this 
reconciliation package without a CBO score, or without a 
hearing to consider the implications of the package. 
Congressman Doggett's amendment was tabled on a party line 
vote.
    The Committee print repeals the current tax on net 
investment income. The ACA imposed a 3.8% tax on net investment 
income at a time when capital gains rates were near historical 
lows. Repeal of this tax, as well as the Medicare tax on high 
income earners (described below), would drain $157.6 billion 
from the Treasury. The JCT found that by 2020, the repeal of 
the two tax provisions would save about $15.9 billion a year 
for those with incomes of $1 million or more. By 2026, the 
final year of the analysis, they would combine to save that 
group a little more than $20 billion a year.\5\ With the 3.8 
percent tax imposed by the ACA, the top capital gains rate 
stands at 23.8 percent for the wealthiest Americans, which is a 
lower rate than it was for most of the previous four 
decades.\6\
---------------------------------------------------------------------------
    \5\https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-
care-act-repeal.html?_r=1
    \6\https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-
care-act-repeal.html?_r=1
---------------------------------------------------------------------------
    The Republican bill gives sixty percent of the tax cuts in 
this bill to millionaires, and each of the top 400 taxpayers 
would receive a $7 million tax break.\7\ In contrast, the 
Republicans are slashing the social safety net, cutting $370 
billion from Medicaid, and increasing taxes to the middle-class 
families by rolling back the financial assistance to buy health 
insurance and cover out-of-pocket costs.
---------------------------------------------------------------------------
    \7\http://www.cbpp.org/research/federal-tax/aca-repeal-would-
lavish-medicare-tax-cuts-on-400-highest-income-households
---------------------------------------------------------------------------
    No doubt this provision benefits the richest Americans. 
President Trump's cabinet members and nominees have a combined 
net worth of $13 billion.\8\ They likely would be significant 
beneficiaries of the tax giveaways under this bill. Those in 
the top 0.1 percent would each receive an average tax cut of 
about $197,000 under the Republican plan.\9\ Those at the 
lowest income levels would get nothing--and lose health 
coverage.
---------------------------------------------------------------------------
    \8\https://www.bostonglobe.com/metro/2016/12/20/trump-cabinet-
picks-far-are-worth-combined/XvAJmHCgkHhOI3ISxgiKvRM/story.html
    \9\http://www.taxploicycenter.org/taxvox/repealing-affordable-care-
act-would-cut-taxes-high-income-households-raise-taxes-many-others
---------------------------------------------------------------------------
    Congressman Davis (D-IL) offered an amendment to require 
any taxpayer benefiting from the net investment income tax 
repeal for high-income earners to have a clean drug test each 
year prior to receiving this tax benefit, given that 
Republicans in the House recently voted (H.J. Res.42) to allow 
states to require drug testing for Americans who apply to 
receive unemployment benefits. Not surprisingly, this amendment 
was defeated along party lines.

                                           Richard E. Neal,
                                                    Ranking Member.
                            COMMITTEE PRINT

Budget Reconciliation Legislative Recommendations Relating to Repeal of 
                       Net Investment Income Tax


            Subtitle __--Repeal of Net Investment Income Tax

SEC. _1. REPEAL OF NET INVESTMENT INCOME TAX.

  (a) In General.--Subtitle A of the Internal Revenue Code of 
1986 is amended by striking chapter 2A.
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after December 31, 2017.

  Amendment to Section_15: Refundable Tax Credit for Health Insurance 
               Coverage Offered by Rep. Linda T. Sanchez

    Sense of Congress that the Tanning Tax should not be 
repealed.

        AMENDMENTS CONSIDERED BY THE COMMITTEE ON WAYS AND MEANS

                               Amendment

                  Offered by Ms. Sanchez of California

                  [Relating to Repeal of Tanning Tax]

Page 1, strike lines 3 through 8 and insert the following:

SEC. _1. SENSE OF CONGRESS REGARDING REPEAL OF TANNING TAX.

  It is the sense of Congress that chapter 49 of the Internal 
Revenue Code of 1986 should not be repealed.
                              ----------                              


      Amendment to AINS to the Budget Reconciliation Legislative 
Recommendation Relating to Repeal of Certain Consumer Taxes Offered by 
                            Rep. Blumenauer

    The amendment would strike the repeal of the pharmaceutical 
company fee and transfer the revenues to the Federal 
Supplemental Medical Insurance trust fund, in order to help 
finance Medicare Part B and Part D.
                              ----------                              


  Amendment to Recommendations relating to repeal of certain consumer 
                                 taxes

                  Offered by Mr. Blumenauer of Oregon

  Strike section _1 and insert the following:

SEC. _1. APPLICATION OF CERTAIN REVENUES TOWARDS MEDICARE PART B TRUST 
                    FUND.

  The Secretary of the Treasury shall provide for the transfer, 
annually to the credit of the Federal Supplementary Medical 
Insurance Trust Fund, established under section 1841 of the 
Social Security Act (42 U.S.C. 1395t), of an amount equivalent 
to the net annual revenues resulting from the application of 
section 9008 of the Patient Protection and Affordable Care Act 
(26 U.S.C. 4001 note prec.).
                              ----------                              


Amendment to the Amendment in the Nature of A Substitute to the Budget 
Reconciliation Legislative Recommendation Relating to Repeal of the Net 
            Investment Income Tax by Rep. Davis of Illinois

    The amendment would require the taxpayer benefiting from 
the investment tax benefit to have a clean drug test annually 
prior to receipt.
                              ----------                              


                               Amendment

               Offered by Mr. Danny K. Davis of Illinois

                  Repeal of Net Investment Income Tax

  Add at the end the following new subsection:
  (c) Application.--The amendment made by this section shall 
not apply to any taxpayer for a taxable year unless the 
taxpayer (and the spouse of the taxpayer in the case of a joint 
return) have a clean drug test during the 1-year period ending 
on the date of the filing of the return of tax for the taxable 
year.
                              ----------                              


   Amendment to H.R. XXXX Offered by Ranking Member Richard Neal (MA)

    The amendment would repeal Medicare tax increase.
                              ----------                              


                               Amendment


                         Offered by M_. ______

  Strike section __14 (relating to repeal of Medicare tax 
increase).
                              ----------                              

    If consumers like the ACA they can keep it: Allows 
consumers the choice between the ACA's tax credits, or the 
American Health Care Act tax credits.
                              ----------                              


                               Amendment


                       Offered by Mr. Blumenauer

  At the end of the subtitle, add the following new section:

SEC. ___. ALLOWING CONSUMER CHOICE OF TAX CREDITS.

  An individual may make an election under this section to 
apply section 36B of the Internal Revenue Code of 1986. If an 
individual so elects, the Secretary of the Treasury shall 
evaluate such individual's tax liability--
          (1) as if such section 36B were in effect; and
          (2) without regard to section 36C of such Code.
                              ----------                              


Amendment to [Amendment in the Nature of a Substitute to the Committee 
  Print Relating to Repeal and Replace of Health-Related Tax Policy] 
                        Offered by Rep. DelBene

    The amendment would fully repeal the excise tax on high-
cost employee health plans (``Cadillac tax'').

                               Amendment


          Offered by Ms. DelBene, for herself and Ms. Sanchez


                                   S

  Page 15, lines 9 through 10, strike ``, and before January 1, 
2025''.
                              ----------                              


             Sewell Amendment #3 (Protections for Farmers)

    This amendment would ensure that the American Health Care 
Act does not result in an increase in medical costs or taxes 
for socially or geographically disadvantaged farmers or farmers 
with disabilities.
                              ----------                              


                               Amendment


                    Offered by Ms. Sewell of Alabama


   Relating to Repeal and Replace of Health-Related Tax Policy Draft

  Add at the end the following:

SEC. _19. INCREASE IN MEDICAL COSTS OR TAXES FOR SOCIALLY OR 
                    GEOGRAPHICALLY DISADVANTAGED FARMERS OR FARMERS 
                    WITH DISABILITIES.

  Nothing in this subtitle (including any amendment made by 
this subtitle) shall be construed to increase medical costs or 
taxes for socially or geographically disadvantaged farmers or 
farmers with disabilities.
                              ----------                              


 Amendment to H.R.__, The American Health Care Act Offered by Rep. Chu

    The amendment strikes the abortion restrictions in the 
bill.

                              Amendment to


 Offered by Ms. Judy Chu of California with Ms. DelBene and Ms. Sanchez


             [Repeal and Replace Health-Related Tax Policy]

  Page 2, line 2, strike ``, and'' and all that follows through 
line 12 and insert a period.
  Page 4, strike line 1 and all that follows through page 5, 
line 9.
  Page 11, strike line 18 and all that follows through page 13, 
line 14.
  Page 13, strike lines 19 through 23.
  Page 24, line 25, insert ``and'' after the comma.
  Page 25, strike lines 1 through 5 and redesignate the 
succeeding subparagraph accordingly.
  Page 33, strike line 13 and all that follows through page 34, 
line 13.
                              ----------                              


Amendment to the Amendment in the Nature of a Substitute to the Budget 
   Reconciliation Legislative Recommendations Relating to Repeal and 
 Replace of Certain Health-Related Tax Policy Provisions by Rep. Davis 
                              of Illinois

    The amendment would require that the credit apply only to 
health plans that include services from community providers, 
including rural providers, community health centers, and 
children's hospitals.
                              ----------                              


                              Amendment to


                    Offered by Mr. Davis of Illinois


     [Relating to Repeal and Replace of Health-Related Tax Policy]

  In section 36C of the Internal Revenue Code of 1986, as 
inserted by section _15, at the end of subsection (f)(1), add 
the following flush matter:

        ``Such term does not include any health insurance 
        coverage unless the coverage provides benefits for 
        items and services furnished by or through essential 
        community providers, including rural providers, 
        community health centers, and children's hospitals, in 
        a manner consistent with the criteria established under 
        section 1311(c)(1)(C) of the Patient Protection and 
        Affordable Care Act (42 U.S.C. 18031(c)(1)(C)), as in 
        effect on January 1, 2017.''.
                              ----------                              


Amendment to [Amendment in the Nature of a Substitute to the Committee 
  Print Relating to Repeal and Replace of Health-Related Tax Policy] 
                        Offered by Rep. DelBene

    The amendment would strike the underlying bill's repeal of 
the Small Business Tax Credit and insert reforms that make the 
tax credit accessible to more small businesses, available for 
three consecutive years (currently two), and easier to claim by 
eliminating burdensome requirements.
                              ----------                              


      Amendment to Recommendations Relating to Repeal and Replace


   Offered by Ms. DelBene of Washington, for herself, Mr. Kind, Mr. 
                          Higgins and Ms. Chu

  Strike section _04 and insert the following:

SEC. _04. EXPANSION AND MODIFICATION OF CREDIT FOR EMPLOYEE HEALTH 
                    INSURANCE EXPENSES OF SMALL EMPLOYERS.

  (a) Expansion of Definition of Eligible Small Employer.--
Subparagraph (A) of section 45R(d)(1) of the Internal Revenue 
Code of 1986 is amended by striking ``25'' and inserting 
``50''.
  (b) Amendment To Phaseout Determination.--Subsection (c) of 
section 45R of the Internal Revenue Code of 1986 is amended to 
read as follows:
  ``(c) Phaseout of Credit Amount Based on Number of Employees 
and Average Wages.--The amount of the credit determined under 
subsection (b) (without regard to this subsection) shall be 
adjusted (but not below zero) by multiplying such amount by the 
product of--
          ``(1) the lesser of--
                  ``(A) a fraction the numerator of which is 
                the excess (if any) of 50 over the total number 
                of full-time equivalent employees of the 
                employer and the denominator of which is 30, 
                and
                  ``(B) 1, and
          ``(2) the lesser of--
                  ``(A) a fraction--
                          ``(i) the numerator of which is the 
                        excess (if any) of--
                                  ``(I) the dollar amount in 
                                effect under subsection 
                                (d)(3)(B) for the taxable year, 
                                multiplied by 3, over
                                  ``(II) the average annual 
                                wages of the employer for such 
                                taxable year, and
                          ``(ii) the denominator of which is 
                        the dollar amount so in effect under 
                        subsection (d)(3)(B), multiplied by 2, 
                        and
                  ``(B) 1.''.
  (c) Extension of Credit Period.--Paragraph (2) of section 
45R(e) of the Internal Revenue Code of 1986 is amended by 
striking ``2-consecutive-taxable year period'' and all that 
follows and inserting ``3-consecutive-taxable year period 
beginning with the first taxable year beginning after 2014 in 
which--
                  ``(A) the employer (or any predecessor) 
                offers one or more qualified health plans to 
                its employees through an Exchange, and
                  ``(B) the employer (or any predecessor) 
                claims the credit under this section.''.
  (d) Average Annual Wage Limitation.--Subparagraph (B) of 
section 45R(d)(3) of the Internal Revenue Code of 1986 is 
amended to read as follows:
                  ``(B) Dollar amount.--For purposes of 
                paragraph (1)(B) and subsection (c)(2), the 
                dollar amount in effect under this paragraph is 
                the amount equal to 110 percent of the poverty 
                line (within the meaning of section 36B(d)(3)) 
                for a family of 4.''.
  (e) Elimination of Uniform Percentage Contribution 
Requirement.--Paragraph (4) of section 45R(d) of the Internal 
Revenue Code of 1986 is amended by striking ``a uniform 
percentage (not less than 50 percent)'' and inserting ``at 
least 50 percent''.
  (f) Elimination of Cap Relating to Average Local Premiums.--
Subsection (b) of section 45R of the Internal Revenue Code of 
1986 is amended by striking ``the lesser of'' and all that 
follows and inserting ``the aggregate amount of nonelective 
contributions the employer made on behalf of its employees 
during the taxable year under the arrangement described in 
subsection (d)(4) for premiums for qualified health plans 
offered by the employer to its employees through an 
Exchange.''.
  (g) Conforming Amendment Relating to Annual Wage 
Limitation.--Subparagraph (B) of section 45R(d)(1) of the 
Internal Revenue Code of 1986 is amended by striking ``twice'' 
and inserting ``three times''.
  (h) Effective Date.--The amendments made by this section 
shall apply to amounts paid or incurred in taxable years 
beginning after December 31, 2016.
                              ----------                              


 Amendment to Section __15: Refundable Tax Credit for Health Insurance 
                 Coverage Offered by Rep. Linda Sanchez

    Health plans cannot charge discriminate on the basis of 
gender.
                              ----------                              


                               Amendment


                         Offered by Ms. Sanchez


     [Relating to Repeal and Replace of Health-Related Tax Policy]

    In section 36C of the Internal Revenue Code of 1986, as 
inserted by section _15, at the end of subsection (f)(1), add 
the following flush matter:
        ``Such term does not include any health insurance 
        coverage for which women are charged more than men.''.
                              ----------                              


                         Amendment to H.R. ___


                    Offered by Rep. John Lewis (GA)

    This amendment would strike the entire section and replace 
it with a set of principles for any health reform legislation.
                              ----------                              


                               Amendment


                    Offered by Mr. Lewis of Georgia

  Strike section _01 and all that follows and insert the 
following:

SEC. _01. PRINCIPLES FOR HEALTH REFORM.

  It is the sense of Congress that--
          (1) affordable preventive health care is the right of 
        every American and not a privilege of the wealthy,
          (2) significant health care legislation should be 
        developed through an open, transparent, and inclusive 
        process, and
          (3) any replacement of the Affordable Care Act should 
        not put undue financial or health burdens on 
        individuals and families who are elderly, middle and 
        working class, low-income, or have chronic health 
        conditions.
                              ----------                              


   Amendment by Chairman Kevin Brady (TX-08) To Amend the Chairman's 
Amendment in the Nature of a Substitute to the Committee Print Relating 
           to Repeal and Replace of Health-Related Tax Policy

    This amendment would prohibit short-term limited duration 
insurance from being eligible coverage for purposes of the 
credit established under 36C.
                              ----------                              


    Amendment to the Amendment in the Nature of a Substitute to the 
 Committee Print Relating to Repeal and Replace of Health-Related Tax 
                                 Policy


                     Offered by Mr. Brady of Texas

  In section 36C(f)(1) of the Internal Revenue Code of 1986, as 
proposed to be inserted by section _15--
          (1) strike ``and'' at the end of subparagraph (D),
          (2) redesignate subparagraph (E) as subparagraph (F), 
        and
          (3) insert after subparagraph (D) the following:
                  ``(E) such coverage does not consist of 
                short-term limited duration insurance (as 
                defined by the Secretary), and''.

                  VOTES OF THE COMMITTEE ON THE BUDGET

                              ----------                              

    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 American Health 
Care Act of 2017.

    On March 16, 2017, the Committee met in open session, a 
quorum being present.
    Mr. Rokita asked unanimous consent that the Chair 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.
    The Committee adopted and ordered reported the American 
Health Care Act of 2017.
    The Committee on the Budget took the following votes:
    Mr. Rokita made a motion that the Committee report the bill 
with the recommendation that the bill do pass.
    The motion was agreed to by a roll call vote of 19 ayes to 
17 noes.

                           ROLLCALL VOTE NO. 1
------------------------------------------------------------------------
  Name &                     Answer     Name &                   Answer
  State      Aye     No     Present     State      Aye     No    Present
------------------------------------------------------------------------
BLACK         X                       YARMUTH              X
 (TN)                                  (KY)
 (Chairma                              (Ranking
 n)                                    )
------------------------------------------------------------------------
ROKITA        X                       LEE (CA)             X
 (IN)
 (Vice
 Chairman
 )
------------------------------------------------------------------------
DIAZ-BALA     X                       LUJAN                X
 RT (FL)                               GRISHAM
                                       (NM)
------------------------------------------------------------------------
COLE (OK)     X                       MOULTON              X
                                       (MA)
------------------------------------------------------------------------
McCLINTOC     X                       JEFFRIES             X
 K (CA)                                (NY)
------------------------------------------------------------------------
WOODALL       X                       HIGGINS              X
 (GA)                                  (NY)
------------------------------------------------------------------------
SANFORD               X               DelBENE              X
 (SC)                                  (WA)
------------------------------------------------------------------------
WOMACK        X                       WASSERMAN            X
 (AR)                                  SCHULTZ
                                       (FL)
------------------------------------------------------------------------
BRAT (VA)             X               BOYLE                X
                                       (PA)
------------------------------------------------------------------------
GROTHMAN      X                       KHANNA               X
 (WI)                                  (CA)
------------------------------------------------------------------------
PALMER                X               JAYAPAL              X
 (AL)                                  (WA)
                                       (Vice
                                       Ranking)
------------------------------------------------------------------------
WESTERMAN     X                       CARBAJAL             X
 (AR)                                  (CA)
------------------------------------------------------------------------
RENACCI       X                       JACKSON              X
 (OH)                                  LEE (TX)
------------------------------------------------------------------------
JOHNSON       X                       SCHAKOWSK            X
 (OH)                                  Y (IL)
------------------------------------------------------------------------
SMITH         X            .........
 (MO)
------------------------------------------------------------------------
LEWIS         X                       .........
 (MN)
------------------------------------------------------------------------
BERGMAN       X                       .........
 (MI)
------------------------------------------------------------------------
FASO (NY)     X                       .........
------------------------------------------------------------------------
SMUCKER       X            .........
 (PA)
------------------------------------------------------------------------
GAETZ         X            .........
 (FL)
------------------------------------------------------------------------
ARRINGTON     X            .........
 (TX)
------------------------------------------------------------------------
FERGUSON      X
 (GA)
------------------------------------------------------------------------

    Mr. Rokita made a motion that on the measure reported the 
staff be authorized to make any necessary technical and 
conforming corrections prior to filing the bill, such as 
inserting the short title of the bill, that the motion to 
reconsider be laid on the table, and that, pursuant to clause 1 
of rule XXII, the Chair be authorized to offer motions to go to 
conference on the reported bill or any companion measure from 
the Senate.
    The motion was agreed to without objection.

              Motions on the Rule for Consideration of the
                    American Health Care Act of 2017

A Motion Offered by Mr. Boyle and Mr. Jeffries
    1. Mr. Boyle and Mr. Jeffries moved that the Committee on 
the Budget direct its Chairman to request that the rule 
providing for consideration of the American Health Care Act 
make in order an amendment that would ensure the number of 
individuals without health insurance does not increase and that 
health care costs for individuals do not rise.
    The motion was not agreed to by a roll call vote of 14 ayes 
and 20 noes.

                           ROLLCALL VOTE NO. 2
------------------------------------------------------------------------
  Name &                     Answer     Name &                   Answer
  State      Aye     No     Present     State      Aye     No    Present
------------------------------------------------------------------------
BLACK                 X               YARMUTH       X
 (TN)                                  (KY)
 (Chairma                              (Ranking
 n)                                    )
------------------------------------------------------------------------
ROKITA                X               LEE (CA)      X
 (IN)
 (Vice
 Chairman
 )
------------------------------------------------------------------------
DIAZ-BALA             X               LUJAN         X
 RT (FL)                               GRISHAM
                                       (NM)
------------------------------------------------------------------------
COLE (OK)             X               MOULTON       X
                                       (MA)
------------------------------------------------------------------------
McCLINTOC             X               JEFFRIES      X
 K (CA)                                (NY)
------------------------------------------------------------------------
WOODALL               X               HIGGINS       X
 (GA)                                  (NY)
------------------------------------------------------------------------
SANFORD               X               DelBENE       X
 (SC)                                  (WA)
------------------------------------------------------------------------
WOMACK                X               WASSERMAN     X
 (AR)                                  SCHULTZ
                                       (FL)
------------------------------------------------------------------------
BRAT (VA)                             BOYLE         X
                                       (PA)
------------------------------------------------------------------------
GROTHMAN              X               KHANNA        X
 (WI)                                  (CA)
------------------------------------------------------------------------
PALMER                X               JAYAPAL       X
 (AL)                                  (WA)
                                       (Vice
                                       Ranking)
------------------------------------------------------------------------
WESTERMAN             X               CARBAJAL      X
 (AR)                                  (CA)
------------------------------------------------------------------------
RENACCI               X               JACKSON       X
 (OH)                                  LEE (TX)
------------------------------------------------------------------------
JOHNSON               X               SCHAKOWSK     X
 (OH)                                  Y (IL)
------------------------------------------------------------------------
SMITH                 X    .........
 (MO)
------------------------------------------------------------------------
LEWIS                 X               .........
 (MN)
------------------------------------------------------------------------
BERGMAN               X               .........
 (MI)
------------------------------------------------------------------------
FASO (NY)             X               .........
------------------------------------------------------------------------
SMUCKER                    .........
 (PA)
------------------------------------------------------------------------
GAETZ                 X    .........
 (FL)
------------------------------------------------------------------------
ARRINGTON             X    .........
 (TX)
------------------------------------------------------------------------
FERGUSON              X
 (GA)
------------------------------------------------------------------------

A Motion Offered by Mr. Higgins and Mr. Khanna
    2. Mr. Higgins and Mr. Khanna moved that the Committee on 
the Budget direct its Chairman to request that the rule 
providing for consideration of the American Health Care Act 
make in order an amendment that strikes provisions in the bill 
relating to reductions in coverage or benefits, increased 
costs, and tax cuts.
    The motion was not agreed to by a roll call vote of 14 ayes 
and 22 noes.

