HR 2771 IH

To establish a medical education trust fund, and for other purposes.

August 5, 1999

Mrs. LOWEY (for herself, Ms. SLAUGHTER, Mr. MCGOVERN, and Mr. MOAKLEY) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

To establish a medical education trust fund, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Medical Education Trust Fund Act of 1999'.

(b) TABLE OF CONTENTS- The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Medical Education Trust Fund.

Sec. 3. Amendments to medicare program.

Sec. 4. Amendments to medicaid program.

Sec. 5. Assessments on insured and self-insured health plans.

Sec. 6. Medical Education Advisory Commission.

Sec. 7. Demonstration projects.

SEC. 2. MEDICAL EDUCATION TRUST FUND.

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

`TITLE XXII--MEDICAL EDUCATION TRUST FUND

`TABLE OF CONTENTS OF TITLE

`SEC. 2201. ESTABLISHMENT OF TRUST FUND.

`(a) IN GENERAL- There is established in the Treasury of the United States a fund to be known as the Medical Education Trust Fund (in this title referred to as the `Trust Fund'), consisting of the following accounts:

`(1) The Medical School Account.

`(2) The Medicare Teaching Hospital Indirect Account.

`(3) The Medicare Teaching Hospital Direct Account.

`(4) The Non-Medicare Teaching Hospital Indirect Account.

`(5) The Non-Medicare Teaching Hospital Direct Account.

Each such account shall consist of such amounts as are allocated and transferred to such account under this section, sections 1886(l) and 1936, and section 4503 of the Internal Revenue Code of 1986. Amounts in the accounts of the Trust Fund shall remain available until expended.

`(b) EXPENDITURES FROM TRUST FUND- Amounts in the accounts of the Trust Fund are available to the Secretary for making payments under sections 2202 and 2203.

`(c) INVESTMENT-

`(1) IN GENERAL- The Secretary of the Treasury shall invest amounts in the accounts of the Trust Fund which the Secretary determines are not required to meet current withdrawals from the Trust Fund. Such investments may be made only in interest-bearing obligations of the United States. For such purpose, such obligations may be acquired on original issue at the issue price, or by purchase of outstanding obligations at the market price.

`(2) SALE OF OBLIGATIONS- The Secretary of the Treasury may sell at market price any obligation acquired under paragraph (1).

`(3) AVAILABILITY OF INCOME- Any interest derived from obligations held in each such account, and proceeds from any sale or redemption of such obligations, are hereby appropriated to such account.

`(d) MONETARY GIFTS TO TRUST FUND- There are appropriated to the Trust Fund such amounts as may be unconditionally donated to the Federal Government as gifts to the Trust Fund. Such amounts shall be allocated and transferred to the accounts described in subsection (a) in the same proportion as the amounts in each of the accounts bears to the total amount in all the accounts of the Trust Fund.

`SEC. 2202. PAYMENTS TO MEDICAL SCHOOLS.

`(a) FEDERAL PAYMENTS TO MEDICAL SCHOOLS FOR CERTAIN COSTS-

`(1) IN GENERAL- In the case of a medical school that in accordance with paragraph (2) submits to the Secretary an application for fiscal year 2000 or any subsequent fiscal year, the Secretary shall make payments for such year to the medical school for the purpose specified in paragraph (3). The Secretary shall make such payments from the Medical School Account in an amount determined in accordance with subsection (b), and may administer the payments as a contract, grant, or cooperative agreement.

`(2) APPLICATION FOR PAYMENTS- For purposes of paragraph (1), an application for payments under such paragraph for a fiscal year is in accordance with this paragraph if--

`(A) the medical school involved submits the application not later than the date specified by the Secretary; and

`(B) the application is in such form, is made in such manner, and contains such agreements, assurances, and information as the Secretary determines to be necessary to carry out this section.

`(3) PURPOSE OF PAYMENTS- The purpose of payments under paragraph (1) is to assist medical schools in maintaining and developing quality educational programs in an increasingly competitive health care system.

`(b) AVAILABILITY OF TRUST FUND FOR PAYMENTS; ANNUAL AMOUNT OF PAYMENTS-

`(1) AVAILABILITY OF TRUST FUND FOR PAYMENTS- The following amounts shall be available for a fiscal year for making payments under subsection (a) from the amount allocated and transferred to the Medical School Account under sections 1886(l), 1936, 2201(c)(3), and 2201(d), and section 4503 of the Internal Revenue Code of 1986:

`(A) In the case of fiscal year 2000, $200,000,000.