                           ROLLCALL VOTE NO. 3
------------------------------------------------------------------------
  Name &                     Answer     Name &                   Answer
  State      Aye     No     Present     State      Aye     No    Present
------------------------------------------------------------------------
BLACK                 X               YARMUTH       X
 (TN)                                  (KY)
 (Chairma                              (Ranking
 n)                                    )
------------------------------------------------------------------------
ROKITA                X               LEE (CA)      X
 (IN)
 (Vice
 Chairman
 )
------------------------------------------------------------------------
DIAZ-BALA             X               LUJAN         X
 RT (FL)                               GRISHAM
                                       (NM)
------------------------------------------------------------------------
COLE (OK)             X               MOULTON       X
                                       (MA)
------------------------------------------------------------------------
McCLINTOC             X               JEFFRIES      X
 K (CA)                                (NY)
------------------------------------------------------------------------
WOODALL               X               HIGGINS       X
 (GA)                                  (NY)
------------------------------------------------------------------------
SANFORD               X               DelBENE       X
 (SC)                                  (WA)
------------------------------------------------------------------------
WOMACK                X               WASSERMAN     X
 (AR)                                  SCHULTZ
                                       (FL)
------------------------------------------------------------------------
BRAT (VA)             X               BOYLE         X
                                       (PA)
------------------------------------------------------------------------
GROTHMAN              X               KHANNA        X
 (WI)                                  (CA)
------------------------------------------------------------------------
PALMER                X               JAYAPAL       X
 (AL)                                  (WA)
                                       (Vice
                                       Ranking)
------------------------------------------------------------------------
WESTERMAN             X               CARBAJAL      X
 (AR)                                  (CA)
------------------------------------------------------------------------
RENACCI               X               JACKSON       X
 (OH)                                  LEE (TX)
------------------------------------------------------------------------
JOHNSON               X               SCHAKOWSK     X
 (OH)                                  Y (IL)
------------------------------------------------------------------------
SMITH                 X    .........
 (MO)
------------------------------------------------------------------------
LEWIS                 X               .........
 (MN)
------------------------------------------------------------------------
BERGMAN               X               .........
 (MI)
------------------------------------------------------------------------
FASO (NY)             X               .........
------------------------------------------------------------------------
SMUCKER               X    .........
 (PA)
------------------------------------------------------------------------
GAETZ                 X    .........
 (FL)
------------------------------------------------------------------------
ARRINGTON             X    .........
 (TX)
------------------------------------------------------------------------
FERGUSON              X
 (GA)
------------------------------------------------------------------------

A Motion Offered by Ms. Jayapal and Ms. Jackson Lee
    3. Ms. Jayapal and Ms. Jackson Lee moved that the Committee 
on the Budget direct its Chairman to request that the rule 
providing for consideration of the American Health Care Act 
make in order an amendment that strikes language in the bill 
relating to ending Medicaid expansion, the Medicaid per capita 
cap, and the bill's tax cuts.
    The motion was not agreed to by a roll call vote of 14 ayes 
and 22 noes.

                           ROLLCALL VOTE NO. 4
------------------------------------------------------------------------
  Name &                     Answer     Name &                   Answer
  State      Aye     No     Present     State      Aye     No    Present
------------------------------------------------------------------------
BLACK                 X               YARMUTH       X
 (TN)                                  (KY)
 (Chairma                              (Ranking
 n)                                    )
------------------------------------------------------------------------
ROKITA                X               LEE (CA)      X
 (IN)
 (Vice
 Chairman
 )
------------------------------------------------------------------------
DIAZ-BALA             X               LUJAN         X
 RT (FL)                               GRISHAM
                                       (NM)
------------------------------------------------------------------------
COLE (OK)             X               MOULTON       X
                                       (MA)
------------------------------------------------------------------------
McCLINTOC             X               JEFFRIES      X
 K (CA)                                (NY)
------------------------------------------------------------------------
WOODALL               X               HIGGINS       X
 (GA)                                  (NY)
------------------------------------------------------------------------
SANFORD               X               DelBENE       X
 (SC)                                  (WA)
------------------------------------------------------------------------
WOMACK                X               WASSERMAN     X
 (AR)                                  SCHULTZ
                                       (FL)
------------------------------------------------------------------------
BRAT (VA)             X               BOYLE         X
                                       (PA)
------------------------------------------------------------------------
GROTHMAN              X               KHANNA        X
 (WI)                                  (CA)
------------------------------------------------------------------------
PALMER                X               JAYAPAL       X
 (AL)                                  (WA)
                                       (Vice
                                       Ranking)
------------------------------------------------------------------------
WESTERMAN             X               CARBAJAL      X
 (AR)                                  (CA)
------------------------------------------------------------------------
RENACCI               X               JACKSON       X
 (OH)                                  LEE (TX)
------------------------------------------------------------------------
JOHNSON               X               SCHAKOWSK     X
 (OH)                                  Y (IL)
------------------------------------------------------------------------
SMITH                 X    .........
 (MO)
------------------------------------------------------------------------
LEWIS                 X               .........
 (MN)
------------------------------------------------------------------------
BERGMAN               X               .........
 (MI)
------------------------------------------------------------------------
FASO (NY)             X               .........
------------------------------------------------------------------------
SMUCKER               X    .........
 (PA)
------------------------------------------------------------------------
GAETZ                 X    .........
 (FL)
------------------------------------------------------------------------
ARRINGTON             X    .........
 (TX)
------------------------------------------------------------------------
FERGUSON              X
 (GA)
------------------------------------------------------------------------

A Motion Offered by Mr. Moulton and Mr. Yarmuth
    4. Mr. Moulton and Mr. Yarmuth moved that the Committee on 
the Budget direct its Chairman to request that the rule 
providing for consideration of the American Health Care Act 
make in order an amendment that strikes all provisions in the 
bill that lead to increased costs and reductions in coverage 
numbers in addition to tax cuts provided by the bill.
    The motion was not agreed to by a roll call vote of 13 ayes 
and 21 noes.

                           ROLLCALL VOTE NO. 5
------------------------------------------------------------------------
  Name &                     Answer     Name &                   Answer
  State      Aye     No     Present     State      Aye     No    Present
------------------------------------------------------------------------
BLACK                 X               YARMUTH       X
 (TN)                                  (KY)
 (Chairma                              (Ranking
 n)                                    )
------------------------------------------------------------------------
ROKITA                X               LEE (CA)      X
 (IN)
 (Vice
 Chairman
 )
------------------------------------------------------------------------
DIAZ-BALA             X               LUJAN         X
 RT (FL)                               GRISHAM
                                       (NM)
------------------------------------------------------------------------
COLE (OK)             X               MOULTON       X
                                       (MA)
------------------------------------------------------------------------
McCLINTOC             X               JEFFRIES      X
 K (CA)                                (NY)
------------------------------------------------------------------------
WOODALL               X               HIGGINS       X
 (GA)                                  (NY)
------------------------------------------------------------------------
SANFORD               X               DelBENE       X
 (SC)                                  (WA)
------------------------------------------------------------------------
WOMACK                X               WASSERMAN     X
 (AR)                                  SCHULTZ
                                       (FL)
------------------------------------------------------------------------
BRAT (VA)                             BOYLE
                                       (PA)
------------------------------------------------------------------------
GROTHMAN              X               KHANNA        X
 (WI)                                  (CA)
------------------------------------------------------------------------
PALMER                X               JAYAPAL       X
 (AL)                                  (WA)
                                       (Vice
                                       Ranking)
------------------------------------------------------------------------
WESTERMAN             X               CARBAJAL      X
 (AR)                                  (CA)
------------------------------------------------------------------------
RENACCI               X               JACKSON       X
 (OH)                                  LEE (TX)
------------------------------------------------------------------------
JOHNSON               X               SCHAKOWSK     X
 (OH)                                  Y (IL)
------------------------------------------------------------------------
SMITH                 X    .........
 (MO)
------------------------------------------------------------------------
LEWIS                 X               .........
 (MN)
------------------------------------------------------------------------
BERGMAN               X               .........
 (MI)
------------------------------------------------------------------------
FASO (NY)             X               .........
------------------------------------------------------------------------
SMUCKER               X    .........
 (PA)
------------------------------------------------------------------------
GAETZ                 X    .........
 (FL)
------------------------------------------------------------------------
ARRINGTON             X    .........
 (TX)
------------------------------------------------------------------------
FERGUSON              X
 (GA)
------------------------------------------------------------------------

A Motion Offered by Ms. Lee and Ms. Schakowsky
    5. Ms. Lee and Ms. Schakowsky moved that the Committee on 
the Budget direct its Chairman to request that the rule 
providing for consideration of the American Health Care Act 
make in order an amendment that would strike all provisions in 
the bill prohibiting mandatory funding for Planned Parenthood 
clinics for one year.
    The motion was not agreed to by a roll call vote of 14 ayes 
and 21 noes.

                           ROLLCALL VOTE NO. 6
------------------------------------------------------------------------
  Name &                     Answer     Name &                   Answer
  State      Aye     No     Present     State      Aye     No    Present
------------------------------------------------------------------------
BLACK                 X               YARMUTH       X
 (TN)                                  (KY)
 (Chairma                              (Ranking
 n)                                    )
------------------------------------------------------------------------
ROKITA                X               LEE (CA)      X
 (IN)
 (Vice
 Chairman
 )
------------------------------------------------------------------------
DIAZ-BALA             X               LUJAN         X
 RT (FL)                               GRISHAM
                                       (NM)
------------------------------------------------------------------------
COLE (OK)             X               MOULTON       X
                                       (MA)
------------------------------------------------------------------------
McCLINTOC             X               JEFFRIES      X
 K (CA)                                (NY)
------------------------------------------------------------------------
WOODALL               X               HIGGINS       X
 (GA)                                  (NY)
------------------------------------------------------------------------
SANFORD               X               DelBENE       X
 (SC)                                  (WA)
------------------------------------------------------------------------
WOMACK                X               WASSERMAN     X
 (AR)                                  SCHULTZ
                                       (FL)
------------------------------------------------------------------------
BRAT (VA)             X               BOYLE
                                       (PA)
------------------------------------------------------------------------
GROTHMAN              X               KHANNA        X
 (WI)                                  (CA)
------------------------------------------------------------------------
PALMER                X               JAYAPAL       X
 (AL)                                  (WA)
                                       (Vice
                                       Ranking)
------------------------------------------------------------------------
WESTERMAN             X               CARBAJAL      X
 (AR)                                  (CA)
------------------------------------------------------------------------
RENACCI               X               JACKSON       X
 (OH)                                  LEE (TX)
------------------------------------------------------------------------
JOHNSON               X               SCHAKOWSK     X
 (OH)                                  Y (IL)
------------------------------------------------------------------------
SMITH                 X    .........
 (MO)
------------------------------------------------------------------------
LEWIS                 X               .........
 (MN)
------------------------------------------------------------------------
BERGMAN               X               .........
 (MI)
------------------------------------------------------------------------
FASO (NY)     X                       .........
------------------------------------------------------------------------
SMUCKER               X    .........
 (PA)
------------------------------------------------------------------------
GAETZ                 X    .........
 (FL)
------------------------------------------------------------------------
ARRINGTON             X    .........
 (TX)
------------------------------------------------------------------------
FERGUSON              X
 (GA)
------------------------------------------------------------------------

A Motion Offered by Ms. DelBene and Ms. Wasserman Schultz
    6. Ms. DelBene and Ms. Wasserman Schultz moved that the 
Committee on the Budget direct its Chairman to request that the 
rule providing for consideration of the American Health Care 
Act make in order an amendment that strikes language 
accelerating the insolvency of the Medicare Hospital Insurance 
Trust Fund by three years by repealing the additional Medicare 
tax on high-income earners.
    The motion was not agreed to by a roll call vote of 13 ayes 
and 21 noes.

                           ROLLCALL VOTE NO. 7
------------------------------------------------------------------------
  Name &                     Answer     Name &                   Answer
  State      Aye     No     Present     State      Aye     No    Present
------------------------------------------------------------------------
BLACK                 X               YARMUTH       X
 (TN)                                  (KY)
 (Chairma                              (Ranking
 n)                                    )
------------------------------------------------------------------------
ROKITA                X               LEE (CA)      X
 (IN)
 (Vice
 Chairman
 )
------------------------------------------------------------------------
DIAZ-BALA             X               LUJAN         X
 RT (FL)                               GRISHAM
                                       (NM)
------------------------------------------------------------------------
COLE (OK)             X               MOULTON       X
                                       (MA)
------------------------------------------------------------------------
McCLINTOC             X               JEFFRIES      X
 K (CA)                                (NY)
------------------------------------------------------------------------
WOODALL               X               HIGGINS       X
 (GA)                                  (NY)
------------------------------------------------------------------------
SANFORD               X               DelBENE       X
 (SC)                                  (WA)
------------------------------------------------------------------------
WOMACK                X               WASSERMAN     X
 (AR)                                  SCHULTZ
                                       (FL)
------------------------------------------------------------------------
BRAT (VA)                             BOYLE
                                       (PA)
------------------------------------------------------------------------
GROTHMAN              X               KHANNA        X
 (WI)                                  (CA)
------------------------------------------------------------------------
PALMER                X               JAYAPAL       X
 (AL)                                  (WA)
                                       (Vice
                                       Ranking)
------------------------------------------------------------------------
WESTERMAN             X               CARBAJAL      X
 (AR)                                  (CA)
------------------------------------------------------------------------
RENACCI               X               JACKSON       X
 (OH)                                  LEE (TX)
------------------------------------------------------------------------
JOHNSON               X               SCHAKOWSK     X
 (OH)                                  Y (IL)
------------------------------------------------------------------------
SMITH                 X    .........
 (MO)
------------------------------------------------------------------------
LEWIS                 X               .........
 (MN)
------------------------------------------------------------------------
BERGMAN               X               .........
 (MI)
------------------------------------------------------------------------
FASO (NY)             X               .........
------------------------------------------------------------------------
SMUCKER               X    .........
 (PA)
------------------------------------------------------------------------
GAETZ                 X    .........
 (FL)
------------------------------------------------------------------------
ARRINGTON             X    .........
 (TX)
------------------------------------------------------------------------
FERGUSON              X
 (GA)
------------------------------------------------------------------------

A Motion Offered by Ms. Lujan Grisham and Mr. Carbajal
    7. Ms. Lujan Grisham and Mr. Carbajal moved that the 
Committee on the Budget direct its Chairman to request that the 
rule providing for consideration of the American Health Care 
Act make in order an amendment that would prevent the bill from 
taking effect until the Secretary of Health and Human Services 
determines that the bill would not decrease coverage, increase 
costs, or undermine parity of mental health and substance abuse 
services.
    The motion was not agreed to by a roll call vote of 14 ayes 
and 22 noes.

                           ROLLCALL VOTE NO. 8
------------------------------------------------------------------------
  Name &                     Answer     Name &                   Answer
  State      Aye     No     Present     State      Aye     No    Present
------------------------------------------------------------------------
BLACK                 X               YARMUTH       X
 (TN)                                  (KY)
 (Chairma                              (Ranking
 n)                                    )
------------------------------------------------------------------------
ROKITA                X               LEE (CA)      X
 (IN)
 (Vice
 Chairman
 )
------------------------------------------------------------------------
DIAZ-BALA             X               LUJAN         X
 RT (FL)                               GRISHAM
                                       (NM)
------------------------------------------------------------------------
COLE (OK)             X               MOULTON       X
                                       (MA)
------------------------------------------------------------------------
McCLINTOC             X               JEFFRIES      X
 K (CA)                                (NY)
------------------------------------------------------------------------
WOODALL               X               HIGGINS       X
 (GA)                                  (NY)
------------------------------------------------------------------------
SANFORD               X               DelBENE       X
 (SC)                                  (WA)
------------------------------------------------------------------------
WOMACK                X               WASSERMAN     X
 (AR)                                  SCHULTZ
                                       (FL)
------------------------------------------------------------------------
BRAT (VA)             X               BOYLE         X
                                       (PA)
------------------------------------------------------------------------
GROTHMAN              X               KHANNA        X
 (WI)                                  (CA)
------------------------------------------------------------------------
PALMER                X               JAYAPAL       X
 (AL)                                  (WA)
                                       (Vice
                                       Ranking)
------------------------------------------------------------------------
WESTERMAN             X               CARBAJAL      X
 (AR)                                  (CA)
------------------------------------------------------------------------
RENACCI               X               JACKSON       X
 (OH)                                  LEE (TX)
------------------------------------------------------------------------
JOHNSON               X               SCHAKOWSK     X
 (OH)                                  Y (IL)
------------------------------------------------------------------------
SMITH                 X    .........
 (MO)
------------------------------------------------------------------------
LEWIS                 X               .........
 (MN)
------------------------------------------------------------------------
BERGMAN               X               .........
 (MI)
------------------------------------------------------------------------
FASO (NY)             X               .........
------------------------------------------------------------------------
SMUCKER               X    .........
 (PA)
------------------------------------------------------------------------
GAETZ                 X    .........
 (FL)
------------------------------------------------------------------------
ARRINGTON             X    .........
 (TX)
------------------------------------------------------------------------
FERGUSON              X
 (GA)
------------------------------------------------------------------------

A Motion Offered by Mr. Rokita
    8. Mr. Rokita moved that the Committee on the Budget direct 
its Chairman to express the support of the Committee prior to 
the consideration of the rule for the American Health Care Act 
for state flexibility in the design of their Medicaid programs.
    The motion was agreed to by a roll call vote of 21 ayes and 
12 noes.

                           ROLLCALL VOTE NO. 9
------------------------------------------------------------------------
  Name &                     Answer     Name &                   Answer
  State      Aye     No     Present     State      Aye     No    Present
------------------------------------------------------------------------
BLACK         X                       YARMUTH              X
 (TN)                                  (KY)
 (Chairma                              (Ranking
 n)                                    )
------------------------------------------------------------------------
ROKITA        X                       LEE (CA)             X
 (IN)
 (Vice
 Chairman
 )
------------------------------------------------------------------------
DIAZ-BALA     X                       LUJAN                X
 RT (FL)                               GRISHAM
                                       (NM)
------------------------------------------------------------------------
COLE (OK)     X                       MOULTON              X
                                       (MA)
------------------------------------------------------------------------
McCLINTOC     X                       JEFFRIES
 K (CA)                                (NY)
------------------------------------------------------------------------
WOODALL       X                       HIGGINS              X
 (GA)                                  (NY)
------------------------------------------------------------------------
SANFORD       X                       DelBENE              X
 (SC)                                  (WA)
------------------------------------------------------------------------
WOMACK        X                       WASSERMAN            X
 (AR)                                  SCHULTZ
                                       (FL)
------------------------------------------------------------------------
BRAT (VA)                             BOYLE
                                       (PA)
------------------------------------------------------------------------
GROTHMAN      X                       KHANNA               X
 (WI)                                  (CA)
------------------------------------------------------------------------
PALMER        X                       JAYAPAL              X
 (AL)                                  (WA)
                                       (Vice
                                       Ranking)
------------------------------------------------------------------------
WESTERMAN     X                       CARBAJAL             X
 (AR)                                  (CA)
------------------------------------------------------------------------
RENACCI       X                       JACKSON              X
 (OH)                                  LEE (TX)
------------------------------------------------------------------------
JOHNSON       X                       SCHAKOWSK            X
 (OH)                                  Y (IL)
------------------------------------------------------------------------
SMITH         X            .........
 (MO)
------------------------------------------------------------------------
LEWIS         X                       .........
 (MN)
------------------------------------------------------------------------
BERGMAN       X                       .........
 (MI)
------------------------------------------------------------------------
FASO (NY)     X                       .........
------------------------------------------------------------------------
SMUCKER       X            .........
 (PA)
------------------------------------------------------------------------
GAETZ         X            .........
 (FL)
------------------------------------------------------------------------
ARRINGTON     X            .........
 (TX)
------------------------------------------------------------------------
FERGUSON      X
 (GA)
------------------------------------------------------------------------

A Motion Offered by Mr. Gaetz
    9. Mr. Gaetz moved that the Committee on the Budget direct 
its Chairman to express the support of the Committee prior to 
the consideration of the rule for the American Health Care Act 
for policies that do not incentivize new Medicaid enrollment.
    The motion was agreed to by a roll call vote of 22 ayes and 
13 noes.

                          ROLLCALL VOTE NO. 10
------------------------------------------------------------------------
  Name &                     Answer     Name &                   Answer
  State      Aye     No     Present     State      Aye     No    Present
------------------------------------------------------------------------
BLACK         X                       YARMUTH              X
 (TN)                                  (KY)
 (Chairma                              (Ranking
 n)                                    )
------------------------------------------------------------------------
ROKITA        X                       LEE (CA)             X
 (IN)
 (Vice
 Chairman
 )
------------------------------------------------------------------------
DIAZ-BALA     X                       LUJAN                X
 RT (FL)                               GRISHAM
                                       (NM)
------------------------------------------------------------------------
COLE (OK)     X                       MOULTON              X
                                       (MA)
------------------------------------------------------------------------
McCLINTOC     X                       JEFFRIES
 K (CA)                                (NY)
------------------------------------------------------------------------
WOODALL       X                       HIGGINS              X
 (GA)                                  (NY)
------------------------------------------------------------------------
SANFORD       X                       DelBENE              X
 (SC)                                  (WA)
------------------------------------------------------------------------
WOMACK        X                       WASSERMAN            X
 (AR)                                  SCHULTZ
                                       (FL)
------------------------------------------------------------------------
BRAT (VA)     X                       BOYLE                X
                                       (PA)
------------------------------------------------------------------------
GROTHMAN      X                       KHANNA               X
 (WI)                                  (CA)
------------------------------------------------------------------------
PALMER        X                       JAYAPAL              X
 (AL)                                  (WA)
                                       (Vice
                                       Ranking)
------------------------------------------------------------------------
WESTERMAN     X                       CARBAJAL             X
 (AR)                                  (CA)
------------------------------------------------------------------------
RENACCI       X                       JACKSON              X
 (OH)                                  LEE (TX)
------------------------------------------------------------------------
JOHNSON       X                       SCHAKOWSK            X
 (OH)                                  Y (IL)
------------------------------------------------------------------------
SMITH         X            .........
 (MO)
------------------------------------------------------------------------
LEWIS         X                       .........
 (MN)
------------------------------------------------------------------------
BERGMAN       X                       .........
 (MI)
------------------------------------------------------------------------
FASO (NY)     X                       .........
------------------------------------------------------------------------
SMUCKER       X            .........
 (PA)
------------------------------------------------------------------------
GAETZ         X            .........
 (FL)
------------------------------------------------------------------------
ARRINGTON     X            .........
 (TX)
------------------------------------------------------------------------
FERGUSON      X
 (GA)
------------------------------------------------------------------------

A Motion Offered by Mr. Palmer
    10. Mr. Palmer moved that the Committee on the Budget 
direct its Chairman to express the support of the Committee 
prior to the consideration of the rule for the American Health 
Care Act for encouraging able-bodied, working-age adults 
without dependents to meet a work requirement while enrolled in 
Medicaid.
    The motion was agreed to by a roll call vote of 21 ayes and 
13 noes.