`(B) In the case of fiscal year 2001, $300,000,000.

`(C) In the case of fiscal year 2002, $400,000,000.

`(D) In the case of fiscal year 2003, $500,000,000.

`(E) In the case of fiscal year 2004, $600,000,000.

`(F) In the case of each subsequent fiscal year, the amount determined under this paragraph for the previous fiscal year updated through the midpoint of such previous fiscal year by the estimated percentage change in the general health care inflation factor (as defined in subsection (d)) during the 12-month period ending at that midpoint, with appropriate adjustments to reflect previous underestimations or overestimations under this subparagraph in the projected health care inflation factor.

`(2) AMOUNT OF PAYMENTS FOR MEDICAL SCHOOLS-

`(A) IN GENERAL- Subject to the annual amount available under paragraph (1) for a fiscal year, the amount of payments required under subsection (a) to be made to a medical school that submits to the Secretary an application for such year in accordance with subsection (a)(2) is an amount equal to an amount determined by the Secretary in accordance with subparagraph (B).

`(B) DEVELOPMENT OF FORMULA- The Secretary shall develop a formula for allocation of funds to medical schools under this section consistent with the purpose described in subsection (a)(3).

`(c) MEDICAL SCHOOL DEFINED- For purposes of this section, the term `medical school' means a school of medicine (as defined in section 799 of the Public Health Service Act) or a school of osteopathic medicine (as defined in such section).

`(d) GENERAL HEALTH CARE INFLATION FACTOR- The term `general health care inflation factor' means the Consumer Price Index for Medical Services as determined by the Bureau of Labor Statistics.

`SEC. 2203. PAYMENTS TO TEACHING HOSPITALS.

`(a) FORMULA PAYMENTS TO ELIGIBLE ENTITIES-

`(1) IN GENERAL- In the case of any fiscal year beginning after September 30, 1999, the Secretary shall make payments to each eligible entity that, in accordance with paragraph (2), submits to the Secretary an application for such fiscal year. Such payments shall be made from the Trust Fund, and the total of the payments to the eligible entity for the fiscal year shall equal the sum of the amounts determined under subsections (b), (c), (d), and (e) with respect to such entity.

`(2) APPLICATION- For purposes of paragraph (1), an application shall contain such information as may be necessary for the Secretary to make payments under such paragraph to an eligible entity during a fiscal year. An application shall be treated as submitted in accordance with this paragraph if it is submitted not later than the date specified by the Secretary, and is made in such form and manner as the Secretary may require.

`(3) PERIODIC PAYMENTS- Payments under paragraph (1) to an eligible entity for a fiscal year shall be made periodically, at such intervals and in such amounts as the Secretary determines to be appropriate (subject to applicable Federal law regarding Federal payments).

`(4) ADMINISTRATOR OF PROGRAMS- The Secretary shall carry out responsibility under this title by acting through the Administrator of the Health Care Financing Administration.

`(5) ELIGIBLE ENTITY- For purposes of this title, the term `eligible entity', with respect to any fiscal year, means--

`(A) for payment under subsections (b) and (c), an entity which would be eligible to receive payments for such fiscal year under--

`(i) section 1886(d)(5)(B), if such payments had not been terminated for discharges occurring after September 30, 1999;

`(ii) section 1886(h), if such payments had not been terminated for cost reporting periods beginning after September 30, 1999; or

`(iii) both sections; or

`(B) for payment under subsections (d) and (e)--

`(i) an entity which meets the requirement of subparagraph (A); or

`(ii) an entity which the Secretary determines should be considered an eligible entity.

`(b) DETERMINATION OF AMOUNT FROM MEDICARE TEACHING HOSPITAL INDIRECT ACCOUNT-

`(1) IN GENERAL- The amount determined for an eligible entity for a fiscal year under this subsection is the amount equal to the applicable percentage of the total amount allocated and transferred to the Medicare Teaching Hospital Indirect Account under section 1886(l)(1), and subsections (c)(3) and (d) of section 2201 for such fiscal year.

`(2) APPLICABLE PERCENTAGE- For purposes of paragraph (1), the applicable percentage for any fiscal year is equal to the percentage of the total payments which would have been made to the eligible entity in such fiscal year under section 1886(d)(5)(B) if such payments had not been terminated for discharges occurring after September 30, 1999.