                          ROLLCALL VOTE NO. 11
------------------------------------------------------------------------
  Name &                     Answer     Name &                   Answer
  State      Aye     No     Present     State      Aye     No    Present
------------------------------------------------------------------------
BLACK         X                       YARMUTH              X
 (TN)                                  (KY)
 (Chairma                              (Ranking
 n)                                    )
------------------------------------------------------------------------
ROKITA        X                       LEE (CA)             X
 (IN)
 (Vice
 Chairman
 )
------------------------------------------------------------------------
DIAZ-BALA     X                       LUJAN                X
 RT (FL)                               GRISHAM
                                       (NM)
------------------------------------------------------------------------
COLE (OK)     X                       MOULTON              X
                                       (MA)
------------------------------------------------------------------------
McCLINTOC     X                       JEFFRIES
 K (CA)                                (NY)
------------------------------------------------------------------------
WOODALL       X                       HIGGINS              X
 (GA)                                  (NY)
------------------------------------------------------------------------
SANFORD       X                       DelBENE              X
 (SC)                                  (WA)
------------------------------------------------------------------------
WOMACK        X                       WASSERMAN            X
 (AR)                                  SCHULTZ
                                       (FL)
------------------------------------------------------------------------
BRAT (VA)     X                       BOYLE                X
                                       (PA)
------------------------------------------------------------------------
GROTHMAN      X                       KHANNA               X
 (WI)                                  (CA)
------------------------------------------------------------------------
PALMER        X                       JAYAPAL              X
 (AL)                                  (WA)
                                       (Vice
                                       Ranking)
------------------------------------------------------------------------
WESTERMAN     X                       CARBAJAL             X
 (AR)                                  (CA)
------------------------------------------------------------------------
RENACCI       X                       JACKSON              X
 (OH)                                  LEE (TX)
------------------------------------------------------------------------
JOHNSON       X                       SCHAKOWSK            X
 (OH)                                  Y (IL)
------------------------------------------------------------------------
SMITH         X            .........
 (MO)
------------------------------------------------------------------------
LEWIS         X                       .........
 (MN)
------------------------------------------------------------------------
BERGMAN       X                       .........
 (MI)
------------------------------------------------------------------------
FASO (NY)                             .........
------------------------------------------------------------------------
SMUCKER       X            .........
 (PA)
------------------------------------------------------------------------
GAETZ         X            .........
 (FL)
------------------------------------------------------------------------
ARRINGTON     X            .........
 (TX)
------------------------------------------------------------------------
FERGUSON      X
 (GA)
------------------------------------------------------------------------

A Motion Offered by Mr. McClintock
    11. Mr. McClintock moved that the Committee on the Budget 
direct its Chairman to express the support of the Committee 
prior to the consideration of the rule for the American Health 
Care Act for policies that ensure the personal tax credits are 
afforded to the population they are intended to serve.
    The motion was agreed to by a roll call vote of 27 ayes and 
8 noes.

                          ROLLCALL VOTE NO. 12
------------------------------------------------------------------------
  Name &                     Answer     Name &                   Answer
  State      Aye     No     Present     State      Aye     No    Present
------------------------------------------------------------------------
BLACK         X                       YARMUTH       X
 (TN)                                  (KY)
 (Chairma                              (Ranking
 n)                                    )
------------------------------------------------------------------------
ROKITA        X                       LEE (CA)             X
 (IN)
 (Vice
 Chairman
 )
------------------------------------------------------------------------
DIAZ-BALA     X                       LUJAN         X
 RT (FL)                               GRISHAM
                                       (NM)
------------------------------------------------------------------------
COLE (OK)     X                       MOULTON       X
                                       (MA)
------------------------------------------------------------------------
McCLINTOC     X                       JEFFRIES
 K (CA)                                (NY)
------------------------------------------------------------------------
WOODALL       X                       HIGGINS              X
 (GA)                                  (NY)
------------------------------------------------------------------------
SANFORD       X                       DelBENE              X
 (SC)                                  (WA)
------------------------------------------------------------------------
WOMACK        X                       WASSERMAN            X
 (AR)                                  SCHULTZ
                                       (FL)
------------------------------------------------------------------------
BRAT (VA)     X                       BOYLE         X
                                       (PA)
------------------------------------------------------------------------
GROTHMAN      X                       KHANNA               X
 (WI)                                  (CA)
------------------------------------------------------------------------
PALMER        X                       JAYAPAL              X
 (AL)                                  (WA)
                                       (Vice
                                       Ranking)
------------------------------------------------------------------------
WESTERMAN     X                       CARBAJAL      X
 (AR)                                  (CA)
------------------------------------------------------------------------
RENACCI       X                       JACKSON              X
 (OH)                                  LEE (TX)
------------------------------------------------------------------------
JOHNSON       X                       SCHAKOWSK            X
 (OH)                                  Y (IL)
------------------------------------------------------------------------
SMITH         X            .........
 (MO)
------------------------------------------------------------------------
LEWIS         X                       .........
 (MN)
------------------------------------------------------------------------
BERGMAN       X                       .........
 (MI)
------------------------------------------------------------------------
FASO (NY)     X                       .........
------------------------------------------------------------------------
SMUCKER       X            .........
 (PA)
------------------------------------------------------------------------
GAETZ         X            .........
 (FL)
------------------------------------------------------------------------
ARRINGTON     X            .........
 (TX)
------------------------------------------------------------------------
FERGUSON      X
 (GA)
------------------------------------------------------------------------


                       HOUSE REPORT REQUIREMENTS

                              ----------                              


                      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 
to contain oversight findings and recommendations required 
pursuant to Clause (2)(b)(1) of rule X. The Committee on the 
Budget has examined its activities over the past session and 
has determined that there are no specific oversight findings on 
the text of the reported bill.

                        Committee Cost Estimate

    For purposes of Clauses 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 and Impoundment Control 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 and Impoundment Control Act of 1974. 
The required matter is included in the report language for each 
title of the legislative recommendations submitted by the 
appropriate authorizing committees and reported to the House by 
the Committee on the Budget.

                    Performance Goals and Objectives

    Clause 3(c)(4) of rule XIII of the Rules of the House of 
Representatives requires the report of a committee on a measure 
to include a statement of general performance goals and 
objectives, including outcome-related goals and objectives, for 
which the measure authorizes funding. This bill is reported 
pursuant to Section 2002 of S. Con. Res. 3, the Concurrent 
Resolution on the Budget for Fiscal Year 2017. The goals and 
objectives of this bill are to reduce the deficit by at least 
$2 billion over the 10-year period and clear the way for 
patient-centered health care reform that meets the principles 
set forth in the introduction of this report.

                   Constitutional Authority Statement

    Clause 7(c)(1) of rule XII of the Rules of the House of 
Representatives requires each report of a committee on a public 
bill or public joint resolution contain a statement citing the 
specific powers granted to Congress in the Constitution to 
enact the law proposed by the bill or joint resolution. The 
Committee on the Budget finds the Constitutional authority for 
this legislation in Article I of the Constitution, Sections 5 
and 8.

         Changes in Existing Law Made by the Bill, as Reported

    Clause 3(e) of rule XIII of the Rules of the House of 
Representatives requires each report of a committee on a bill 
or joint resolution contain the text of statutes that are 
proposed to be repealed and a comparative print of that part of 
the bill proposed to be amended whenever the bill repeals or 
amends any statute. The required matter is included in the 
report language for each title of the legislative 
recommendations submitted by the appropriate authorizing 
committees and reported to the House by the Committee on the 
Budget.

                       Federal Mandates Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act of 1974 requires a statement of whether the 
provisions of the reported bill include unfunded mandates. The 
Congressional Budget Office has determined that the bill 
contains no intergovernmental or private sector mandates within 
the narrow definition of the Unfunded Mandates Reform Act of 
1995. Any statements regarding unfunded mandates for the 
legislative recommendations submitted by each of the 
authorizing committees are included under the appropriate 
titles.

                          Advisory on Earmarks

    In compliance with Clause 9 of rule XXI of the Rules of the 
House of Representatives, the bill 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 
of the Rules of the House of Representatives.

                    Duplication of Federal Programs

    In compliance with Clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the reconciliation bill 
reported by the Committee on the Budget does not establish or 
reauthorize: (1) a program of the Federal Government known to 
be duplicative of another Federal program, (2) a program 
included in any report from the Government Accountability 
Office to Congress pursuant to Section 21 of Public Law 111-
139, or (3) a program related to a program identified in the 
most recent Catalog of Federal Domestic Assistance, published 
pursuant to Section 6104 of Title 31, United States Code.

                   Disclosure of Directed Rulemakings

    Section 3(i) of H. Res. 5 requires committee reports on any 
bill or joint resolution to include a statement estimating the 
number of directed rulemakings required by the measure. This 
bill does not require any directed rulemakings.

                       VIEWS OF COMMITTEE MEMBERS

                              ----------                              

    Clause 2(c) of rule XIII of the Rules of the House of 
Representatives requires each report by a committee on a public 
matter to include any additional, minority, supplemental, or 
dissenting views submitted pursuant to Clause 2(l) of rule XI 
by one or more members of the committee. In addition, this 
report includes views from members of committees submitting 
reconciliation recommendations pursuant to Section 2002 of S. 
Con. Res. 3 under the appropriate titles or subtitles, as the 
case may be, of this report. The minority views of members of 
the Committee on the Budget are as follows:




                              SIGNATORIES
                              John Yarmuth
                              Barbara Lee
                         Michelle Lujan Grisham
                              Seth Moulton
                            Hakeem Jeffries
                             Brian Higgins
                             Suzan DelBene
                        Debbie Wasserman Schultz
                             Brendan Boyle
                               Ro Khanna
                            Pramila Jayapal
                             Salud Carbajal
                           Sheila Jackson Lee
                           Janice Schakowsky

  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 ``American Health Care Act of 
2017''.

SEC. 2. TABLE OF CONTENTS.

  The table of contents of this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.

                      TITLE I--ENERGY AND COMMERCE

          Subtitle A--Patient Access to Public Health Programs

Sec. 101. The Prevention and Public Health Fund.
Sec. 102. Community health center program.
Sec. 103. Federal payments to States.

                Subtitle B--Medicaid Program Enhancement

Sec. 111. Repeal of Medicaid provisions.
Sec. 112. Repeal of Medicaid expansion.
Sec. 113. Elimination of DSH cuts.
Sec. 114. Reducing State Medicaid costs.
Sec. 115. Safety net funding for non-expansion States.
Sec. 116. Providing incentives for increased frequency of eligibility 
          redeterminations.

         Subtitle C--Per Capita Allotment for Medical Assistance

Sec. 121. Per capita allotment for medical assistance.

    Subtitle D--Patient Relief and Health Insurance Market Stability

Sec. 131. Repeal of cost-sharing subsidy.
Sec. 132. Patient and State Stability Fund.
Sec. 133. Continuous health insurance coverage incentive.
Sec. 134. Increasing coverage options.
Sec. 135. Change in permissible age variation in health insurance 
          premium rates.

                  TITLE II--COMMITTEE ON WAYS AND MEANS

       Subtitle A--Repeal and Replace of Health-Related Tax Policy

Sec. 201. Recapture excess advance payments of premium tax credits.
Sec. 202. Additional modifications to premium tax credit.
Sec. 203. Premium tax credit.
Sec. 204. Small business tax credit.
Sec. 205. Individual mandate.
Sec. 206. Employer mandate.
Sec. 207. Repeal of the tax on employee health insurance premiums and 
          health plan benefits.
Sec. 208. Repeal of tax on over-the-counter medications.
Sec. 209. Repeal of increase of tax on health savings accounts.
Sec. 210. Repeal of limitations on contributions to flexible spending 
          accounts.
Sec. 211. Repeal of medical device excise tax.
Sec. 212. Repeal of elimination of deduction for expenses allocable to 
          medicare part D subsidy.
Sec. 213. Repeal of increase in income threshold for determining medical 
          care deduction.
Sec. 214. Repeal of Medicare tax increase.
Sec. 215. Refundable tax credit for health insurance coverage.
Sec. 216. Maximum contribution limit to health savings account increased 
          to amount of deductible and out-of-pocket limitation.
Sec. 217. Allow both spouses to make catch-up contributions to the same 
          health savings account.
Sec. 218. Special rule for certain medical expenses incurred before 
          establishment of health savings account.

              Subtitle B--Repeal of Certain Consumer Taxes

Sec. 221. Repeal of tax on prescription medications.
Sec. 222. Repeal of health insurance tax.

                    Subtitle C--Repeal of Tanning Tax

Sec. 231. Repeal of tanning tax.

             Subtitle D--Remuneration From Certain Insurers

Sec. 241. Remuneration from certain insurers.

             Subtitle E--Repeal of Net Investment Income Tax

Sec. 251. Repeal of net investment income tax.

                      TITLE I--ENERGY AND COMMERCE

          Subtitle A--Patient Access to Public Health Programs

SEC. 101. THE PREVENTION AND PUBLIC HEALTH FUND.

  (a) In General.--Subsection (b) of section 4002 of the 
Patient Protection and Affordable Care Act (42 U.S.C. 300u-11), 
as amended by section 5009 of the 21st Century Cures Act, is 
amended--
          (1) in paragraph (2), by adding ``and'' at the end;
          (2) in paragraph (3)--
                  (A) by striking ``each of fiscal years 2018 
                and 2019'' and inserting ``fiscal year 2018''; 
                and
                  (B) by striking the semicolon at the end and 
                inserting a period; and
          (3) by striking paragraphs (4) through (8).
  (b) Rescission of Unobligated Funds.--Of the funds made 
available by such section 4002, the unobligated balance at the 
end of fiscal year 2018 is rescinded.

SEC. 102. COMMUNITY HEALTH CENTER PROGRAM.

   Effective as if included in the enactment of the Medicare 
Access and CHIP Reauthorization Act of 2015 (Public Law 114-10, 
129 Stat. 87), paragraph (1) of section 221(a) of such Act is 
amended by inserting ``, and an additional $422,000,000 for 
fiscal year 2017'' after ``2017''.

SEC. 103. FEDERAL PAYMENTS TO STATES.

  (a) In General.--Notwithstanding section 504(a), 1902(a)(23), 
1903(a), 2002, 2005(a)(4), 2102(a)(7), or 2105(a)(1) of the 
Social Security Act (42 U.S.C. 704(a), 1396a(a)(23), 1396b(a), 
1397a, 1397d(a)(4), 1397bb(a)(7), 1397ee(a)(1)), or the terms 
of any Medicaid waiver in effect on the date of enactment of 
this Act that is approved under section 1115 or 1915 of the 
Social Security Act (42 U.S.C. 1315, 1396n), for the 1-year 
period beginning on the date of the enactment of this Act, no 
Federal funds provided from a program referred to in this 
subsection that is considered direct spending for any year may 
be made available to a State for payments to a prohibited 
entity, whether made directly to the prohibited entity or 
through a managed care organization under contract with the 
State.
  (b) Definitions.--In this section:
          (1) Prohibited entity.--The term ``prohibited 
        entity'' means an entity, including its affiliates, 
        subsidiaries, successors, and clinics--
                  (A) that, as of the date of enactment of this 
                Act--
                          (i) is an organization described in 
                        section 501(c)(3) of the Internal 
                        Revenue Code of 1986 and exempt from 
                        tax under section 501(a) of such Code;
                          (ii) is an essential community 
                        provider described in section 156.235 
                        of title 45, Code of Federal 
                        Regulations (as in effect on the date 
                        of enactment of this Act), that is 
                        primarily engaged in family planning 
                        services, reproductive health, and 
                        related medical care; and
                          (iii) provides for abortions, other 
                        than an abortion--
                                  (I) if the pregnancy is the 
                                result of an act of rape or 
                                incest; or
                                  (II) in the case where a 
                                woman suffers from a physical 
                                disorder, physical injury, or 
                                physical illness that would, as 
                                certified by a physician, place 
                                the woman in danger of death 
                                unless an abortion is 
                                performed, including a life-
                                endangering physical condition 
                                caused by or arising from the 
                                pregnancy itself; and
                  (B) for which the total amount of Federal and 
                State expenditures under the Medicaid program 
                under title XIX of the Social Security Act in 
                fiscal year 2014 made directly to the entity 
                and to any affiliates, subsidiaries, 
                successors, or clinics of the entity, or made 
                to the entity and to any affiliates, 
                subsidiaries, successors, or clinics of the 
                entity as part of a nationwide health care 
                provider network, exceeded $350,000,000.
          (2) Direct spending.--The term ``direct spending'' 
        has the meaning given that term under section 250(c) of 
        the Balanced Budget and Emergency Deficit Control Act 
        of 1985 (2 U.S.C. 900(c)).

                Subtitle B--Medicaid Program Enhancement

SEC. 111. REPEAL OF MEDICAID PROVISIONS.

  The Social Security Act is amended--
          (1) in section 1902 (42 U.S.C. 1396a)--
                  (A) in subsection (a)(47)(B), by inserting 
                ``and provided that any such election shall 
                cease to be effective on January 1, 2020, and 
                no such election shall be made after that 
                date'' before the semicolon at the end; and
                  (B) in subsection (l)(2)(C), by inserting 
                ``and ending December 31, 2019,'' after 
                ``January 1, 2014,'';
          (2) in section 1915(k)(2) (42 U.S.C. 1396n(k)(2)), by 
        striking ``during the period described in paragraph 
        (1)'' and inserting ``on or after the date referred to 
        in paragraph (1) and before January 1, 2020''; and
          (3) in section 1920(e) (42 U.S.C. 1396r-1(e)), by 
        striking ``under clause (i)(VIII), clause (i)(IX), or 
        clause (ii)(XX) of subsection (a)(10)(A)'' and 
        inserting ``under clause (i)(VIII) or clause (ii)(XX) 
        of section 1902(a)(10)(A) before January 1, 2020, 
        section 1902(a)(10)(A)(i)(IX),''.

SEC. 112. REPEAL OF MEDICAID EXPANSION.

  (a) In General.--Section 1902(a)(10)(A) of the Social 
Security Act (42 U.S.C. 1396a(a)(10)(A)) is amended--
          (1) in clause (i)(VIII), by inserting ``at the option 
        of a State,'' after ``January 1, 2014,''; and
          (2) in clause (ii)(XX), by inserting ``and ending 
        December 31, 2019,'' after ``2014,''.
  (b) Termination of EFMAP for New ACA Expansion Enrollees.--
Section 1905 of the Social Security Act (42 U.S.C. 1396d) is 
amended--
          (1) in subsection (y)(1), in the matter preceding 
        subparagraph (A), by striking ``with respect to'' and 
        all that follows through ``shall be'' and inserting 
        ``with respect to amounts expended before January 1, 
        2020, by such State for medical assistance for newly 
        eligible individuals described in subclause (VIII) of 
        section 1902(a)(10)(A)(i) who are enrolled under the 
        State plan (or a waiver of the plan) before such date 
        and with respect to amounts expended after such date by 
        such State for medical assistance for individuals 
        described in such subclause who were enrolled under 
        such plan (or waiver of such plan) as of December 31, 
        2019, and who do not have a break in eligibility for 
        medical assistance under such State plan (or waiver) 
        for more than one month after such date, shall be''; 
        and
          (2) in subsection (z)(2)--
                  (A) in subparagraph (A), by striking 
                ``medical assistance for individuals'' and all 
                that follows through ``shall be'' and inserting 
                ``amounts expended before January 1, 2020, by 
                such State for medical assistance for 
                individuals described in section 
                1902(a)(10)(A)(i)(VIII) who are nonpregnant 
                childless adults with respect to whom the State 
                may require enrollment in benchmark coverage 
                under section 1937 and who are enrolled under 
                the State plan (or a waiver of the plan) before 
                such date and with respect to amounts expended 
                after such date by such State for medical 
                assistance for individuals described in such 
                section, who are nonpregnant childless adults 
                with respect to whom the State may require 
                enrollment in benchmark coverage under section 
                1937, who were enrolled under such plan (or 
                waiver of such plan) as of December 31, 2019, 
                and who do not have a break in eligibility for 
                medical assistance under such State plan (or 
                waiver) for more than one month after such 
                date, shall be''; and
                  (B) in subparagraph (B)(ii)--
                          (i) in subclause (III), by adding 
                        ``and'' at the end; and
                          (ii) by striking subclauses (IV), 
                        (V), and (VI) and inserting the 
                        following new subclause:
                  ``(IV) 2017 and each subsequent year is 80 
                percent.''.
  (c) Sunset of Essential Health Benefits Requirement.--Section 
1937(b)(5) of the Social Security Act (42 U.S.C. 1396u-7(b)(5)) 
is amended by adding at the end the following: ``This paragraph 
shall not apply after December 31, 2019.''.

SEC. 113. ELIMINATION OF DSH CUTS.