`(c) DETERMINATION OF AMOUNT FROM MEDICARE TEACHING HOSPITAL DIRECT ACCOUNT-

`(1) IN GENERAL- The amount determined for an eligible entity for a fiscal year under this subsection is the amount equal to the applicable percentage of the total amount allocated and transferred to the Medicare Teaching Hospital Direct Account under section 1886(l)(2), and subsections (c)(3) and (d) of section 2201 for such fiscal year.

`(2) APPLICABLE PERCENTAGE- For purposes of paragraph (1), the applicable percentage for any fiscal year is equal to the percentage of the total payments which would have been made to the eligible entity in such fiscal year under section 1886(h) if such payments had not been terminated for cost reporting periods beginning after September 30, 1999.

`(d) DETERMINATION OF AMOUNT FROM NON-MEDICARE TEACHING HOSPITAL INDIRECT ACCOUNT-

`(1) IN GENERAL- The amount determined for an eligible entity for a fiscal year under this subsection is the amount equal to the applicable percentage of the total amount allocated and transferred to the Non-Medicare Teaching Hospital Indirect Account for such fiscal year under section 1936, subsections (c)(3) and (d) of section 2201, and section 4503 of the Internal Revenue Code of 1986.

`(2) APPLICABLE PERCENTAGE- For purposes of paragraph (1), the applicable percentage for any fiscal year for an eligible entity is equal to the percentage of the total payments which, as determined by the Secretary, would have been made in such fiscal year under section 1886(d)(5)(B) if--

`(A) such payments had not been terminated for discharges occurring after September 30, 1999; and

`(B) non-medicare patients were taken into account in lieu of medicare patients.

`(e) DETERMINATION OF AMOUNT FROM NON-MEDICARE TEACHING HOSPITAL DIRECT ACCOUNT-

`(1) IN GENERAL- The amount determined for an eligible entity for a fiscal year under this subsection is the amount equal to the applicable percentage of the total amount allocated and transferred to the Non-Medicare Teaching Hospital Direct Account for such fiscal year under section 1936, subsections (c)(3) and (d) of section 2201, and section 4503 of the Internal Revenue Code of 1986.

`(2) APPLICABLE PERCENTAGE- For purposes of paragraph (1), the applicable percentage for any fiscal year for an eligible entity is equal to the percentage of the total payments which, as determined by the Secretary, would have been made in such fiscal year under section 1886(h) if--

`(A) such payments had not been terminated for cost reporting periods beginning after September 30, 1999; and

`(B) non-medicare patients were taken into account in lieu of medicare patients.'.

SEC. 3. AMENDMENTS TO MEDICARE PROGRAM.

Section 1886 of the Social Security Act (42 U.S.C. 1395ww) is amended--

(1) in subsection (d)(5)(B), in the matter preceding clause (i), by striking `The Secretary shall provide' and inserting the following: `For discharges occurring before October 1, 1999, the Secretary shall provide';

(2) in subsection (d)(11)(C), by inserting after `paragraph (5)(B)' `(notwithstanding that payments under paragraph (5)(B) are terminated for discharges occurring after September 30, 1999)';

(3) in subsection (h)--

(A) in paragraph (1), in the first sentence, by striking `the Secretary shall provide' and inserting `the Secretary shall, subject to paragraph (7), provide'; and

(B) by adding at the end the following:

`(7) LIMITATION-

`(A) IN GENERAL- The authority to make payments under this subsection (other than payments made under paragraphs (3)(D) and (6)) shall not apply with respect to--

`(i) cost reporting periods beginning after September 30, 1999; and

`(ii) any portion of a cost reporting period beginning on or before such date which occurs after such date.

`(B) RULE OF CONSTRUCTION- This paragraph may not be construed as authorizing any payment under section 1861(v) with respect to graduate medical education.'; and

(4) by adding at the end the following:

`(l) TRANSFERS TO MEDICAL EDUCATION TRUST FUND-

`(1) INDIRECT COSTS OF MEDICAL EDUCATION-

`(A) TRANSFER-

`(i) IN GENERAL- From the Federal Hospital Insurance Trust Fund, the Secretary shall, for fiscal year 2000 and each subsequent fiscal year, transfer to the Medical Education Trust Fund an amount equal to the amount estimated by the Secretary under subparagraph (B).