  Section 1923(f) of the Social Security Act (42 U.S.C. 1396r-
4(f)) is amended--
          (1) in paragraph (7)--
                  (A) in subparagraph (A)--
                          (i) in clause (i)--
                                  (I) in the matter preceding 
                                subclause (I), by striking 
                                ``2025'' and inserting 
                                ``2019''; and
                          (ii) in clause (ii)--
                                  (I) in subclause (I), by 
                                adding ``and'' at the end;
                                  (II) in subclause (II), by 
                                striking the semicolon at the 
                                end and inserting a period; and
                                  (III) by striking subclauses 
                                (III) through (VIII); and
                  (B) by adding at the end the following new 
                subparagraph:
                  ``(C) Exemption from exemption for non-
                expansion states.--
                          ``(i) In general.--In the case of a 
                        State that is a non-expansion State for 
                        a fiscal year, subparagraph (A)(i) 
                        shall not apply to the DSH allotment 
                        for such State and fiscal year.
                          ``(ii) No change in reduction for 
                        expansion states.--In the case of a 
                        State that is an expansion State for a 
                        fiscal year, the DSH allotment for such 
                        State and fiscal year shall be 
                        determined as if clause (i) did not 
                        apply.
                          ``(iii) Non-expansion and expansion 
                        state defined.--
                                  ``(I) The term `expansion 
                                State' means with respect to a 
                                fiscal year, a State that, as 
                                of July 1 of the preceding 
                                fiscal year, provides for 
                                eligibility under clause 
                                (i)(VIII) or (ii)(XX) of 
                                section 1902(a)(10)(A) for 
                                medical assistance under this 
                                title (or a waiver of the State 
                                plan approved under section 
                                1115).
                                  ``(II) The term `non-
                                expansion State' means, with 
                                respect to a fiscal year, a 
                                State that is not an expansion 
                                State.''; and
          (2) in paragraph (8), by striking ``fiscal year 
        2025'' and inserting ``fiscal year 2019''.

SEC. 114. REDUCING STATE MEDICAID COSTS.

  (a) Letting States Disenroll High Dollar Lottery Winners.--
          (1) In general.--Section 1902 of the Social Security 
        Act (42 U.S.C. 1396a) is amended--
                  (A) in subsection (a)(17), by striking 
                ``(e)(14), (e)(14)'' and inserting ``(e)(14), 
                (e)(15)''; and
                  (B) in subsection (e)--
                          (i) in paragraph (14) (relating to 
                        modified adjusted gross income), by 
                        adding at the end the following new 
                        subparagraph:
                  ``(J) Treatment of certain lottery winnings 
                and income received as a lump sum.--
                          ``(i) In general.--In the case of an 
                        individual who is the recipient of 
                        qualified lottery winnings (pursuant to 
                        lotteries occurring on or after January 
                        1, 2020) or qualified lump sum income 
                        (received on or after such date) and 
                        whose eligibility for medical 
                        assistance is determined based on the 
                        application of modified adjusted gross 
                        income under subparagraph (A), a State 
                        shall, in determining such eligibility, 
                        include such winnings or income (as 
                        applicable) as income received--
                                  ``(I) in the month in which 
                                such winnings or income (as 
                                applicable) is received if the 
                                amount of such winnings or 
                                income is less than $80,000;
                                  ``(II) over a period of 2 
                                months if the amount of such 
                                winnings or income (as 
                                applicable) is greater than or 
                                equal to $80,000 but less than 
                                $90,000;
                                  ``(III) over a period of 3 
                                months if the amount of such 
                                winnings or income (as 
                                applicable) is greater than or 
                                equal to $90,000 but less than 
                                $100,000; and
                                  ``(IV) over a period of 3 
                                months plus 1 additional month 
                                for each increment of $10,000 
                                of such winnings or income (as 
                                applicable) received, not to 
                                exceed a period of 120 months 
                                (for winnings or income of 
                                $1,260,000 or more), if the 
                                amount of such winnings or 
                                income is greater than or equal 
                                to $100,000.
                          ``(ii) Counting in equal 
                        installments.--For purposes of 
                        subclauses (II), (III), and (IV) of 
                        clause (i), winnings or income to which 
                        such subclause applies shall be counted 
                        in equal monthly installments over the 
                        period of months specified under such 
                        subclause.
                          ``(iii) Hardship exemption.--An 
                        individual whose income, by application 
                        of clause (i), exceeds the applicable 
                        eligibility threshold established by 
                        the State, may continue to be eligible 
                        for medical assistance to the extent 
                        that the State determines, under 
                        procedures established by the State 
                        under the State plan (or in the case of 
                        a waiver of the plan under section 
                        1115, incorporated in such waiver), or 
                        as otherwise established by such State 
                        in accordance with such standards as 
                        may be specified by the Secretary, that 
                        the denial of eligibility of the 
                        individual would cause an undue medical 
                        or financial hardship as determined on 
                        the basis of criteria established by 
                        the Secretary.
                          ``(iv) Notifications and assistance 
                        required in case of loss of 
                        eligibility.--A State shall, with 
                        respect to an individual who loses 
                        eligibility for medical assistance 
                        under the State plan (or a waiver of 
                        such plan) by reason of clause (i), 
                        before the date on which the individual 
                        loses such eligibility, inform the 
                        individual of the date on which the 
                        individual would no longer be 
                        considered ineligible by reason of such 
                        clause to receive medical assistance 
                        under the State plan or under any 
                        waiver of such plan and the date on 
                        which the individual would be eligible 
                        to reapply to receive such medical 
                        assistance.
                          ``(v) Qualified lottery winnings 
                        defined.--In this subparagraph, the 
                        term `qualified lottery winnings' means 
                        winnings from a sweepstakes, lottery, 
                        or pool described in paragraph (3) of 
                        section 4402 of the Internal Revenue 
                        Code of 1986 or a lottery operated by a 
                        multistate or multijurisdictional 
                        lottery association, including amounts 
                        awarded as a lump sum payment.
                          ``(vi) Qualified lump sum income 
                        defined.--In this subparagraph, the 
                        term `qualified lump sum income' means 
                        income that is received as a lump sum 
                        from one of the following sources:
                                  ``(I) Monetary winnings from 
                                gambling (as defined by the 
                                Secretary and including 
                                monetary winnings from gambling 
                                activities described in section 
                                1955(b)(4) of title 18, United 
                                States Code).
                                  ``(II) Income received as 
                                liquid assets from the estate 
                                (as defined in section 
                                1917(b)(4)) of a deceased 
                                individual.''; and
                          (ii) by striking ``(14) Exclusion'' 
                        and inserting ``(15) Exclusion''.
          (2) Rules of construction.--
                  (A) Interception of lottery winnings 
                allowed.--Nothing in the amendment made by 
                paragraph (1)(B)(i) shall be construed as 
                preventing a State from intercepting the State 
                lottery winnings awarded to an individual in 
                the State to recover amounts paid by the State 
                under the State Medicaid plan under title XIX 
                of the Social Security Act for medical 
                assistance furnished to the individual.
                  (B) Applicability limited to eligibility of 
                recipient of lottery winnings or lump sum 
                income.--Nothing in the amendment made by 
                paragraph (1)(B)(i) shall be construed, with 
                respect to a determination of household income 
                for purposes of a determination of eligibility 
                for medical assistance under the State plan 
                under title XIX of the Social Security Act (42 
                U.S.C. 1396 et seq.) (or a waiver of such plan) 
                made by applying modified adjusted gross income 
                under subparagraph (A) of section 1902(e)(14) 
                of such Act (42 U.S.C. 1396a(e)(14)), as 
                limiting the eligibility for such medical 
                assistance of any individual that is a member 
                of the household other than the individual (or 
                the individual's spouse) who received qualified 
                lottery winnings or qualified lump-sum income 
                (as defined in subparagraph (J) of such section 
                1902(e)(14), as added by paragraph (1)(B)(i) of 
                this subsection).
  (b) Repeal of Retroactive Eligibility.--
          (1) In general.--
                  (A) State plan requirements.--Section 
                1902(a)(34) of the Social Security Act (42 
                U.S.C. 1396a(a)(34)) is amended by striking 
                ``in or after the third month before the month 
                in which he made application'' and inserting 
                ``in or after the month in which the individual 
                made application''.
                  (B) Definition of medical assistance.--
                Section 1905(a) of the Social Security Act (42 
                U.S.C. 1396d(a)) is amended by striking ``in or 
                after the third month before the month in which 
                the recipient makes application for 
                assistance'' and inserting ``in or after the 
                month in which the recipient makes application 
                for assistance''.
          (2) Effective date.--The amendments made by paragraph 
        (1) shall apply to medical assistance with respect to 
        individuals whose eligibility for such assistance is 
        based on an application for such assistance made (or 
        deemed to be made) on or after October 1, 2017.
  (c) Ensuring States Are Not Forced to Pay for Individuals 
Ineligible for the Program.--
          (1) In general.--Section 1137(f) of the Social 
        Security Act (42 U.S.C. 1320b-7(f)) is amended--
                  (A) by striking ``Subsections (a)(1) and 
                (d)'' and inserting ``(1) Subsections (a)(1) 
                and (d)''; and
                  (B) by adding at the end the following new 
                paragraph:
  ``(2)(A) Subparagraphs (A) and (B)(ii) of subsection (d)(4) 
shall not apply in the case of an initial determination made on 
or after the date that is 6 months after the date of the 
enactment of this paragraph with respect to the eligibility of 
an alien described in subparagraph (B) for benefits under the 
program listed in subsection (b)(2).
  ``(B) An alien described in this subparagraph is an 
individual declaring to be a citizen or national of the United 
States with respect to whom a State, in accordance with section 
1902(a)(46)(B), requires--
          ``(i) pursuant to 1902(ee), the submission of a 
        social security number; or
          ``(ii) pursuant to 1903(x), the presentation of 
        satisfactory documentary evidence of citizenship or 
        nationality.''.
          (2) No payments for medical assistance provided 
        before presentation of evidence.--Section 1903(i)(22) 
        of the Social Security Act (42 U.S.C. 1396b(i)(22)) is 
        amended--
                  (A) by striking ``with respect to amounts 
                expended'' and inserting ``(A) with respect to 
                amounts expended'';
                  (B) by inserting ``and'' at the end; and
                  (C) by adding at the end the following new 
                subparagraph:
          ``(B) in the case of a State that elects to provide a 
        reasonable period to present satisfactory documentary 
        evidence of such citizenship or nationality pursuant to 
        paragraph (2)(C) of section 1902(ee) or paragraph (4) 
        of subsection (x) of this section, for amounts expended 
        for medical assistance for such an individual (other 
        than an individual described in paragraph (2) of such 
        subsection (x)) during such period;''.
          (3) Conforming amendments.--Section 1137(d)(4) of the 
        Social Security Act (42 U.S.C. 1320b-7(d)(4)) is 
        amended--
                  (A) in subparagraph (A), in the matter 
                preceding clause (i), by inserting ``subject to 
                subsection (f)(2),'' before ``the State''; and
                  (B) in subparagraph (B)(ii), by inserting 
                ``subject to subsection (f)(2),'' before 
                ``pending such verification''.
  (d) Updating Allowable Home Equity Limits in Medicaid.--
          (1) In general.--Section 1917(f)(1) of the Social 
        Security Act (42 U.S.C. 1396p(f)(1)) is amended--
                  (A) in subparagraph (A), by striking 
                ``subparagraphs (B) and (C)'' and inserting 
                ``subparagraph (B)'';
                  (B) by striking subparagraph (B);
                  (C) by redesignating subparagraph (C) as 
                subparagraph (B); and
                  (D) in subparagraph (B), as so redesignated, 
                by striking ``dollar amounts specified in this 
                paragraph'' and inserting ``dollar amount 
                specified in subparagraph (A)''.
          (2) Effective date.--
                  (A) In general.--The amendments made by 
                paragraph (1) shall apply with respect to 
                eligibility determinations made after the date 
                that is 180 days after the date of the 
                enactment of this section.
                  (B) Exception for state legislation.--In the 
                case of a State plan under title XIX of the 
                Social Security Act that the Secretary of 
                Health and Human Services determines requires 
                State legislation in order for the respective 
                plan to meet any requirement imposed by 
                amendments made by this subsection, the 
                respective plan shall not be regarded as 
                failing to comply with the requirements of such 
                title solely on the basis of its failure to 
                meet such an additional requirement before the 
                first day of the first calendar quarter 
                beginning after the close of the first regular 
                session of the State legislature that begins 
                after the date of the enactment of this Act. 
                For purposes of the previous sentence, in the 
                case of a State that has a 2-year legislative 
                session, each year of the session shall be 
                considered to be a separate regular session of 
                the State legislature.

SEC. 115. SAFETY NET FUNDING FOR NON-EXPANSION STATES.

  Title XIX of the Social Security Act is amended by inserting 
after section 1923 (42 U.S.C. 1396r-4) the following new 
section:

  ``ADJUSTMENT IN PAYMENT FOR SERVICES OF SAFETY NET PROVIDERS IN NON-
                            EXPANSION STATES

  ``Sec. 1923A.  (a) In General.--Subject to the limitations of 
this section, for each year during the period beginning with 
2018 and ending with 2021, each State that is one of the 50 
States or the District of Columbia and that, as of July 1 of 
the preceding year, did not provide for eligibility under 
clause (i)(VIII) or (ii)(XX) of section 1902(a)(10)(A) for 
medical assistance under this title (or a waiver of the State 
plan approved under section 1115) (each such State or District 
referred to in this section for the year as a `non-expansion 
State') may adjust the payment amounts otherwise provided under 
the State plan under this title (or a waiver of such plan) to 
health care providers that provide health care services to 
individuals enrolled under this title (in this section referred 
to as `eligible providers').
  ``(b) Increase in Applicable FMAP.--Notwithstanding section 
1905(b), the Federal medical assistance percentage applicable 
with respect to expenditures attributable to a payment 
adjustment under subsection (a) for which payment is permitted 
under subsection (c) shall be equal to--
          ``(1) 100 percent for calendar quarters in calendar 
        years 2018, 2019, 2020, and 2021; and
          ``(2) 95 percent for calendar quarters in calendar 
        year 2022.
  ``(c) Limitations; Disqualification of States.--
          ``(1) Annual allotment limitation.--Payment under 
        section 1903(a) shall not be made to a State with 
        respect to any payment adjustment made under this 
        section for all calendar quarters in a year in excess 
        of the $2,000,000,000 multiplied by the ratio of--
                  ``(A) the population of the State with income 
                below 138 percent of the poverty line in 2015 
                (as determined based the table entitled `Health 
                Insurance Coverage Status and Type by Ratio of 
                Income to Poverty Level in the Past 12 Months 
                by Age' for the universe of the civilian 
                noninstitutionalized population for whom 
                poverty status is determined based on the 2015 
                American Community Survey 1-Year Estimates, as 
                published by the Bureau of the Census), to
                  ``(B) the sum of the populations under 
                subparagraph (A) for all non-expansion States.
          ``(2) Limitation on payment adjustment amount for 
        individual providers.--The amount of a payment 
        adjustment under subsection (a) for an eligible 
        provider may not exceed the provider's costs incurred 
        in furnishing health care services (as determined by 
        the Secretary and net of payments under this title, 
        other than under this section, and by uninsured 
        patients) to individuals who either are eligible for 
        medical assistance under the State plan (or under a 
        waiver of such plan) or have no health insurance or 
        health plan coverage for such services.
  ``(d) Disqualification in Case of State Coverage Expansion.--
If a State is a non-expansion for a year and provides 
eligibility for medical assistance described in subsection (a) 
during the year, the State shall no longer be treated as a non-
expansion State under this section for any subsequent years.''.

SEC. 116. PROVIDING INCENTIVES FOR INCREASED FREQUENCY OF ELIGIBILITY 
                    REDETERMINATIONS.

  (a) In General.--Section 1902(e)(14) of the Social Security 
Act (42 U.S.C. 1396a(e)(14)) (relating to modified adjusted 
gross income), as amended by section 114(a)(1), is further 
amended by adding at the end the following:
                  ``(K) Frequency of eligibility 
                redeterminations.--Beginning on October 1, 
                2017, and notwithstanding subparagraph (H), in 
                the case of an individual whose eligibility for 
                medical assistance under the State plan under 
                this title (or a waiver of such plan) is 
                determined based on the application of modified 
                adjusted gross income under subparagraph (A) 
                and who is so eligible on the basis of clause 
                (i)(VIII) or clause (ii)(XX) of subsection 
                (a)(10)(A), a State shall redetermine such 
                individual's eligibility for such medical 
                assistance no less frequently than once every 6 
                months.''.
  (b) Civil Monetary Penalty.--Section 1128A(a) of the Social 
Security Act (42 U.S.C. 1320a-7a(a)) is amended, in the matter 
following paragraph (10), by striking ``(or, in cases under 
paragraph (3)'' and inserting the following: ``(or, in cases 
under paragraph (1) in which an individual was knowingly 
enrolled on or after October 1, 2017, pursuant to section 
1902(a)(10)(A)(i)(VIII) for medical assistance under the State 
plan under title XIX whose income does not meet the income 
threshold specified in such section or in which a claim was 
presented on or after October 1, 2017, as a claim for an item 
or service furnished to an individual described in such section 
but whose enrollment under such State plan is not made on the 
basis of such individual's meeting the income threshold 
specified in such section, $20,000 for each such individual or 
claim; in cases under paragraph (3)''.
  (c) Increased Administrative Matching Percentage.--For each 
calendar quarter during the period beginning on October 1, 
2017, and ending on December 31, 2019, the Federal matching 
percentage otherwise applicable under section 1903(a) of the 
Social Security Act (42 U.S.C. 1396b(a)) with respect to State 
expenditures during such quarter that are attributable to 
meeting the requirement of section 1902(e)(14) (relating to 
determinations of eligibility using modified adjusted gross 
income) of such Act shall be increased by 5 percentage points 
with respect to State expenditures attributable to activities 
carried out by the State (and approved by the Secretary) to 
increase the frequency of eligibility redeterminations required 
by subparagraph (K) of such section (relating to eligibility 
redeterminations made on a 6-month basis) (as added by 
subsection (a)).

        Subtitle C--Per Capita Allotment for Medical Assistance

SEC. 121. PER CAPITA ALLOTMENT FOR MEDICAL ASSISTANCE.

  Title XIX of the Social Security Act is amended--
          (1) in section 1903 (42 U.S.C. 1396b)--
                  (A) in subsection (a), in the matter before 
                paragraph (1), by inserting ``and section 
                1903A(a)'' after ``except as otherwise provided 
                in this section''; and
                  (B) in subsection (d)(1), by striking ``to 
                which'' and inserting ``to which, subject to 
                section 1903A(a),''; and
          (2) by inserting after such section 1903 the 
        following new section:

``SEC. 1903A. PER CAPITA-BASED CAP ON PAYMENTS FOR MEDICAL ASSISTANCE.

  ``(a) Application of Per Capita Cap on Payments for Medical 
Assistance Expenditures.--
          ``(1) In general.--If a State has excess aggregate 
        medical assistance expenditures (as defined in 
        paragraph (2)) for a fiscal year (beginning with fiscal 
        year 2020), the amount of payment to the State under 
        section 1903(a)(1) for each quarter in the following 
        fiscal year shall be reduced by \1/4\ of the excess 
        aggregate medical assistance payments (as defined in 
        paragraph (3)) for that previous fiscal year. In this 
        section, the term `State' means only the 50 States and 
        the District of Columbia.
          ``(2) Excess aggregate medical assistance 
        expenditures.--In this subsection, the term `excess 
        aggregate medical assistance expenditures' means, for a 
        State for a fiscal year, the amount (if any) by which--
                  ``(A) the amount of the adjusted total 
                medical assistance expenditures (as defined in 
                subsection (b)(1)) for the State and fiscal 
                year; exceeds
                  ``(B) the amount of the target total medical 
                assistance expenditures (as defined in 
                subsection (c)) for the State and fiscal year.
          ``(3) Excess aggregate medical assistance payments.--
        In this subsection, the term `excess aggregate medical 
        assistance payments' means, for a State for a fiscal 
        year, the product of--
                  ``(A) the excess aggregate medical assistance 
                expenditures (as defined in paragraph (2)) for 
                the State for the fiscal year; and
                  ``(B) the Federal average medical assistance 
                matching percentage (as defined in paragraph 
                (4)) for the State for the fiscal year.
          ``(4) Federal average medical assistance matching 
        percentage.--In this subsection, the term `Federal 
        average medical assistance matching percentage' means, 
        for a State for a fiscal year, the ratio (expressed as 
        a percentage) of--
                  ``(A) the amount of the Federal payments that 
                would be made to the State under section 
                1903(a)(1) for medical assistance expenditures 
                for calendar quarters in the fiscal year if 
                paragraph (1) did not apply; to
                  ``(B) the amount of the medical assistance 
                expenditures for the State and fiscal year.
  ``(b) Adjusted Total Medical Assistance Expenditures.--
Subject to subsection (g), the following shall apply:
          ``(1) In general.--In this section, the term 
        `adjusted total medical assistance expenditures' means, 
        for a State--
                  ``(A) for fiscal year 2016, the product of--
                          ``(i) the amount of the medical 
                        assistance expenditures (as defined in 
                        paragraph (2)) for the State and fiscal 
                        year, reduced by the amount of any 
                        excluded expenditures (as defined in 
                        paragraph (3)) for the State and fiscal 
                        year otherwise included in such medical 
                        assistance expenditures; and
                          ``(ii) the 1903A FY16 population 
                        percentage (as defined in paragraph 
                        (4)) for the State; or
                  ``(B) for fiscal year 2019 or a subsequent 
                fiscal year, the amount of the medical 
                assistance expenditures (as defined in 
                paragraph (2)) for the State and fiscal year 
                that is attributable to 1903A enrollees, 
                reduced by the amount of any excluded 
                expenditures (as defined in paragraph (3)) for 
                the State and fiscal year otherwise included in 
                such medical assistance expenditures.
          ``(2) Medical assistance expenditures.--In this 
        section, the term `medical assistance expenditures' 
        means, for a State and fiscal year, the medical 
        assistance payments as reported by medical service 
        category on the Form CMS-64 quarterly expense report 
        (or successor to such a report form, and including 
        enrollment data and subsequent adjustments to any such 
        report, in this section referred to collectively as a 
        `CMS-64 report') that directly result from providing 
        medical assistance under the State plan (including 
        under a waiver of the plan) for which payment is (or 
        may otherwise be) made pursuant to section 1903(a)(1).
          ``(3) Excluded expenditures.--In this section, the 
        term `excluded expenditures' means, for a State and 
        fiscal year, expenditures under the State plan (or 
        under a waiver of such plan) that are attributable to 
        any of the following:
                  ``(A) DSH.--Payment adjustments made for 
                disproportionate share hospitals under section 
                1923.
                  ``(B) Medicare cost-sharing.--Payments made 
                for medicare cost-sharing (as defined in 
                section 1905(p)(3)).
                  ``(C) Safety net provider payment adjustments 
                in non-expansion states.--Payment adjustments 
                under subsection (a) of section 1923A for which 
                payment is permitted under subsection (c) of 
                such section.
          ``(4) 1903A fy 16 population percentage.--In this 
        subsection, the term `1903A FY16 population percentage' 
        means, for a State, the Secretary's calculation of the 
        percentage of the actual medical assistance 
        expenditures, as reported by the State on the CMS-64 
        reports for calendar quarters in fiscal year 2016, that 
        are attributable to 1903A enrollees (as defined in 
        subsection (e)(1)).
  ``(c)  Target Total Medical Assistance Expenditures.--
          ``(1) Calculation.--In this section, the term `target 
        total medical assistance expenditures' means, for a 
        State for a fiscal year, the sum of the products, for 
        each of the 1903A enrollee categories (as defined in 
        subsection (e)(2)), of--
                  ``(A) the target per capita medical 
                assistance expenditures (as defined in 
                paragraph (2)) for the enrollee category, 
                State, and fiscal year; and
                  ``(B) the number of 1903A enrollees for such 
                enrollee category, State, and fiscal year, as 
                determined under subsection (e)(4).
          ``(2) Target per capita medical assistance 
        expenditures.--In this subsection, the term `target per 
        capita medical assistance expenditures' means, for a 
        1903A enrollee category, State, and a fiscal year, an 
        amount equal to--
                  ``(A) the provisional FY19 target per capita 
                amount for such enrollee category (as 
                calculated under subsection (d)(5)) for the 
                State; increased by
                  ``(B) the percentage increase in the medical 
                care component of the consumer price index for 
                all urban consumers (U.S. city average) from 
                September of 2019 to September of the fiscal 
                year involved.
  ``(d) Calculation of FY19 Provisional Target Amount for Each 
1903A Enrollee Category.--Subject to subsection (g), the 
following shall apply:
          ``(1) Calculation of base amounts for fiscal year 
        2016.--For each State the Secretary shall calculate 
        (and provide notice to the State not later than April 
        1, 2018, of) the following:
                  ``(A) The amount of the adjusted total 
                medical assistance expenditures (as defined in 
                subsection (b)(1)) for the State for fiscal 
                year 2016.
                  ``(B) The number of 1903A enrollees for the 
                State in fiscal year 2016 (as determined under 
                subsection (e)(4)).
                  ``(C) The average per capita medical 
                assistance expenditures for the State for 
                fiscal year 2016 equal to--
                          ``(i) the amount calculated under 
                        subparagraph (A); divided by
                          ``(ii) the number calculated under 
                        subparagraph (B).
          ``(2) Fiscal year 2019 average per capita amount 
        based on inflating the fiscal year 2016 amount to 
        fiscal year 2019 by cpi-medical.--The Secretary shall 
        calculate a fiscal year 2019 average per capita amount 
        for each State equal to--
                  ``(A) the average per capita medical 
                assistance expenditures for the State for 
                fiscal year 2016 (calculated under paragraph 
                (1)(C)); increased by
                  ``(B) the percentage increase in the medical 
                care component of the consumer price index for 
                all urban consumers (U.S. city average) from 
                September, 2016 to September, 2019.
          ``(3) Aggregate and average expenditures per capita 
        for fiscal year 2019.--The Secretary shall calculate 
        for each State the following:
                  ``(A) The amount of the adjusted total 
                medical assistance expenditures (as defined in 
                subsection (b)(1)) for the State for fiscal 
                year 2019. 
                  ``(B) The number of 1903A enrollees for the 
                State in fiscal year 2019 (as determined under 
                subsection (e)(4)).
          ``(4) Per capita expenditures for fiscal year 2019 
        for each 1903a enrollee category.--The Secretary shall 
        calculate (and provide notice to each State not later 
        than January 1, 2020, of) the following:
                  ``(A)(i) For each 1903A enrollee category, 
                the amount of the adjusted total medical 
                assistance expenditures (as defined in 
                subsection (b)(1)) for the State for fiscal 
                year 2019 for individuals in the enrollee 
                category, calculated by excluding from medical 
                assistance expenditures those expenditures 
                attributable to expenditures described in 
                clause (iii) or non-DSH supplemental 
                expenditures (as defined in clause (ii)).
                  ``(ii) In this paragraph, the term `non-DSH 
                supplemental expenditure' means a payment to a 
                provider under the State plan (or under a 
                waiver of the plan) that--
                          ``(I) is not made under section 1923;
                          ``(II) is not made with respect to a 
                        specific item or service for an 
                        individual;
                          ``(III) is in addition to any 
                        payments made to the provider under the 
                        plan (or waiver) for any such item or 
                        service; and
                          ``(IV) complies with the limits for 
                        additional payments to providers under 
                        the plan (or waiver) imposed pursuant 
                        to section 1902(a)(30)(A), including 
                        the regulations specifying upper 
                        payment limits under the State plan in 
                        part 447 of title 42, Code of Federal 
                        Regulations (or any successor 
                        regulations).
                  ``(iii) An expenditure described in this 
                clause is an expenditure that meets the 
                criteria specified in subclauses (I), (II), and 
                (III) of clause (ii) and is authorized under 
                section 1115 for the purposes of funding a 
                delivery system reform pool, uncompensated care 
                pool, a designated state health program, or any 
                other similar expenditure (as defined by the 
                Secretary).
                  ``(B) For each 1903A enrollee category, the 
                number of 1903A enrollees for the State in 
                fiscal year 2019 in the enrollee category (as 
                determined under subsection (e)(4)).
                  ``(C) For fiscal year 2016, the State's non-
                DSH supplemental payment percentage is equal to 
                the ratio (expressed as a percentage) of--
                          ``(i) the total amount of non-DSH 
                        supplemental expenditures (as defined 
                        in subparagraph (A)(ii)) for the State 
                        for fiscal year 2016; to
                          ``(ii) the amount described in 
                        subsection (b)(1)(A) for the State for 
                        fiscal year 2016.
                  ``(D) For each 1903A enrollee category an 
                average medical assistance expenditures per 
                capita for the State for fiscal year 2019 for 
                the enrollee category equal to--
                          ``(i) the amount calculated under 
                        subparagraph (A) for the State, 
                        increased by the non-DSH supplemental 
                        payment percentage for the State (as 
                        calculated under subparagraph (C)); 
                        divided by
                          ``(ii) the number calculated under 
                        subparagraph (B) for the State for the 
                        enrollee category.
          ``(5) Provisional fy19 per capita target amount for 
        each 1903a enrollee category.--Subject to subsection 
        (f)(2), the Secretary shall calculate for each State a 
        provisional FY19 per capita target amount for each 
        1903A enrollee category equal to the average medical 
        assistance expenditures per capita for the State for 
        fiscal year 2019 (as calculated under paragraph (4)(D)) 
        for such enrollee category multiplied by the ratio of--
                  ``(A) the product of--
                          ``(i) the fiscal year 2019 average 
                        per capita amount for the State, as 
                        calculated under paragraph (2); and
                          ``(ii) the number of 1903A enrollees 
                        for the State in fiscal year 2019, as 
                        calculated under paragraph (3)(B); to
                  ``(B) the amount of the adjusted total 
                medical assistance expenditures for the State 
                for fiscal year 2019, as calculated under 
                paragraph (3)(A).
  ``(e) 1903A Enrollee; 1903A Enrollee Category.--Subject to 
subsection (g), for purposes of this section, the following 
shall apply:
          ``(1) 1903A enrollee.--The term `1903A enrollee' 
        means, with respect to a State and a month, any 
        Medicaid enrollee (as defined in paragraph (3)) for the 
        month, other than such an enrollee who for such month 
        is in any of the following categories of excluded 
        individuals:
                  ``(A) CHIP.--An individual who is provided, 
                under this title in the manner described in 
                section 2101(a)(2), child health assistance 
                under title XXI.
                  ``(B) IHS.--An individual who receives any 
                medical assistance under this title for 
                services for which payment is made under the 
                third sentence of section 1905(b).
                  ``(C) Breast and cervical cancer services 
                eligible individual.--An individual who is 
                entitled to medical assistance under this title 
                only pursuant to section 
                1902(a)(10)(A)(ii)(XVIII).
                  ``(D) Partial-benefit enrollees.--An 
                individual who--
                          ``(i) is an alien who is entitled to 
                        medical assistance under this title 
                        only pursuant to section 1903(v)(2);
                          ``(ii) is entitled to medical 
                        assistance under this title only 
                        pursuant to subclause (XII) or (XXI) of 
                        section 1902(a)(10)(A)(ii) (or pursuant 
                        to a waiver that provides only 
                        comparable benefits);
                          ``(iii) is a dual eligible individual 
                        (as defined in section 1915(h)(2)(B)) 
                        and is entitled to medical assistance 
                        under this title (or under a waiver) 
                        only for some or all of medicare cost-
                        sharing (as defined in section 
                        1905(p)(3)); or
                          ``(iv) is entitled to medical 
                        assistance under this title and for 
                        whom the State is providing a payment 
                        or subsidy to an employer for coverage 
                        of the individual under a group health 
                        plan pursuant to section 1906 or 
                        section 1906A (or pursuant to a waiver 
                        that provides only comparable 
                        benefits).
          ``(2) 1903A enrollee category.--The term `1903A 
        enrollee category' means each of the following:
                  ``(A) Elderly.--A category of 1903A enrollees 
                who are 65 years of age or older.
                  ``(B) Blind and disabled.--A category of 
                1903A enrollees (not described in the previous 
                subparagraph) who are eligible for medical 
                assistance under this title on the basis of 
                being blind or disabled.
                  ``(C) Children.--A category of 1903A 
                enrollees (not described in a previous 
                subparagraph) who are children under 19 years 
                of age.
                  ``(D) Expansion enrollees.--A category of 
                1903A enrollees (not described in a previous 
                subparagraph) for whom the amounts expended for 
                medical assistance are subject to an increase 
                or change in the Federal medical assistance 
                percentage under subsection (y) or (z)(2), 
                respectively, of section 1905.
                  ``(E) Other nonelderly, nondisabled, non-
                expansion adults.--A category of 1903A 
                enrollees who are not described in any previous 
                subparagraph.
          ``(3) Medicaid enrollee.--The term `Medicaid 
        enrollee' means, with respect to a State for a month, 
        an individual who is eligible for medical assistance 
        for items or services under this title and enrolled 
        under the State plan (or a waiver of such plan) under 
        this title for the month.
          ``(4) Determination of number of 1903a enrollees.--
        The number of 1903A enrollees for a State and fiscal 
        year, and, if applicable, for a 1903A enrollee 
        category, is the average monthly number of Medicaid 
        enrollees for such State and fiscal year (and, if 
        applicable, in such category) that are reported through 
        the CMS-64 report under (and subject to audit under) 
        subsection (h).
  ``(f) Special Payment Rules.--
          ``(1) Application in case of research and 
        demonstration projects and other waivers.--In the case 
        of a State with a waiver of the State plan approved 
        under section 1115, section 1915, or another provision 
        of this title, this section shall apply to medical 
        assistance expenditures and medical assistance payments 
        under the waiver, in the same manner as if such 
        expenditures and payments had been made under a State 
        plan under this title and the limitations on 
        expenditures under this section shall supersede any 
        other payment limitations or provisions (including 
        limitations based on a per capita limitation) otherwise 
        applicable under such a waiver.
          ``(2) Treatment of states expanding coverage after 
        fiscal year 2016.--In the case of a State that did not 
        provide for medical assistance for the 1903A enrollee 
        category described in subsection (e)(2)(D) during 
        fiscal year 2016 but which provides for such assistance 
        for such category in a subsequent year, the provisional 
        FY19 per capita target amount for such enrollee 
        category under subsection (d)(5) shall be equal to the 
        provisional FY19 per capita target amount for the 1903A 
        enrollee category described in subsection (e)(2)(E).
          ``(3) In case of state failure to report necessary 
        data.--If a State for any quarter in a fiscal year 
        (beginning with fiscal year 2019) fails to 
        satisfactorily submit data on expenditures and 
        enrollees in accordance with subsection (h)(1), for 
        such fiscal year and any succeeding fiscal year for 
        which such data are not satisfactorily submitted--
                  ``(A) the Secretary shall calculate and apply 
                subsections (a) through (e) with respect to the 
                State as if all 1903A enrollee categories for 
                which such expenditure and enrollee data were 
                not satisfactorily submitted were a single 
                1903A enrollee category; and
                  ``(B) the growth factor otherwise applied 
                under subsection (c)(2)(B) shall be decreased 
                by 1 percentage point.
  ``(g) Recalculation of Certain Amounts for Data Errors.--The 
amounts and percentage calculated under paragraphs (1) and 
(4)(C) of subsection (d) for a State for fiscal year 2016, and 
the amounts of the adjusted total medical assistance 
expenditures calculated under subsection (b) and the number of 
Medicaid enrollees and 1903A enrollees determined under 
subsection (e)(4) for a State for fiscal year 2016, fiscal year 
2019, and any subsequent fiscal year, may be adjusted by the 
Secretary based upon an appeal (filed by the State in such a 
form, manner, and time, and containing such information 
relating to data errors that support such appeal, as the 
Secretary specifies) that the Secretary determines to be valid, 
except that any adjustment by the Secretary under this 
subsection for a State may not result in an increase of the 
target total medical assistance expenditures exceeding 2 
percent.
  ``(h) Required Reporting and Auditing of CMS-64 Data; 
Transitional Increase in Federal Matching Percentage for 
Certain Administrative Expenses.--
          ``(1) Reporting.--In addition to the data required on 
        form Group VIII on the CMS-64 report form as of January 
        1, 2017, in each CMS-64 report required to be submitted 
        (for each quarter beginning on or after October 1, 
        2018), the State shall include data on medical 
        assistance expenditures within such categories of 
        services and categories of enrollees (including each 
        1903A enrollee category and each category of excluded 
        individuals under subsection (e)(1)) and the numbers of 
        enrollees within each of such enrollee categories, as 
        the Secretary determines are necessary (including 
        timely guidance published as soon as possible after the 
        date of the enactment of this section) in order to 
        implement this section and to enable States to comply 
        with the requirement of this paragraph on a timely 
        basis.
          ``(2) Auditing.--The Secretary shall conduct for each 
        State an audit of the number of individuals and 
        expenditures reported through the CMS-64 report for 
        fiscal year 2016, fiscal year 2019, and each subsequent 
        fiscal year, which audit may be conducted on a 
        representative sample (as determined by the Secretary).
          ``(3) Temporary increase in federal matching 
        percentage to support improved data reporting systems 
        for fiscal years 2018 and 2019.--For amounts expended 
        during calendar quarters beginning on or after October 
        1, 2017, and before October 1, 2019--
                  ``(A) the Federal matching percentage applied 
                under section 1903(a)(3)(A)(i) shall be 
                increased by 10 percentage points to 100 
                percent;
                  ``(B) the Federal matching percentage applied 
                under section 1903(a)(3)(B) shall be increased 
                by 25 percentage points to 100 percent; and
                  ``(C) the Federal matching percentage applied 
                under section 1903(a)(7) shall be increased by 
                10 percentage points to 60 percent but only 
                with respect to amounts expended that are 
                attributable to a State's additional 
                administrative expenditures to implement the 
                data requirements of paragraph (1).''.

    Subtitle D--Patient Relief and Health Insurance Market Stability

SEC. 131. REPEAL OF COST-SHARING SUBSIDY.

  (a) In General.--Section 1402 of the Patient Protection and 
Affordable Care Act is repealed.
  (b) Effective Date.--The repeal made by subsection (a) shall 
apply to cost-sharing reductions (and payments to issuers for 
such reductions) for plan years beginning after December 31, 
2019.

SEC. 132. PATIENT AND STATE STABILITY FUND.

  The Social Security Act (42 U.S.C. 301 et seq.) is amended by 
adding at the end the following new title:

             ``TITLE XXII--PATIENT AND STATE STABILITY FUND

``SEC. 2201. ESTABLISHMENT OF PROGRAM.

  ``There is hereby established the `Patient and State 
Stability Fund' to be administered by the Secretary of Health 
and Human Services, acting through the Administrator of the 
Centers for Medicare & Medicaid Services (in this section 
referred to as the `Administrator'), to provide funding, in 
accordance with this title, to the 50 States and the District 
of Columbia (each referred to in this section as a `State') 
during the period, subject to section 2204(c), beginning on 
January 1, 2018, and ending on December 31, 2026, for the 
purposes described in section 2202.

``SEC. 2202. USE OF FUNDS.

  ``A State may use the funds allocated to the State under this 
title for any of the following purposes:
          ``(1) Helping, through the provision of financial 
        assistance, high-risk individuals who do not have 
        access to health insurance coverage offered through an 
        employer enroll in health insurance coverage in the 
        individual market in the State, as such market is 
        defined by the State (whether through the establishment 
        of a new mechanism or maintenance of an existing 
        mechanism for such purpose).
          ``(2) Providing incentives to appropriate entities to 
        enter into arrangements with the State to help 
        stabilize premiums for health insurance coverage in the 
        individual market, as such markets are defined by the 
        State.
          ``(3) Reducing the cost for providing health 
        insurance coverage in the individual market and small 
        group market, as such markets are defined by the State, 
        to individuals who have, or are projected to have, a 
        high rate of utilization of health services (as 
        measured by cost).
          ``(4) Promoting participation in the individual 
        market and small group market in the State and 
        increasing health insurance options available through 
        such market.
          ``(5) Promoting access to preventive services; dental 
        care services (whether preventive or medically 
        necessary); vision care services (whether preventive or 
        medically necessary); prevention, treatment, or 
        recovery support services for individuals with mental 
        or substance use disorders; or any combination of such 
        services.
          ``(6) Providing payments, directly or indirectly, to 
        health care providers for the provision of such health 
        care services as are specified by the Administrator.
          ``(7) Providing assistance to reduce out-of-pocket 
        costs, such as copayments, coinsurance, premiums, and 
        deductibles, of individuals enrolled in health 
        insurance coverage in the State.

``SEC. 2203. STATE ELIGIBILITY AND APPROVAL; DEFAULT SAFEGUARD.

  ``(a) Encouraging State Options for Allocations.--
          ``(1) In general.--To be eligible for an allocation 
        of funds under this title for a year during the period 
        described in section 2201 for use for one or more 
        purposes described in section 2202, a State shall 
        submit to the Administrator an application at such time 
        (but, in the case of allocations for 2018, not later 
        than 45 days after the date of the enactment of this 
        title and, in the case of allocations for a subsequent 
        year, not later than March 31 of the previous year) and 
        in such form and manner as specified by the 
        Administrator and containing--
                  ``(A) a description of how the funds will be 
                used for such purposes;
                  ``(B) a certification that the State will 
                make, from non-Federal funds, expenditures for 
                such purposes in an amount that is not less 
                than the State percentage required for the year 
                under section 2204(e)(1); and
                  ``(C) such other information as the 
                Administrator may require.
          ``(2) Automatic approval.--An application so 
        submitted is approved unless the Administrator notifies 
        the State submitting the application, not later than 60 
        days after the date of the submission of such 
        application, that the application has been denied for 
        not being in compliance with any requirement of this 
        title and of the reason for such denial.
          ``(3) One-time application.--If an application of a 
        State is approved for a year, with respect to a purpose 
        described in section 2202, such application shall be 
        treated as approved, with respect to such purpose, for 
        each subsequent year through 2026.
          ``(4) Treatment as a state health care program.--Any 
        program receiving funds from an allocation for a State 
        under this title, including pursuant to subsection (b), 
        shall be considered to be a `State health care program' 
        for purposes of sections 1128, 1128A, and 1128B.
  ``(b) Default Federal Safeguard.--
          ``(1) In general.--
                  ``(A) 2018.--For allocations made under this 
                title for 2018, in the case of a State that 
                does not submit an application under subsection 
                (a) by the 45-day submission date applicable to 
                such year under subsection (a)(1) and in the 
                case of a State that does submit such an 
                application by such date that is not approved, 
                subject to section 2204(e), the Administrator, 
                in consultation with the State insurance 
                commissioner, shall use the allocation that 
                would otherwise be provided to the State under 
                this title for such year, in accordance with 
                paragraph (2), for such State.
                  ``(B) 2019 through 2026.--In the case of a 
                State that does not have in effect an approved 
                application under this section for 2019 or a 
                subsequent year beginning during the period 
                described in section 2201, subject to section 
                2204(e), the Administrator, in consultation 
                with the State insurance commissioner, shall 
                use the allocation that would otherwise be 
                provided to the State under this title for such 
                year, in accordance with paragraph (2), for 
                such State.
          ``(2) Required use for market stabilization payments 
        to issuers.--Subject to section 2204(a), an allocation 
        for a State made pursuant to paragraph (1) for a year 
        shall be used to carry out the purpose described in 
        section 2202(2) in such State by providing payments to 
        appropriate entities described in such section with 
        respect to claims that exceed $50,000 (or, with respect 
        to allocations made under this title for 2020 or a 
        subsequent year during the period specified in section 
        2201, such dollar amount specified by the 
        Administrator), but do not exceed $350,000 (or, with 
        respect to allocations made under this title for 2020 
        or a subsequent year during such period, such dollar 
        amount specified by the Administrator), in an amount 
        equal to 75 percent (or, with respect to allocations 
        made under this title for 2020 or a subsequent year 
        during such period, such percentage specified by the 
        Administrator) of the amount of such claims.

``SEC. 2204. ALLOCATIONS.