`(ii) ALLOCATION- Of the amount transferred under clause (i)--

`(I) there shall be allocated and transferred to the Medical School Account of such Trust Fund an amount which bears the same ratio to the total amount available under section 2202(b)(1) for the fiscal year (reduced by the balance in such account at the end of the preceding fiscal year) as the amount transferred under clause (i) bears to the total amounts transferred to such Trust Fund under title XXII (excluding amounts transferred under subsections (c)(3) and (d) of section 2201) for such fiscal year; and

`(II) the remainder shall be allocated and transferred to the Medicare Teaching Hospital Indirect Account of such Trust Fund.

`(B) DETERMINATION OF AMOUNTS- The Secretary shall make an estimate for each fiscal year involved of the nationwide total of the amounts that would have been paid under subsection (d)(5)(B) to hospitals during the fiscal year if such payments had not been terminated for discharges occurring after September 30, 1999.

`(2) DIRECT COSTS OF MEDICAL EDUCATION-

`(A) TRANSFER-

`(i) IN GENERAL- From the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund, the Secretary shall, for fiscal year 2000 and each subsequent fiscal year, transfer to the Medical Education Trust Fund an amount equal to the amount estimated by the Secretary under subparagraph (B).

`(ii) ALLOCATION- Of the amount transferred under clause (i)--

`(I) there shall be allocated and transferred to the Medical School Account of such Trust Fund an amount which bears the same ratio to the total amount available under section 2202(b)(1) for the fiscal year (reduced by the balance in such account at the end of the preceding fiscal year) as the amount transferred under clause (i) bears to the total amounts transferred to such Trust Fund under title XXII (excluding amounts transferred under subsections (c)(3) and (d) of section 2201) for such fiscal year; and

`(II) the remainder shall be allocated and transferred to the Medicare Teaching Hospital Direct Account of such Trust Fund.

`(B) DETERMINATION OF AMOUNTS- For each hospital, the Secretary shall make an estimate for the fiscal year involved of the amount that would have been paid under subsection (h) to the hospital during the fiscal year if such payments had not been terminated for cost reporting periods beginning after September 30, 1999.

`(C) ALLOCATION BETWEEN FUNDS- In providing for a transfer under subparagraph (A) for a fiscal year, the Secretary shall provide for an allocation of the amounts involved between part A and part B (and the trust funds established under the respective parts) as reasonably reflects the proportion of direct graduate medical education costs of hospitals associated with the provision of services under each respective part.'.

SEC. 4. AMENDMENTS TO MEDICAID PROGRAM.

(a) IN GENERAL- Title XIX of the Social Security Act (42 U.S.C. 1396 et seq.) is amended by adding at the end the following:

`TRANSFER OF FUNDS TO ACCOUNTS

`SEC. 1936. (a) TRANSFER OF FUNDS-

`(1) IN GENERAL- For fiscal year 2000 and each subsequent fiscal year, the Secretary shall transfer to the Medical Education Trust Fund established under title XXII an amount equal to the amount determined under subsection (b).

`(2) ALLOCATION- Of the amount transferred under paragraph (1)--

`(A) there shall be allocated and transferred to the Medical School Account of such Trust Fund an amount which bears the same ratio to the total amount available under section 2202(b)(1) for the fiscal year (reduced by the balance in such account at the end of the preceding fiscal year) as the amount transferred under paragraph (1) bears to the total amounts transferred to such Trust Fund (excluding amounts transferred under subsections (c)(3) and (d) of section 2201) for such fiscal year; and

`(B) the remainder shall be allocated and transferred to the Non-Medicare Teaching Hospital Indirect Account and the Non-Medicare Teaching Hospital Direct Account of such Trust Fund, in the same proportion as the amounts transferred to each account under section 1886(l) relate to the total amounts transferred under such section for such fiscal year.

`(b) AMOUNT DETERMINED-

`(1) OUTLAYS FOR ACUTE MEDICAL SERVICES DURING PRECEDING FISCAL YEAR- Beginning with fiscal year 2000, the Secretary shall determine 5 percent of the total amount of Federal outlays made under this title for acute medical services, as defined in paragraph (2), for the preceding fiscal year.

`(2) ACUTE MEDICAL SERVICES DEFINED- The term `acute medical services' means items and services described in section 1905(a) other than the following:

`(A) Nursing facility services (as defined in section 1905(f)).