  ``(a) Appropriation.--For the purpose of providing 
allocations for States (including pursuant to section 2203(b)) 
under this title there is appropriated, out of any money in the 
Treasury not otherwise appropriated--
          ``(1) for 2018, $15,000,000,000;
          ``(2) for 2019, $15,000,000,000;
          ``(3) for 2020, $10,000,000,000;
          ``(4) for 2021, $10,000,000,000;
          ``(5) for 2022, $10,000,000,000;
          ``(6) for 2023, $10,000,000,000;
          ``(7) for 2024, $10,000,000,000;
          ``(8) for 2025, $10,000,000,000; and
          ``(9) for 2026, $10,000,000,000.
  ``(b) Allocations.--
          ``(1) Payment.--
                  ``(A) In general.--From amounts appropriated 
                under subsection (a) for a year, the 
                Administrator shall, with respect to a State 
                and not later than the date specified under 
                subparagraph (B) for such year, allocate, 
                subject to subsection (e), for such State 
                (including pursuant to section 2203(b)) the 
                amount determined for such State and year under 
                paragraph (2).
                  ``(B) Specified date.--For purposes of 
                subparagraph (A), the date specified in this 
                subparagraph is--
                          ``(i) for 2018, the date that is 45 
                        days after the date of the enactment of 
                        this title; and
                          ``(ii) for 2019 and subsequent years, 
                        January 1 of the respective year.
          ``(2) Allocation amount determinations.--
                  ``(A) For 2018 and 2019.--
                          ``(i) In general.--For purposes of 
                        paragraph (1), the amount determined 
                        under this paragraph for 2018 and 2019 
                        for a State is an amount equal to the 
                        sum of--
                                  ``(I) the relative incurred 
                                claims amount described in 
                                clause (ii) for such State and 
                                year; and
                                  ``(II) the relative uninsured 
                                and issuer participation amount 
                                described in clause (iv) for 
                                such State and year.
                          ``(ii) Relative incurred claims 
                        amount.--For purposes of clause (i), 
                        the relative incurred claims amount 
                        described in this clause for a State 
                        for 2018 and 2019 is the product of--
                                  ``(I) 85 percent of the 
                                amount appropriated under 
                                subsection (a) for the year; 
                                and
                                  ``(II) the relative State 
                                incurred claims proportion 
                                described in clause (iii) for 
                                such State and year.
                          ``(iii) Relative state incurred 
                        claims proportion.--The relative State 
                        incurred claims proportion described in 
                        this clause for a State and year is the 
                        amount equal to the ratio of--
                                  ``(I) the adjusted incurred 
                                claims by the State, as 
                                reported through the medical 
                                loss ratio annual reporting 
                                under section 2718 of the 
                                Public Health Service Act for 
                                the third previous year; to
                                  ``(II) the sum of such 
                                adjusted incurred claims for 
                                all States, as so reported, for 
                                such third previous year.
                          ``(iv) Relative uninsured and issuer 
                        participation amount.--For purposes of 
                        clause (i), the relative uninsured and 
                        issuer participation amount described 
                        in this clause for a State for 2018 and 
                        2019 is the product of--
                                  ``(I) 15 percent of the 
                                amount appropriated under 
                                subsection (a) for the year; 
                                and
                                  ``(II) the relative State 
                                uninsured and issuer 
                                participation proportion 
                                described in clause (v) for 
                                such State and year.
                          ``(v) Relative state uninsured and 
                        issuer participation proportion.--The 
                        relative State uninsured and issuer 
                        participation proportion described in 
                        this clause for a State and year is--
                                  ``(I) in the case of a State 
                                not described in clause (vi) 
                                for such year, 0; and
                                  ``(II) in the case of a State 
                                described in clause (vi) for 
                                such year, the amount equal to 
                                the ratio of--
                                          ``(aa) the number of 
                                        individuals residing in 
                                        such State who for the 
                                        third preceding year 
                                        were not enrolled in a 
                                        health plan or 
                                        otherwise did not have 
                                        health insurance 
                                        coverage (including 
                                        through a Federal or 
                                        State health program) 
                                        and whose income is 
                                        below 100 percent of 
                                        the poverty line 
                                        applicable to a family 
                                        of the size involved; 
                                        to
                                          ``(bb) the sum of the 
                                        number of such 
                                        individuals for all 
                                        States described in 
                                        clause (vi) for the 
                                        third preceding year.
                          ``(vi) States described.--For 
                        purposes of clause (v), a State is 
                        described in this clause, with respect 
                        to 2018 and 2019, if the State 
                        satisfies either of the following 
                        criterion:
                                  ``(I) The number of 
                                individuals residing in such 
                                State and described in clause 
                                (v)(II)(aa) was higher in 2015 
                                than 2013.
                                  ``(II) The State have fewer 
                                than three health insurance 
                                issuers offering qualified 
                                health plans through the 
                                Exchange for 2017.
                  ``(B) For 2020 through 2026.--For purposes of 
                paragraph (1), the amount determined under this 
                paragraph for a year (beginning with 2020) 
                during the period described in section 2201 for 
                a State is an amount determined in accordance 
                with an allocation methodology specified by the 
                Administrator which--
                          ``(i) takes into consideration the 
                        adjusted incurred claims of such State, 
                        the number of residents of such State 
                        who for the previous year were not 
                        enrolled in a health plan or otherwise 
                        did not have health insurance coverage 
                        (including through a Federal or State 
                        health program) and whose income is 
                        below 100 percent of the poverty line 
                        applicable to a family of the size 
                        involved, and the number of health 
                        insurance issuers participating in the 
                        insurance market in such State for such 
                        year;
                          ``(ii) is established after 
                        consultation with health care 
                        consumers, health insurance issuers, 
                        State insurance commissioners, and 
                        other stakeholders and after taking 
                        into consideration additional cost and 
                        risk factors that may inhibit health 
                        care consumer and health insurance 
                        issuer participation; and
                          ``(iii) reflects the goals of 
                        improving the health insurance risk 
                        pool, promoting a more competitive 
                        health insurance market, and increasing 
                        choice for health care consumers.
  ``(c) Annual Distribution of Previous Year's Remaining 
Funds.-- In carrying out subsection (b), the Administrator 
shall, with respect to a year (beginning with 2020 and ending 
with 2027), not later than March 31 of such year--
          ``(1) determine the amount of funds, if any, from the 
        amounts appropriated under subsection (a) for the 
        previous year but not allocated for such previous year; 
        and
          ``(2) if the Administrator determines that any funds 
        were not so allocated for such previous year, allocate 
        such remaining funds, in accordance with the allocation 
        methodology specified pursuant to subsection 
        (b)(2)(B)--
                  ``(A) to States that have submitted an 
                application approved under section 2203(a) for 
                such previous year for any purpose for which 
                such an application was approved; and
                  ``(B) for States for which allocations were 
                made pursuant to section 2203(b) for such 
                previous year, to be used by the Administrator 
                for such States, to carry out the purpose 
                described in section 2202(2) in such States by 
                providing payments to appropriate entities 
                described in such section with respect to 
                claims that exceed $1,000,000;
        with, respect to a year before 2027, any remaining 
        funds being made available for allocations to States 
        for the subsequent year.
  ``(d) Availability.--Amounts appropriated under subsection 
(a) for a year and allocated to States in accordance with this 
section shall remain available for expenditure through December 
31, 2027.
  ``(e) Conditions for and Limitations on Receipt of Funds.--
The Secretary may not make an allocation under this title for a 
State, with respect to a purpose described in section 2202--
          ``(1) in the case of an allocation that would be made 
        to a State pursuant to section 2203(a), if the State 
        does not agree that the State will make available non-
        Federal contributions towards such purpose in an amount 
        equal to--
                  ``(A) for 2020, 7 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(B) for 2021, 14 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(C) for 2022, 21 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(D) for 2023, 28 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(E) for 2024, 35 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(F) for 2025, 42 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose; and
                  ``(G) for 2026, 50 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
          ``(2) in the case of an allocation that would be made 
        for a State pursuant to section 2203(b), if the State 
        does not agree that the State will make available non-
        Federal contributions towards such purpose in an amount 
        equal to--
                  ``(A) for 2020, 10 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(B) for 2021, 20 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose; and
                  ``(C) for 2022, 30 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(D) for 2023, 40 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(E) for 2024, 50 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose;
                  ``(F) for 2025, 50 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose; and
                  ``(G) for 2026, 50 percent of the amount 
                allocated under this subsection to such State 
                for such year and purpose; or
          ``(3) if such an allocation for such purpose would 
        not be permitted under subsection (c)(7) of section 
        2105 if such allocation were payment made under such 
        section.''.

SEC. 133. CONTINUOUS HEALTH INSURANCE COVERAGE INCENTIVE.

  Subpart I of part A of title XXVII of the Public Health 
Service Act is amended--
          (1) in section 2701(a)(1)(B), by striking ``such 
        rate'' and inserting ``subject to section 2710A, such 
        rate'';
          (2) by redesignating the second section 2709 as 
        section 2710; and
          (3) by adding at the end the following new section:

``SEC. 2710A. ENCOURAGING CONTINUOUS HEALTH INSURANCE COVERAGE.

  ``(a) Penalty Applied.--
          ``(1) In general.--Notwithstanding section 2701, 
        subject to the succeeding provisions of this section, a 
        health insurance issuer offering health insurance 
        coverage in the individual or small group market shall, 
        in the case of an individual who is an applicable 
        policyholder of such coverage with respect to an 
        enforcement period applicable to enrollments for a plan 
        year beginning with plan year 2019 (or, in the case of 
        enrollments during a special enrollment period, 
        beginning with plan year 2018), increase the monthly 
        premium rate otherwise applicable to such individual 
        for such coverage during each month of such period, by 
        an amount determined under paragraph (2).
          ``(2) Amount of penalty.--The amount determined under 
        this paragraph for an applicable policyholder enrolling 
        in health insurance coverage described in paragraph (1) 
        for a plan year, with respect to each month during the 
        enforcement period applicable to enrollments for such 
        plan year, is the amount that is equal to 30 percent of 
        the monthly premium rate otherwise applicable to such 
        applicable policyholder for such coverage during such 
        month.
  ``(b) Definitions.--For purposes of this section:
          ``(1) Applicable policyholder.--The term `applicable 
        policyholder' means, with respect to months of an 
        enforcement period and health insurance coverage, an 
        individual who--
                  ``(A) is a policyholder of such coverage for 
                such months;
                  ``(B) cannot demonstrate (through 
                presentation of certifications described in 
                section 2704(e) or in such other manner as may 
                be specified in regulations, such as a return 
                or statement made under section 6055(d) or 36C 
                of the Internal Revenue Code of 1986), during 
                the look-back period that is with respect to 
                such enforcement period, there was not a period 
                of at least 63 continuous days during which the 
                individual did not have creditable coverage (as 
                defined in paragraph (1) of section 2704(c) and 
                credited in accordance with paragraphs (2) and 
                (3) of such section); and
                  ``(C) in the case of an individual who had 
                been enrolled under dependent coverage under a 
                group health plan or health insurance coverage 
                by reason of section 2714 and such dependent 
                coverage of such individual ceased because of 
                the age of such individual, is not enrolling 
                during the first open enrollment period 
                following the date on which such coverage so 
                ceased.
          ``(2) Look-back period.--The term `look-back period' 
        means, with respect to an enforcement period applicable 
        to an enrollment of an individual for a plan year 
        beginning with plan year 2019 (or, in the case of an 
        enrollment of an individual during a special enrollment 
        period, beginning with plan year 2018) in health 
        insurance coverage described in subsection (a)(1), the 
        12-month period ending on the date the individual 
        enrolls in such coverage for such plan year.
          ``(3) Enforcement period.--The term `enforcement 
        period' means--
                  ``(A) with respect to enrollments during a 
                special enrollment period for plan year 2018, 
                the period beginning with the first month that 
                is during such plan year and that begins 
                subsequent to such date of enrollment, and 
                ending with the last month of such plan year; 
                and
                  ``(B) with respect to enrollments for plan 
                year 2019 or a subsequent plan year, the 12-
                month period beginning on the first day of the 
                respective plan year.''.

SEC. 134. INCREASING COVERAGE OPTIONS.

  Section 1302 of the Patient Protection and Affordable Care 
Act (42 U.S.C. 18022) is amended--
          (1) in subsection (a)(3), by inserting ``and with 
        respect to a plan year before plan year 2020'' after 
        ``subsection (e)''; and
          (2) in subsection (d), by adding at the end the 
        following:
          ``(5) Sunset.--The provisions of this subsection 
        shall not apply after December 31, 2019, and after such 
        date any reference to this subsection or level of 
        coverage or plan described in this subsection and any 
        requirement under law applying such a level of coverage 
        or plan shall have no force or effect (and such a 
        requirement shall be applied as if this section had 
        been repealed).''.

SEC. 135. CHANGE IN PERMISSIBLE AGE VARIATION IN HEALTH INSURANCE 
                    PREMIUM RATES.

  Section 2701(a)(1)(A)(iii) of the Public Health Service Act 
(42 U.S.C. 300gg(a)(1)(A)(iii)), as inserted by section 1201(4) 
of the Patient Protection and Affordable Care Act, is amended 
by inserting after ``(consistent with section 2707(c))'' the 
following: ``or, for plan years beginning on or after January 
1, 2018, as the Secretary may implement through interim final 
regulation, 5 to 1 for adults (consistent with section 2707(c)) 
or such other ratio for adults (consistent with section 
2707(c)) as the State involved may provide''.

                 TITLE II--COMMITTEE ON WAYS AND MEANS

      Subtitle A--Repeal and Replace of Health-Related Tax Policy

SEC. 201. RECAPTURE EXCESS ADVANCE PAYMENTS OF PREMIUM TAX CREDITS.

  Subparagraph (B) of section 36B(f)(2) of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new 
clause:
                          ``(iii) Nonapplicability of 
                        limitation.--This subparagraph shall 
                        not apply to taxable years beginning 
                        after December 31, 2017, and before 
                        January 1, 2020.''.

SEC. 202. ADDITIONAL MODIFICATIONS TO PREMIUM TAX CREDIT.

  (a) Modification of Definition of Qualified Health Plan.--
          (1) In general.--Section 36B(c)(3)(A) of the Internal 
        Revenue Code of 1986 is amended--
                  (A) by inserting ``(determined without regard 
                to subparagraphs (A), (C)(ii), and (C)(iv) of 
                paragraph (1) thereof and without regard to 
                whether the plan is offered on an Exchange)'' 
                after ``1301(a) of the Patient Protection and 
                Affordable Care Act'', and
                  (B) by striking ``shall not include'' and all 
                that follows and inserting ``shall not include 
                any health plan that--
                          ``(i) is a grandfathered health plan 
                        or a grandmothered health plan, or
                          ``(ii) includes coverage for 
                        abortions (other than any abortion 
                        necessary to save the life of the 
                        mother or any abortion with respect to 
                        a pregnancy that is the result of an 
                        act of rape or incest).''.
          (2) Definition of grandmothered health plan.--Section 
        36B(c)(3) of such Code is amended by adding at the end 
        the following new subparagraph:
                  ``(C) Grandmothered health plan.--
                          ``(i) In general.--The term 
                        `grandmothered health plan' means 
                        health insurance coverage which is 
                        offered in the individual health 
                        insurance market as of October 1, 2013, 
                        and is permitted to be offered in such 
                        market after January 1, 2014, as a 
                        result of CCIIO guidance.
                          ``(ii) CCIIO guidance defined.--The 
                        term `CCIIO guidance' means the letter 
                        issued by the Centers for Medicare & 
                        Medicaid Services on November 14, 2013, 
                        to the State Insurance Commissioners 
                        outlining a transitional policy for 
                        non-grandfathered coverage in the 
                        individual health insurance market, as 
                        subsequently extended and modified 
                        (including by a communication entitled 
                        `Insurance Standards Bulletin Series--
                        INFORMATION--Extension of Transitional 
                        Policy through Calendar Year 2017' 
                        issued on February 29, 2016, by the 
                        Director of the Center for Consumer 
                        Information & Insurance Oversight of 
                        such Centers).
                          ``(iii) Individual health insurance 
                        market.--The term `individual health 
                        insurance market' means the market for 
                        health insurance coverage (as defined 
                        in section 9832(b)) offered to 
                        individuals other than in connection 
                        with a group health plan (within the 
                        meaning of section 5000(b)(1)).''.
          (3) Conforming amendment related to abortion 
        coverage.--Section 36B(c)(3) of such Code, as amended 
        by paragraph (2), is amended by adding at the end the 
        following new subparagraph:
                  ``(D) Certain rules related to abortion.--
                          ``(i) Option to purchase separate 
                        coverage or plan.--Nothing in 
                        subparagraph (A) shall be construed as 
                        prohibiting any individual from 
                        purchasing separate coverage for 
                        abortions described in such 
                        subparagraph, or a health plan that 
                        includes such abortions, so long as no 
                        credit is allowed under this section 
                        with respect to the premiums for such 
                        coverage or plan.
                          ``(ii) Option to offer coverage or 
                        plan.--Nothing in subparagraph (A) 
                        shall restrict any health insurance 
                        issuer offering a health plan from 
                        offering separate coverage for 
                        abortions described in such 
                        subparagraph, or a plan that includes 
                        such abortions, so long as premiums for 
                        such separate coverage or plan are not 
                        paid for with any amount attributable 
                        to the credit allowed under this 
                        section (or the amount of any advance 
                        payment of the credit under section 
                        1412 of the Patient Protection and 
                        Affordable Care Act).
                          ``(iii) Other treatments.--The 
                        treatment of any infection, injury, 
                        disease, or disorder that has been 
                        caused by or exacerbated by the 
                        performance of an abortion shall not be 
                        treated as an abortion for purposes of 
                        subparagraph (A).''.
          (4) Conforming amendments related to off-exchange 
        coverage.--
                  (A) Advance payment not applicable.--Section 
                1412 of the Patient Protection and Affordable 
                Care Act is amended by adding at the end the 
                following new subsection:
  ``(f) Exclusion of Off-Exchange Coverage.--Advance payments 
under this section, and advance determinations under section 
1411, with respect to any credit allowed under section 36B 
shall not be made with respect to any health plan which is not 
enrolled in through an Exchange.''.
                  (B) Reporting.--Section 6055(b) of the 
                Internal Revenue Code of 1986 is amended by 
                adding at the end the following new paragraph:
          ``(3) Information relating to off-exchange premium 
        credit eligible coverage.--If minimum essential 
        coverage provided to an individual under subsection (a) 
        consists of a qualified health plan (as defined in 
        section 36B(c)(3)) which is not enrolled in through an 
        Exchange established under title I of the Patient 
        Protection and Affordable Care Act, a return described 
        in this subsection shall include--
                  ``(A) a statement that such plan is a 
                qualified health plan (as defined in section 
                36B(c)(3)),
                  ``(B) the premiums paid with respect to such 
                coverage,
                  ``(C) the months during which such coverage 
                is provided to the individual,
                  ``(D) the adjusted monthly premium for the 
                applicable second lowest cost silver plan (as 
                defined in section 36B(b)(3)) for each such 
                month with respect to such individual, and
                  ``(E) such other information as the Secretary 
                may prescribe.
        This paragraph shall not apply with respect to coverage 
        provided for any month beginning after December 31, 
        2019.''.
                  (C) Other conforming amendments.--
                          (i) Section 36B(b)(2)(A) is amended 
                        by striking ``and which were enrolled'' 
                        and all that follows and inserting ``, 
                        or''.
                          (ii) Section 36B(b)(3)(B)(i) is 
                        amended by striking ``the same 
                        Exchange'' and all that follows and 
                        inserting ``the Exchange through which 
                        such taxpayer is permitted to obtain 
                        coverage, and''.
  (b) Modification of Applicable Percentage.--Section 
36B(b)(3)(A) of such Code is amended to read as follows:
                  ``(A) Applicable percentage.--
                          ``(i) In general.--The applicable 
                        percentage for any taxable year shall 
                        be the percentage such that the 
                        applicable percentage for any taxpayer 
                        whose household income is within an 
                        income tier specified in the following 
                        table shall increase, on a sliding 
                        scale in a linear manner, from the 
                        initial percentage to the final 
                        percentage specified in such table for 
                        such income tier with respect to a 
                        taxpayer of the age involved:


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
  ``In the case of              Up to Age 29                         Age 30-39                          Age 40-49                         Age 50-59                        Over Age 59
  household income  ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
  (expressed as a
   percent of the
   poverty line)
     within the          Initial %          Final %          Initial %         Final %         Initial %         Final %         Initial %         Final %         Initial %         Final %
  following income
       tier:
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Up to 133%           2...............  2...............  2...............  2..............  2..............  2..............  2..............  2..............  2..............  2
133%-150%            3...............  4...............  3...............  4..............  3..............  4..............  3..............  4..............  3..............  4
150%-200%            4...............  4.3.............  4...............  5.3............  4..............  6.3............  4..............  7.3............  4..............  8.3
200%-250%            4.3.............  4.3.............  5.3.............  5.9............  6.3............  8.05...........  7.3............  9..............  8.3............  10
250%-300%            4.3.............  4.3.............  5.9.............  5.9............  8.05...........  8.35...........  9..............  10.5...........  10.............  11.5
300%-400%            4.3.............  4.3.............  5.9.............  5.9............  8.35...........  8.35...........  10.5...........  10.5...........  11.5...........  11.5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                          ``(ii) Age determinations.--
                                  ``(I) In general.--For 
                                purposes of clause (i), the age 
                                of the taxpayer taken into 
                                account under clause (i) with 
                                respect to any taxable year is 
                                the age attained by such 
                                taxpayer before the close of 
                                such taxable year.
                                  ``(II) Joint returns.--In the 
                                case of a joint return, the age 
                                of the older spouse shall be 
                                taken into account under clause 
                                (i).
                          ``(iii) Indexing.--In the case of any 
                        taxable year beginning in calendar year 
                        2019, the initial and final percentages 
                        contained in clause (i) shall be 
                        adjusted to reflect--
                                  ``(I) the excess (if any) of 
                                the rate of premium growth for 
                                the period beginning with 
                                calendar year 2013 and ending 
                                with calendar year 2018, over 
                                the rate of income growth for 
                                such period, and
                                  ``(II) in addition to any 
                                adjustment under subclause (I), 
                                the excess (if any) of the rate 
                                of premium growth for calendar 
                                year 2018, over the rate of 
                                growth in the consumer price 
                                index for calendar year 2018.
                          ``(iv) Failsafe.--Clause (iii)(II) 
                        shall apply only if the aggregate 
                        amount of premium tax credits under 
                        this section and cost-sharing 
                        reductions under section 1402 of the 
                        Patient Protection and Affordable Care 
                        Act for calendar year 2018 exceeds an 
                        amount equal to 0.504 percent of the 
                        gross domestic product for such 
                        calendar year.''.
  (b) Effective Date.--
          (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall 
        apply to taxable years beginning after December 31, 
        2017.
          (2) Advance payment not applicable to off-exchange 
        coverage.--The amendment made by subsection (a)(4)(A) 
        shall take effect on January 1, 2018.
          (3) Reporting.--The amendment made by subsection 
        (a)(4)(B) shall apply to coverage provided for months 
        beginning after December 31, 2017.
          (4) Modification of applicable percentage.--The 
        amendment made by subsection (b) shall apply to taxable 
        years beginning after December 31, 2018.

SEC. 203. PREMIUM TAX CREDIT.

  (a) Repeal of Premium Tax Credit.--Section 36B of the 
Internal Revenue Code of 1986 is amended by adding at the end 
the following new subsection:
  ``(h) Termination.--No credit shall be allowed under this 
section with respect to any coverage month which begins after 
December 31, 2019.''.
  (b) Repeal of Advance Payment of, and Eligibility 
Determination for, Premium Tax Credit.--Section 1412 of the 
Patient Protection and Affordable Care Act, as amended by the 
preceding provisions of this subtitle, is amended by adding at 
the end the following new subsection:
  ``(g) Termination With Respect to Premium Tax Credit.--
Effective January 1, 2020, no provision of this section or 
section 1411 shall apply to the credit allowed under section 
36B of the Internal Revenue Code of 1986 (or to the advance 
payment of, or determination of eligibility for, such credit or 
payment).''.
  (c) Effective Dates.--
          (1) Premium tax credit.--The amendment made by 
        subsection (a) shall apply to months beginning after 
        December 31, 2019, in taxable years ending after such 
        date.
          (2) Eligibility determinations.--The amendment made 
        by subsection (b) shall take effect on January 1, 2020.

SEC. 204. SMALL BUSINESS TAX CREDIT.

  (a) In General.--Section 45R of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
subsection:
  ``(j) Shall Not Apply.--This section shall not apply with 
respect to amounts paid or incurred in taxable years beginning 
after December 31, 2019.''.
  (b) Disallowance of Small Employer Health Insurance Expense 
Credit for Plan Which Includes Coverage for Abortion.--
Subsection (h) of section 45R of the Internal Revenue Code of 
1986 is amended--
          (1) by striking ``Any term'' and inserting the 
        following:
          ``(1) In general.--Any term''; and
          (2) by adding at the end the following new paragraph:
          ``(2) Exclusion of health plans including coverage 
        for abortion.--
                  ``(A) In general.--The term `qualified health 
                plan' does not include any health plan that 
                includes coverage for abortions (other than any 
                abortion necessary to save the life of the 
                mother or any abortion with respect to a 
                pregnancy that is the result of an act of rape 
                or incest) .
                  ``(B) Certain rules related to abortion.--
                          ``(i) Option to purchase separate 
                        coverage or plan.--Nothing in 
                        subparagraph (A) shall be construed as 
                        prohibiting any employer from 
                        purchasing for its employees separate 
                        coverage for abortions described in 
                        such subparagraph, or a health plan 
                        that includes such abortions, so long 
                        as no credit is allowed under this 
                        section with respect to the employer 
                        contributions for such coverage or 
                        plan.
                          ``(ii) Option to offer coverage or 
                        plan.--Nothing in subparagraph (A) 
                        shall restrict any health insurance 
                        issuer offering a health plan from 
                        offering separate coverage for 
                        abortions described in such 
                        subparagraph, or a plan that includes 
                        such abortions, so long as such 
                        separate coverage or plan is not paid 
                        for with any employer contribution 
                        eligible for the credit allowed under 
                        this section.
                          ``(iii) Other treatments.--The 
                        treatment of any infection, injury, 
                        disease, or disorder that has been 
                        caused by or exacerbated by the 
                        performance of an abortion shall not be 
                        treated as an abortion for purposes of 
                        subparagraph (A).''.
  (c) Effective Dates.--
          (1) In general.--The amendment made by subsection (a) 
        shall apply to taxable years beginning after December 
        31, 2019.
          (2) Disallowance of small employer health insurance 
        expense credit for plan which includes coverage for 
        abortion.--The amendments made by subsection (b) shall 
        apply to taxable years beginning after December 31, 
        2017.

SEC. 205. INDIVIDUAL MANDATE.

  (a) In General.--Section 5000A(c) of the Internal Revenue 
Code of 1986 is amended--
          (1) in paragraph (2)(B)(iii), by striking ``2.5 
        percent'' and inserting ``Zero percent'', and
          (2) in paragraph (3)--
                  (A) by striking ``$695'' in subparagraph (A) 
                and inserting ``$0'', and
                  (B) by striking subparagraph (D).
  (b) Effective Date.--The amendments made by this section 
shall apply to months beginning after December 31, 2015.

SEC. 206. EMPLOYER MANDATE.

  (a) In General.--
          (1) Paragraph (1) of section 4980H(c) of the Internal 
        Revenue Code of 1986 is amended by inserting ``($0 in 
        the case of months beginning after December 31, 2015)'' 
        after ``$2,000''.
          (2) Paragraph (1) of section 4980H(b) of the Internal 
        Revenue Code of 1986 is amended by inserting ``($0 in 
        the case of months beginning after December 31, 2015)'' 
        after ``$3,000''.
  (b) Effective Date.--The amendments made by this section 
shall apply to months beginning after December 31, 2015.

SEC. 207. REPEAL OF THE TAX ON EMPLOYEE HEALTH INSURANCE PREMIUMS AND 
                    HEALTH PLAN BENEFITS.

  Section 4980I of the Internal Revenue Code of 1986 is amended 
by adding at the end the following new subsection:
  ``(h) Shall Not Apply.--No tax shall be imposed under this 
section with respect to any taxable period beginning after 
December 31, 2019, and before January 1, 2025.''.

SEC. 208. REPEAL OF TAX ON OVER-THE-COUNTER MEDICATIONS.

  (a) HSAs.--Subparagraph (A) of section 223(d)(2) of the 
Internal Revenue Code of 1986 is amended by striking ``Such 
term'' and all that follows through the period.
  (b) Archer MSAs.--Subparagraph (A) of section 220(d)(2) of 
the Internal Revenue Code of 1986 is amended by striking ``Such 
term'' and all that follows through the period.
  (c) Health Flexible Spending Arrangements and Health 
Reimbursement Arrangements.--Section 106 of the Internal 
Revenue Code of 1986 is amended by striking subsection (f) and 
by redesignating subsection (g) as subsection (f).
  (d) Effective Dates.--
          (1) Distributions from savings accounts.--The 
        amendments made by subsections (a) and (b) shall apply 
        to amounts paid with respect to taxable years beginning 
        after December 31, 2017.
          (2) Reimbursements.--The amendment made by subsection 
        (c) shall apply to expenses incurred with respect to 
        taxable years beginning after December 31, 2017.

SEC. 209. REPEAL OF INCREASE OF TAX ON HEALTH SAVINGS ACCOUNTS.

  (a) HSAs.--Section 223(f)(4)(A) of the Internal Revenue Code 
of 1986 is amended by striking ``20 percent'' and inserting 
``10 percent''.
  (b) Archer MSAs.--Section 220(f)(4)(A) of the Internal 
Revenue Code of 1986 is amended by striking ``20 percent'' and 
inserting ``15 percent''.
  (c) Effective Date.--The amendments made by this section 
shall apply to distributions made after December 31, 2017.

SEC. 210. REPEAL OF LIMITATIONS ON CONTRIBUTIONS TO FLEXIBLE SPENDING 
                    ACCOUNTS.

  (a) In General.--Section 125 of the Internal Revenue Code of 
1986 is amended by striking subsection (i).
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 211. REPEAL OF MEDICAL DEVICE EXCISE TAX.

  Section 4191 of the Internal Revenue Code of 1986 is amended 
by adding at the end the following new subsection:
  ``(d) Applicability.--The tax imposed under subsection (a) 
shall not apply to sales after December 31, 2017.''.

SEC. 212. REPEAL OF ELIMINATION OF DEDUCTION FOR EXPENSES ALLOCABLE TO 
                    MEDICARE PART D SUBSIDY.

  (a) In General.--Section 139A of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
sentence: ``This section shall not be taken into account for 
purposes of determining whether any deduction is allowable with 
respect to any cost taken into account in determining such 
payment.''.
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 213. REPEAL OF INCREASE IN INCOME THRESHOLD FOR DETERMINING 
                    MEDICAL CARE DEDUCTION.

  (a) In General.--Subsection (a) of section 213 of the 
Internal Revenue Code of 1986 is amended by striking ``10 
percent'' and inserting ``7.5 percent''.
  (b) Extension of Special Rule.--Subsection (f) of section 213 
of such Code is amended--
          (1) by striking ``2017'' and inserting ``2018'', and
          (2) by striking ``and 2016'' and inserting ``2016, 
        and 2017''.
  (c) Effective Date.--
          (1) In general.--The amendment made by subsection (a) 
        shall apply to taxable years beginning after December 
        31, 2017.
          (2) Extension of special rule.--The amendments made 
        by subsection (b) shall apply to taxable years 
        beginning after December 31, 2016.

SEC. 214. REPEAL OF MEDICARE TAX INCREASE.

  (a) In General.--Subsection (b) of section 3101 of the 
Internal Revenue Code of 1986 is amended to read as follows:
  ``(b) Hospital Insurance.--In addition to the tax imposed by 
the preceding subsection, there is hereby imposed on the income 
of every individual a tax equal to 1.45 percent of the wages 
(as defined in section 3121(a)) received by such individual 
with respect to employment (as defined in section 3121(b)).''.
  (b) SECA.--Subsection (b) of section 1401 of the Internal 
Revenue Code of 1986 is amended to read as follows:
  ``(b) Hospital Insurance.--In addition to the tax imposed by 
the preceding subsection, there shall be imposed for each 
taxable year, on the self-employment income of every 
individual, a tax equal to 2.9 percent of the amount of the 
self-employment income for such taxable year.''.
  (c) Effective Date.--The amendments made by this section 
shall apply with respect to remuneration received after, and 
taxable years beginning after, December 31, 2017.

SEC. 215. REFUNDABLE TAX CREDIT FOR HEALTH INSURANCE COVERAGE.

  (a) In General.--Subpart C of part IV of subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 is amended by 
inserting after section 36B the following new section:

``SEC. 36C. HEALTH INSURANCE COVERAGE.

  ``(a) In General.--In the case of an individual, there shall 
be allowed as a credit against the tax imposed by this subtitle 
for the taxable year the sum of the monthly credit amounts with 
respect to such taxpayer for calendar months during such 
taxable year.
  ``(b) Monthly Credit Amounts.--
          ``(1) In general.--The monthly credit amount with 
        respect to any taxpayer for any calendar month is the 
        lesser of--
                  ``(A) the sum of the monthly limitation 
                amounts determined under subsection (c) with 
                respect to the taxpayer and the taxpayer's 
                qualifying family members for such month, or
                  ``(B) the amount paid for eligible health 
                insurance for the taxpayer and the taxpayer's 
                qualifying family members for such month.
          ``(2) Eligible coverage month requirement.--No amount 
        shall be taken into account under subparagraph (A) or 
        (B) of paragraph (1) with respect to any individual for 
        any month unless such month is an eligible coverage 
        month with respect to such individual.
  ``(c) Monthly Limitation Amounts.--
          ``(1) In general.--The monthly limitation amount with 
        respect to any individual for any eligible coverage 
        month during any taxable year is \1/12\ of--
                  ``(A) $2,000 in the case of an individual who 
                has not attained age 30 as of the beginning of 
                such taxable year,
                  ``(B) $2,500 in the case of an individual who 
                has attained age 30 but who has not attained 
                age 40 as of such time,
                  ``(C) $3,000 in the case of an individual who 
                has attained age 40 but who has not attained 
                age 50 as of such time,
                  ``(D) $3,500 in the case of an individual who 
                has attained age 50 but who has not attained 
                age 60 as of such time, and
                  ``(E) $4,000 in the case of an individual who 
                has attained age 60 as of such time.
          ``(2) Limitation based on modified adjusted gross 
        income.--
                  ``(A) In general.--The amount otherwise 
                determined under subsection (b)(1)(A) (without 
                regard to this subparagraph but after any other 
                adjustment of such amount under this section) 
                for the taxable year shall be reduced (but not 
                below zero) by 10 percent of the excess (if 
                any) of--
                          ``(i) the taxpayer's modified 
                        adjusted gross income for such taxable 
                        year, over
                          ``(ii) $75,000 (twice such amount in 
                        the case of a joint return).
                  ``(B) Modified adjusted gross income.--For 
                purposes of this paragraph, the term `modified 
                adjusted gross income' means adjusted gross 
                income increased by--
                          ``(i) any amount excluded from gross 
                        income under section 911,
                          ``(ii) any amount of interest 
                        received or accrued by the taxpayer 
                        during the taxable year which is exempt 
                        from tax, and
                          ``(iii) an amount equal to the 
                        portion of the taxpayer's social 
                        security benefits (as defined in 
                        section 86(d)) which is not included in 
                        gross income under section 86 for the 
                        taxable year.
          ``(3) Other limitations.--
                  ``(A) Aggregate dollar limitation.--The sum 
                of the monthly limitation amounts taken into 
                account under this section with respect to any 
                taxpayer for any taxable year shall not exceed 
                $14,000.
                  ``(B) Maximum number of individuals taken 
                into account.--With respect to any taxpayer for 
                any month, monthly limitation amounts shall be 
                taken into account under this section only with 
                respect to the 5 oldest individuals with 
                respect to whom monthly limitation amounts 
                could (without regard to this subparagraph) 
                otherwise be so taken into account.
  ``(d) Eligible Coverage Month.--For purposes of this section, 
the term `eligible coverage month' means, with respect to any 
individual, any month if, as of the first day of such month, 
the individual--
          ``(1) is covered by eligible health insurance,
          ``(2) is not eligible for other specified coverage,
          ``(3) is either--
                  ``(A) a citizen or national of the United 
                States, or
                  ``(B) a qualified alien (within the meaning 
                of section 431 of the Personal Responsibility 
                and Work Opportunity Reconciliation Act of 1996 
                (8 U.S.C. 1641)), and
          ``(4) is not incarcerated, other than incarceration 
        pending the disposition of charges.
  ``(e) Qualifying Family Member.--For purposes of this 
section, the term `qualifying family member' means--
          ``(1) in the case of a joint return, the taxpayer's 
        spouse,
          ``(2) any dependent of the taxpayer, and
          ``(3) with respect to any eligible coverage month, 
        any child (as defined in section 152(f)(1)) of the 
        taxpayer who as of the end of the taxable year has not 
        attained age 27 if such child is covered for such month 
        under eligible health insurance which also covers the 
        taxpayer (in the case of a joint return, either 
        spouse).
  ``(f) Eligible Health Insurance.--For purposes of this 
section--
          ``(1) In general.--The term `eligible health 
        insurance' means any health insurance coverage (as 
        defined in section 9832(b)) if--
                  ``(A) such coverage is either--
                          ``(i) offered in the individual 
                        health insurance market within a State, 
                        or
                          ``(ii) is unsubsidized COBRA 
                        continuation coverage,
                  ``(B) such coverage is not a grandfathered 
                health plan (as defined in section 1251 of the 
                Patient Protection and Affordable Care Act) or 
                a grandmothered health plan,
                  ``(C) substantially all of such coverage is 
                not of excepted benefits described in section 
                9832(c),
                  ``(D) such coverage does not include coverage 
                for abortions (other than any abortion 
                necessary to save the life of the mother or any 
                abortion with respect to a pregnancy that is 
                the result of an act of rape or incest),
                  ``(E) such coverage does not consist of 
                short-term limited duration insurance (as 
                defined by the Secretary), and
                  ``(F) the State in which such insurance is 
                offered certifies that such coverage meets the 
                requirements of this paragraph.
          ``(2) Rules related to state certification.--
                  ``(A) Certification made available to 
                public.--A certification shall not be taken 
                into account under paragraph (1)(E) unless such 
                certification is made available to the public 
                and meets such other requirements as the 
                Secretary may provide.
                  ``(B) Special rule for unsubsidized cobra 
                continuation coverage.--In the case of 
                unsubsidized COBRA continuation coverage--
                          ``(i) paragraph (1)(E) shall be 
                        applied by substituting `the plan 
                        administrator (as defined in section 
                        414(g)) of the health plan' for `the 
                        State in which such insurance is 
                        offered', and
                          ``(ii) the requirements of 
                        subparagraph (A) shall be treated as 
                        satisfied if the certification meets 
                        such requirements as the Secretary may 
                        provide.
          ``(3) Grandmothered health plan.--
                  ``(A) In general.--The term `grandmothered 
                health plan' means health insurance coverage 
                which is offered in the individual health 
                insurance market as of January 1, 2013, and is 
                permitted to be offered in such market after 
                January 1, 2014, as a result of CCIIO guidance.
                  ``(B) CCIIO guidance defined.--The term 
                `CCIIO guidance' means the letter issued by the 
                Centers for Medicare & Medicaid Services on 
                November 14, 2013, to the State Insurance 
                Commissioners outlining a transitional policy 
                for non-grandfathered coverage in the 
                individual health insurance market, as 
                subsequently extended and modified (including 
                by a communication entitled `Insurance 
                Standards Bulletin Series--INFORMATION--
                Extension of Transitional Policy through 
                Calendar Year 2017' issued on February 29, 
                2016, by the Director of the Center for 
                Consumer Information & Insurance Oversight of 
                such Centers).
          ``(4) Individual health insurance market.--The term 
        `individual health insurance market' means the market 
        for health insurance coverage (as defined in section 
        9832(b)) offered to individuals other than in 
        connection with a group health plan (within the meaning 
        of section 5000(b)(1)).
  ``(g) Other Specified Coverage.--For purposes of this 
section--
          ``(1) In general.--The term `other specified 
        coverage' means any of the following:
                  ``(A) Coverage under a group health plan 
                (within the meaning of section 5000(b)(1)) 
                other than--
                          ``(i) coverage under a plan 
                        substantially all of the coverage of 
                        which is of excepted benefits described 
                        in section 9832(c), and
                          ``(ii) COBRA continuation coverage.
                  ``(B) Coverage under the Medicare program 
                under part A of title XVIII of the Social 
                Security Act.
                  ``(C) Coverage under the Medicaid program 
                under title XIX of the Social Security Act.
                  ``(D) Coverage under the CHIP program under 
                title XXI of the Social Security Act.
                  ``(E) Medical coverage under chapter 55 of 
                title 10, United States Code, including 
                coverage under the TRICARE program.
                  ``(F) Coverage under a health care program 
                under chapter 17 or 18 of title 38, United 
                States Code, as determined by the Secretary of 
                Veterans Affairs, in coordination with the 
                Secretary of Health and Human Services and the 
                Secretary of the Treasury.
                  ``(G) Coverage under a health plan under 
                section 2504(e) of title 22, United States Code 
                (relating to Peace Corps volunteers).
                  ``(H) Coverage under the Nonappropriated Fund 
                Health Benefits Program of the Department of 
                Defense, established under section 349 of the 
                National Defense Authorization Act for Fiscal 
                Year 1995 (Public Law 103-337; 10 U.S.C. 1587 
                note).
          ``(2) Special rule with respect to veterans health 
        programs.--In the case of other specified coverage 
        described in paragraph (1)(F), an individual shall not 
        be treated as eligible for such coverage unless such 
        individual is enrolled in such coverage.
  ``(h) Unsubsidized COBRA Continuation Coverage.--For purposes 
of this section--
          ``(1) In general.--The term `unsubsidized COBRA 
        continuation coverage' means COBRA continuation 
        coverage no portion of the premiums for which are 
        subsidized by the employer.
          ``(2) COBRA continuation coverage.--The term `COBRA 
        continuation coverage' means continuation coverage 
        provided pursuant to part 6 of subtitle B of title I of 
        the Employee Retirement Income Security Act of 1974 
        (other than under section 609), title XXII of the 
        Public Health Service Act, section 4980B of the 
        Internal Revenue Code of 1986 (other than subsection 
        (f)(1) of such section insofar as it relates to 
        pediatric vaccines), or section 8905a of title 5, 
        United States Code, or under a State program that 
        provides comparable continuation coverage. Such term 
        shall not include coverage under a health flexible 
        spending arrangement.
  ``(i) Special Rules.--
          ``(1) Married couples must file joint return.--If the 
        taxpayer is married (within the meaning of section 
        7703) at the close of the taxable year, no credit shall 
        be allowed under this section to such taxpayer unless 
        such taxpayer and the taxpayer's spouse file a joint 
        return for such taxable year.
          ``(2) Denial of credit to dependents.--
                  ``(A) In general.--No credit shall be allowed 
                under this section to any individual who is a 
                dependent with respect to another taxpayer for 
                a taxable year beginning in the calendar year 
                in which such individual's taxable year begins.
                  ``(B) Coordination with rule for older 
                children.--In the case of any individual who is 
                a qualifying family member described in 
                subsection (e)(3) with respect to another 
                taxpayer for any month, in determining the 
                amount of any credit allowable to such 
                individual under this section for any taxable 
                year of such individual which includes such 
                month, the monthly limitation amount with 
                respect to such individual for such month shall 
                be zero and no amount paid for eligible health 
                insurance with respect to such individual for 
                such month shall be taken into account.
          ``(3) Coordination with medical expense deduction.--
        Amounts described in subsection (b)(1)(B) with respect 
        to any month shall not be taken into account in 
        determining the deduction allowed under section 213 
        except to the extent that such amounts exceed the 
        amount described in subsection (b)(1)(A) with respect 
        to such month.
          ``(4) Insurance which covers other individuals.--For 
        purposes of this section, rules similar to the rules of 
        section 213(d)(6) shall apply with respect to any 
        contract for eligible health insurance under which 
        amounts are payable for coverage of an individual other 
        than the taxpayer and the taxpayer's qualifying family 
        members.
          ``(5) Coordination with advance payments of credit.--
        With respect to any taxable year--
                  ``(A) the amount which would (but for this 
                subsection) be allowed as a credit to the 
                taxpayer under subsection (a) shall be reduced 
                (but not below zero) by the aggregate amount 
                paid on behalf of such taxpayer under section 
                7529 for months beginning in such taxable year, 
                and
                  ``(B) the tax imposed by section 1 for such 
                taxable year shall be increased by the excess 
                (if any) of--
                          ``(i) the aggregate amount paid on 
                        behalf of such taxpayer under section 
                        7529 for months beginning in such 
                        taxable year, over
                          ``(ii) the amount which would (but 
                        for this subsection) be allowed as a 
                        credit to the taxpayer under subsection 
                        (a).
          ``(6) Special rules for qualified small employer 
        health reimbursement arrangements.--
                  ``(A) In general.--If the taxpayer or any 
                qualifying family member of the taxpayer is 
                provided a qualified small employer health 
                reimbursement arrangement for any eligible 
                coverage month, the sum determined under 
                subsection (b)(1)(A) with respect to the 
                taxpayer for such month shall be reduced (but 
                not below zero) by \1/12\ of the permitted 
                benefit (as defined in section 9831(d)(3)(C)) 
                under such arrangement.
                  ``(B) Qualified small employer health 
                reimbursement arrangement.--For purposes of 
                this paragraph, the term `qualified small 
                employer health reimbursement arrangement' has 
                the meaning given such term by section 
                9831(d)(2).
                  ``(C) Coverage for less than entire year.--In 
                the case of an employee who is provided a 
                qualified small employer health reimbursement 
                arrangement for less than an entire year, 
                subparagraph (A) shall be applied by 
                substituting `the number of months during the 
                year for which such arrangement was provided' 
                for `12'.
          ``(7) Certain rules related to abortion.--
                  ``(A) Option to purchase separate coverage or 
                plan.--Nothing in subsection (f)(1)(D) shall be 
                construed as prohibiting any individual from 
                purchasing separate coverage for abortions 
                described in such subparagraph, or a health 
                plan that includes such abortions, so long as 
                no credit is allowed under this section with 
                respect to the premiums for such coverage or 
                plan.
                  ``(B) Option to offer coverage or plan.--
                Nothing in subsection (f)(1)(D) shall restrict 
                any health insurance issuer offering a health 
                plan from offering separate coverage for 
                abortions described in such clause, or a plan 
                that includes such abortions, so long as 
                premiums for such separate coverage or plan are 
                not paid for with any amount attributable to 
                the credit allowed under this section.
                  ``(C) Other treatments.--The treatment of any 
                infection, injury, disease, or disorder that 
                has been caused by or exacerbated by the 
                performance of an abortion shall not be treated 
                as an abortion for purposes of subsection 
                (f)(1)(D).
          ``(8) Inflation adjustment.--
                  ``(A) In general.--In the case of any taxable 
                year beginning in a calendar year after 2020, 
                each dollar amount in subsection (c)(1), the 
                $75,000 amount in subsection (c)(2)(A)(ii), and 
                the dollar amount in subsection (c)(3)(A), 
                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 in which the taxable 
                        year begins, determined--
                                  ``(I) by substituting 
                                `calendar year 2019' for 
                                `calendar year 1992' in 
                                subparagraph (B) thereof, and
                                  ``(II) by substituting for 
                                the CPI referred to section 
                                1(f)(3)(A) the amount that such 
                                CPI would have been if the 
                                annual percentage increase in 
                                CPI with respect to each year 
                                after 2019 had been one 
                                percentage point greater.
                  ``(B) Terms related to cpi.--
                          ``(i) Annual percentage increase.--
                        For purposes of subparagraph 
                        (A)(ii)(II), the term `annual 
                        percentage increase' means the 
                        percentage (if any) by which CPI for 
                        any year exceeds CPI for the prior 
                        year.
                          ``(ii) Other terms.--Terms used in 
                        this paragraph which are also used in 
                        section 1(f)(3) shall have the same 
                        meanings as when used in such section.
                  ``(C) Rounding.--Any increase determined 
                under subparagraph (A) shall be rounded to the 
                nearest multiple of $50.
          ``(9) Regulations.--The Secretary may prescribe such 
        regulations and other guidance as may be necessary or 
        appropriate to carry out this section, section 6050X, 
        and section 7529.''.
  (b) Advance Payment of Credit; Excess Health Insurance 
Coverage Credit Payable to Health Savings Account.--Chapter 77 
of such Code is amended by adding at the end the following:

``SEC. 7529. ADVANCE PAYMENT OF HEALTH INSURANCE COVERAGE CREDIT.

  ``(a) General Rule.--Not later than January 1, 2020, the 
Secretary, in consultation with the Secretary of Health and 
Human Services, the Secretary of Homeland Security, and the 
Commissioner of Social Security, shall establish a program 
(hereafter in this section referred to as the `advance payment 
program') for making payments to providers of eligible health 
insurance on behalf of taxpayers eligible for the credit under 
section 36C.
  ``(b) Limitation.--The aggregate payments made under this 
section with respect to any taxpayer, determined as of any time 
during any calendar year, shall not exceed the monthly credit 
amounts determined with respect to such taxpayer under section 
36C for months during such calendar year which have ended as of 
such time.
  ``(c) Administration.--
          ``(1) In general.--The advance payment program shall, 
        to the greatest extent practicable, use the methods and 
        procedures used to administer the programs created 
        under sections 1411 and 1412 of the Patient Protection 
        and Affordable Care Act (determined without regard to 
        section 1412(f) of such Act) and each entity that is 
        authorized to take any actions under the programs 
        created under such sections (as so determined) shall, 
        at the request of the Secretary, take such actions to 
        the extent necessary to carry out this section.
          ``(2) Application to off-exchange coverage.--Except 
        as otherwise provided by the Secretary, for purposes of 
        applying this subsection in the case of eligible health 
        insurance which is not enrolled in through an Exchange 
        established under title I of the Patient Protection and 
        Affordable Care Act, the sections referred to in 
        paragraph (1) shall be applied by treating references 
        in such sections to an Exchange as references to the 
        provider of such eligible health insurance (or, as the 
        Secretary determines appropriate, to the licensed agent 
        or broker with respect to such insurance), except that 
        the Secretary of Health and Human Services shall carry 
        out the responsibilities of the Exchange under section 
        1411(e)(4) of the Patient Protection and Affordable 
        Care Act (determined without regard to section 1412(f) 
        of such Act) in the case of such insurance.
          ``(3) Documentation regarding other specified 
        coverage.--
                  ``(A) In general.--The advance payment 
                program shall provide that any individual 
                applying to have payments made on their behalf 
                under such program shall, if such individual 
                (or any qualifying family member of such 
                individual taken into account in determining 
                the amount of the credit allowable under 
                section 36C) is employed, submit a written 
                statement from each employer of such individual 
                or such qualifying family member stating 
                whether such individual or qualifying family 
                member (as the case may be) is eligible for 
                other specified coverage in connection with 
                such employment.
                  ``(B) Issuance of statements.--An employer 
                shall, at the request of any employee, provide 
                the statement under subparagraph (A) at such 
                time, and in such form and manner, as the 
                Secretary may provide.
  ``(d) Definitions.--For purposes of this section, terms used 
in this section which are also used in section 36C shall have 
the same meaning as when used in section 36C.

``SEC. 7530. EXCESS HEALTH INSURANCE COVERAGE CREDIT PAYABLE TO HEALTH 
                    SAVINGS ACCOUNT.

  ``(a) In General.--At the request of an eligible taxpayer, 
the Secretary shall make a payment to the trustee of the 
designated health savings account with respect to such taxpayer 
in an amount equal to the sum of the excesses (if any) 
described in subsection (c)(2) with respect to months in the 
taxable year.
  ``(b) Designated Health Savings Account.--The term 
`designated health savings account' means a health savings 
account of an individual described in subsection (c)(3) which 
is identified by the eligible taxpayer for purposes of this 
section.
  ``(c) Eligible Taxpayer.--The term `eligible taxpayer' means, 
with respect to any taxable year, any taxpayer if--
          ``(1) such taxpayer is allowed a credit under section 
        36C for such taxable year,
          ``(2) the amount described in subparagraph (A) of 
        section 36C(b)(1) exceeds the amount described in 
        subparagraph (B) of such section with respect to such 
        taxpayer applied with respect to any month during such 
        taxable year, and
          ``(3) the taxpayer or one or more of the taxpayer's 
        qualifying family members (as defined in section 
        36C(e)) were eligible individuals (as defined in 
        section 223(c)(1)) for one or more months during such 
        taxable year.
  ``(d) Contributions Treated as Rollovers, etc.--
          ``(1) In general.--Any amount paid the Secretary to a 
        health savings account under this section shall be 
        treated for purposes of this title in the same manner 
        as a rollover contribution described in section 
        223(f)(5).
          ``(2) Coordination with limitation on rollovers.--Any 
        amount described in paragraph (1) shall not be taken 
        into account in applying section 223(f)(5)(B) with 
        respect to any other amount and the limitation of 
        section 223(f)(5)(B) shall not apply with respect to 
        the application of paragraph (1).
  ``(e) Form and Manner of Request.--The request referred to in 
subsection (a) shall be made at such time and in such form and 
manner as the Secretary may provide. To the extent that the 
Secretary determines feasible, such request may identify more 
than one designated health savings account (and the amount to 
be paid to each such account) provided that the aggregate of 
such payments with respect to any taxpayer for any taxable year 
do not exceed the excess described in subsection (c)(2).
  ``(f) Taxpayers With Seriously Delinquent Tax Debt.--In the 
case of an individual who has a seriously delinquent tax debt 
(as defined in section 7345(b)) which has not been fully 
satisfied--
          ``(1) if such individual is the eligible taxpayer 
        (or, in the case of a joint return, either spouse), the 
        Secretary shall not make any payment under this section 
        with respect to such taxpayer, and
          ``(2) if such individual is the account beneficiary 
        (as defined in section 223(d)(3)) of any health savings 
        account, the Secretary shall not make any payment under 
        this section to such health savings account.
  ``(g) Advance Payment.--To the extent that the Secretary 
determines feasible, payment under this section may be made in 
advance on a monthly basis under rules similar to the rules of 
sections 7529 and 36C(i)(5)(B).''.
  (c) Information Reporting.--
          (1) Reporting by health insurance providers.--Subpart 
        B of part III of subchapter A of chapter 61 of such 
        Code is amended by adding at the end the following new 
        section:

``SEC. 6050X. RETURNS BY HEALTH INSURANCE PROVIDERS RELATING TO HEALTH 
                    INSURANCE COVERAGE CREDIT.

  ``(a) Requirement of Reporting.--Every person who provides 
eligible health insurance for any month of any calendar year 
with respect to any individual shall, at such time as the 
Secretary may prescribe, make the return described in 
subsection (b) with respect to each such individual. With 
respect to any individual with respect to whom payments under 
section 7529 are made by the Secretary, the reporting under 
subsection (b) shall be made on a monthly basis.
  ``(b) Form and Manner of Returns.--A return is described in 
this subsection if such return--
          ``(1) is in such form as the Secretary may prescribe, 
        and
          ``(2) contains, with respect to each policy of 
        eligible health insurance--
                  ``(A) the name, address, and TIN of each 
                individual covered under such policy,
                  ``(B) the premiums paid with respect to such 
                policy,
                  ``(C) the amount of advance payments made on 
                behalf of the individual under section 7529,
                  ``(D) the months during which such health 
                insurance is provided to the individual,
                  ``(E) whether such policy constitutes a high 
                deductible health plan (as defined in section 
                223(c)(2)), and
                  ``(F) such other information as the Secretary 
                may prescribe.
  ``(c) Statements to Be Furnished to Individuals With Respect 
to Whom Information Is Required.--Every person required to make 
a return under subsection (a) shall furnish to each individual 
whose name is required to be set forth in such return a written 
statement showing--
          ``(1) the name and address of the person required to 
        make such return and the phone number of the 
        information contact for such person, and
          ``(2) the information required to be shown on the 
        return with respect to such individual.
The written statement required under the preceding sentence 
shall be furnished on or before January 31 of the year 
following the calendar year to which such statement relates.
  ``(d) Definitions.--For purposes of this section, terms used 
in this section which are also used in section 36C shall have 
the same meaning as when used in section 36C.''.
          (2) Reporting by employers.--Section 6051(a) of such 
        Code is amended by striking ``and'' at the end of 
        paragraph (14), by striking the period at the end of 
        paragraph (15) and inserting ``, and'', and by 
        inserting after paragraph (15) the following new 
        paragraph:
          ``(16) each month with respect to which the employee 
        is eligible for other specified coverage (as defined in 
        section 36C(g)) in connection with employment with the 
        employer.''.
          (3) Assessable penalties.--
                  (A) Section 6724(d)(1)(B) of such Code is 
                amended by striking ``or'' at the end of clause 
                (xxiv), by inserting ``or'' at the end of 
                clause (xxv), and by inserting after clause 
                (xxv) the following new clause:
                          ``(xxvi) section 6050X (relating to 
                        returns relating to health insurance 
                        coverage credit),''.
                  (B) Section 6724(d)(2) of such Code is 
                amended by striking ``or'' at the end of 
                subparagraph (HH), by striking the period at 
                the end of subparagraph (II) and inserting a 
                comma, and by adding after subparagraph (II) 
                the following new subparagraphs:
                  ``(JJ) section 6050X (relating to returns 
                relating to health insurance coverage credit), 
                or
                  ``(KK) section 7529(c)(3) (relating to 
                documentation regarding other specified 
                coverage).''.
  (d) Disclosures.--Paragraph (21) of section 6103(l) of the 
Internal Revenue Code of 1986 is amended--
          (1) in subparagraph (A)--
                  (A) by striking ``any premium tax credit 
                under section 36B or any cost-sharing reduction 
                under section 1402 of the Patient Protection 
                and Affordable Care Act or'' and inserting 
                ``any credit under section 36C'',
                  (B) by striking ``, a State's children's 
                health insurance program under title XXI of the 
                Social Security Act, or a basic health program 
                under section 1331 of Patient Protection and 
                Affordable Care Act'' and inserting ``or a 
                State's children's health insurance program 
                under title XXI of the Social Security Act'',
                  (C) by striking ``(as defined in section 
                36B)'' in clause (iv) and inserting ``(as 
                defined in section 36C(c)(2)(B))'', and
                  (D) by striking ``or reduction'' in clause 
                (v),
          (2) in subparagraph (B)--
                  (A) by striking ``may disclose to an 
                Exchange'' and inserting ``may disclose--
                          ``(i) to an Exchange'', and
                  (B) by striking the period at the end and 
                inserting ``, and'', and
                  (C) by adding at the end the following new 
                clause:
                          ``(ii) in the case of any credit 
                        under section 36C with respect to any 
                        health insurance, the amount of such 
                        credit (or the amount of any advance 
                        payment of such credit) to the provider 
                        of such insurance (or, as the Secretary 
                        determines appropriate, the licensed 
                        agent or broker with respect to such 
                        insurance).'', and
          (3) in subparagraph (C)(i), by striking ``amount of, 
        any credit or reduction'' and inserting ``amount of any 
        credit''.
  (e) Increased Penalty on Erroneous Claims of Credit.--Section 
6676(a) of such Code is amended by inserting ``(25 percent in 
the case of a claim for refund or credit relating to the health 
insurance coverage credit under section 36C)'' after ``20 
percent''.
  (f) Conforming Amendments.--
          (1) Section 35(g) of such Code is amended by adding 
        at the end the following new paragraph:
          ``(14) Coordination with health insurance coverage 
        credit.--
                  ``(A) In general.--An eligible coverage month 
                to which the election under paragraph (11) 
                applies shall not be treated as an eligible 
                coverage month (as defined in section 36C(d)) 
                for purposes of section 36C with respect to the 
                taxpayer or any of the taxpayer's qualifying 
                family members (as defined in section 36C(e)).
                  ``(B) Coordination with advance payments of 
                health insurance coverage credit.--In the case 
                of a taxpayer who makes the election under 
                paragraph (11) with respect to any eligible 
                coverage month in a taxable year or on behalf 
                of whom any advance payment is made under 
                section 7527 with respect to any month in such 
                taxable year--
                          ``(i) the tax imposed by this chapter 
                        for the taxable year shall be increased 
                        by the excess, if any, of--
                                  ``(I) the sum of any advance 
                                payments made on behalf of the 
                                taxpayer under sections 7527 
                                and 7529 for months during such 
                                taxable year, over
                                  ``(II) the sum of the credits 
                                allowed under this section 
                                (determined without regard to 
                                paragraph (1)) and section 36C 
                                (determined without regard to 
                                subsection (i)(5)(A) thereof) 
                                for such taxable year, and
                          ``(ii) section 36C(i)(5)(B) shall not 
                        apply with respect to such taxpayer for 
                        such taxable year.''.
          (2) Section 162(l) of such Code is amended by adding 
        at the end the following new paragraph:
          ``(6) Coordination with health insurance coverage 
        credit.--The deduction otherwise allowable to a 
        taxpayer under paragraph (1) for any taxable year shall 
        be reduced (but not below zero) by the sum of--
                  ``(A) the amount of the credit allowable to 
                such taxpayer under section 36C (determined 
                without regard to subsection (i)(5)(A) thereof) 
                for such taxable year, plus
                  ``(B) the aggregate payments made with 
                respect to the taxpayer under section 7530 for 
                months during such taxable year.''.
          (3) Section 1324(b)(2) of title 31, United States 
        Code is amended--
                  (A) by inserting ``36C,'' after ``36B,'', and
                  (B) by striking ``or 6431'' and inserting 
                ``6431, or 7530''.
          (4) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code 
        of 1986 is amended by inserting after the item relating 
        to section 36B the following new item:

``Sec. 36C. Health insurance coverage.''.
          (5) The table of sections for subpart B of part III 
        of subchapter A of chapter 61 of such Code is amended 
        by adding at the end the following new item:

``Sec. 6050X. Returns by health insurance providers relating to health 
          insurance coverage credit.''.
          (6) The table of sections for chapter 77 of such Code 
        is amended by adding at the end the following new 
        items:

``Sec. 7529. Advance payment of health insurance coverage credit.
``Sec. 7530. Excess health insurance coverage credit payable to health 
          savings account.''.
  (g) Effective Date.--The amendments made by this section 
shall apply to months beginning after December 31, 2019, in 
taxable years ending after such date.

SEC. 216. MAXIMUM CONTRIBUTION LIMIT TO HEALTH SAVINGS ACCOUNT 
                    INCREASED TO AMOUNT OF DEDUCTIBLE AND OUT-OF-POCKET 
                    LIMITATION.

  (a) Self-Only Coverage.--Section 223(b)(2)(A) of the Internal 
Revenue Code of 1986 is amended by striking ``$2,250'' and 
inserting ``the amount in effect under subsection 
(c)(2)(A)(ii)(I)''.
  (b) Family Coverage.--Section 223(b)(2)(B) of such Code is 
amended by striking ``$4,500'' and inserting ``the amount in 
effect under subsection (c)(2)(A)(ii)(II)''.
  (c) Conforming Amendments.--Section 223(g)(1) of such Code is 
amended--
          (1) by striking ``subsections (b)(2) and'' both 
        places it appears and inserting ``subsection'', and
          (2) in subparagraph (B), by striking ``determined 
        by'' and all that follows through ```calendar year 
        2003'.'' and inserting ``determined by substituting 
        `calendar year 2003' for `calendar year 1992' in 
        subparagraph (B) thereof .''.
  (d) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017.

SEC. 217. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CONTRIBUTIONS TO THE SAME 
                    HEALTH SAVINGS ACCOUNT.

  (a) In General.--Section 223(b)(5) of the Internal Revenue 
Code of 1986 is amended to read as follows:
          ``(5) Special rule for married individuals with 
        family coverage.--
                  ``(A) In general.--In the case of individuals 
                who are married to each other, if both spouses 
                are eligible individuals and either spouse has 
                family coverage under a high deductible health 
                plan as of the first day of any month--
                          ``(i) the limitation under paragraph 
                        (1) shall be applied by not taking into 
                        account any other high deductible 
                        health plan coverage of either spouse 
                        (and if such spouses both have family 
                        coverage under separate high deductible 
                        health plans, only one such coverage 
                        shall be taken into account),
                          ``(ii) such limitation (after 
                        application of clause (i)) shall be 
                        reduced by the aggregate amount paid to 
                        Archer MSAs of such spouses for the 
                        taxable year, and
                          ``(iii) such limitation (after 
                        application of clauses (i) and (ii)) 
                        shall be divided equally between such 
                        spouses unless they agree on a 
                        different division.
                  ``(B) Treatment of additional contribution 
                amounts.--If both spouses referred to in 
                subparagraph (A) have attained age 55 before 
                the close of the taxable year, the limitation 
                referred to in subparagraph (A)(iii) which is 
                subject to division between the spouses shall 
                include the additional contribution amounts 
                determined under paragraph (3) for both 
                spouses. In any other case, any additional 
                contribution amount determined under paragraph 
                (3) shall not be taken into account under 
                subparagraph (A)(iii) and shall not be subject 
                to division between the spouses.''.
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 218. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BEFORE 
                    ESTABLISHMENT OF HEALTH SAVINGS ACCOUNT.

  (a) In General.--Section 223(d)(2) of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new 
subparagraph:
                  ``(D) Treatment of certain medical expenses 
                incurred before establishment of account.--If a 
                health savings account is established during 
                the 60-day period beginning on the date that 
                coverage of the account beneficiary under a 
                high deductible health plan begins, then, 
                solely for purposes of determining whether an 
                amount paid is used for a qualified medical 
                expense, such account shall be treated as 
                having been established on the date that such 
                coverage begins.''.
  (b) Effective Date.--The amendment made by this section shall 
apply with respect to coverage beginning after December 31, 
2017.

              Subtitle B--Repeal of Certain Consumer Taxes

SEC. 221. REPEAL OF TAX ON PRESCRIPTION MEDICATIONS.

  Section 9008 of the Patient Protection and Affordable Care 
Act is amended by adding at the end the following new 
subsection:
  ``(l) Termination.--No fee shall be imposed under subsection 
(a)(1) with respect to any calendar year beginning after 
December 31, 2017.''.

SEC. 222. REPEAL OF HEALTH INSURANCE TAX.

  Section 9010 of the Patient Protection and Affordable Care 
Act is amended by adding at the end the following new 
subsection:
  ``(k) Termination.--No fee shall be imposed under subsection 
(a)(1) with respect to any calendar year beginning after 
December 31, 2017.''.

                   Subtitle C--Repeal of Tanning Tax

SEC. 231. REPEAL OF TANNING TAX.

  (a) In General.--The Internal Revenue Code of 1986 is amended 
by striking chapter 49.
  (b) Effective Date.--The amendment made by this section shall 
apply to services performed after December 31, 2017.

             Subtitle D--Remuneration From Certain Insurers

SEC. 241. REMUNERATION FROM CERTAIN INSURERS.

  Paragraph (6) of section 162(m) of the Internal Revenue Code 
of 1986 is amended by adding at the end the following new 
subparagraph:
                  ``(I) Termination.--This paragraph shall not 
                apply to taxable years beginning after December 
                31, 2017.''.

            Subtitle E--Repeal of Net Investment Income Tax

SEC. 251. REPEAL OF NET INVESTMENT INCOME TAX.

  (a) In General.--Subtitle A of the Internal Revenue Code of 
1986 is amended by striking chapter 2A.
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after December 31, 2017.