`(B) Intermediate care facility for the mentally retarded services (as defined in section 1905(d)).

`(C) Personal care services (as described in section 1905(a)(24)).

`(D) Private duty nursing services (as referred to in section 1905(a)(8)).

`(E) Home or community-based services furnished under a waiver granted under subsection (c), (d), or (e) of section 1915.

`(F) Home and community care furnished to functionally disabled elderly individuals under section 1929.

`(G) Community supported living arrangements services under section 1930.

`(H) Case-management services (as described in section 1915(g)(2)).

`(I) Home health care services (as referred to in section 1905(a)(7)), clinic services, and rehabilitation services that are furnished to an individual who has a condition or disability that qualifies the individual to receive any of the services described in a previous subparagraph.

`(J) Services furnished in an institution for mental diseases (as defined in section 1905(i)).

`(c) ENTITLEMENT- This section constitutes budget authority in advance of appropriations Acts and represents the obligation of the Federal Government to provide for the payment to the Non-Medicare Teaching Hospital Indirect Account, the Non-Medicare Teaching Hospital Direct Account, and the Medical School Account of amounts determined in accordance with subsections (a) and (b).'.

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall be effective on and after October 1, 1999.

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

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

`CHAPTER 37--HEALTH RELATED ASSESSMENTS

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

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

`Sec. 4501. Health insurance and health-related administrative services.

`Sec. 4502. Self-insured health plans.

`Sec. 4503. Transfer to accounts.

`Sec. 4504. Definitions and special rules.

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

`(a) IMPOSITION OF TAX- There is hereby imposed--

`(1) on each taxable health insurance policy, a tax equal to 1.5 percent of the premiums received under such policy, and

`(2) on each amount received for health-related administrative services, a tax equal to 1.5 percent of the amount so received.

`(b) LIABILITY FOR TAX-

`(1) HEALTH INSURANCE- The tax imposed by subsection (a)(1) shall be paid by the issuer of the policy.

`(2) HEALTH-RELATED ADMINISTRATIVE SERVICES- The tax imposed by subsection (a)(2) shall be paid by the person providing the health-related administrative services.

`(c) TAXABLE HEALTH INSURANCE POLICY- For purposes of this section--

`(1) IN GENERAL- Except as otherwise provided in this section, the term `taxable health insurance policy' means any insurance policy providing accident or health insurance with respect to individuals residing in the United States.

`(2) EXEMPTION OF CERTAIN POLICIES- The term `taxable health insurance policy' does not include any insurance policy if substantially all of the coverage provided under such policy relates to--

`(A) liabilities incurred under workers' compensation laws,

`(B) tort liabilities,

`(C) liabilities relating to ownership or use of property,

`(D) credit insurance, or

`(E) such other similar liabilities as the Secretary may specify by regulations.

`(3) SPECIAL RULE WHERE POLICY PROVIDES OTHER COVERAGE- In the case of any taxable health insurance policy under which amounts are payable other than for accident or health coverage, in determining the amount of the tax imposed by subsection (a)(1) on any premium paid under such policy, there shall be excluded the amount of the charge for the nonaccident or nonhealth coverage if--

`(A) the charge for such nonaccident or nonhealth coverage is either separately stated in the policy, or furnished to the policyholder in a separate statement, and

`(B) such charge is reasonable in relation to the total charges under the policy.

In any other case, the entire amount of the premium paid under such policy shall be subject to tax under subsection (a)(1).

`(4) TREATMENT OF PREPAID HEALTH COVERAGE ARRANGEMENTS-

`(A) IN GENERAL- In the case of any arrangement described in subparagraph (B)--

`(i) such arrangement shall be treated as a taxable health insurance policy,

`(ii) the payments or premiums referred to in subparagraph (B)(i) shall be treated as premiums received for a taxable health insurance policy, and

`(iii) the person referred to in subparagraph (B)(i) shall be treated as the issuer.

`(B) DESCRIPTION OF ARRANGEMENTS- An arrangement is described in this subparagraph if under such arrangement--

`(i) fixed payments or premiums are received as consideration for any person's agreement to provide or arrange for the provision of accident or health coverage to residents of the United States, regardless of how such coverage is provided or arranged to be provided, and

`(ii) substantially all of the risks of the rates of utilization of services is assumed by such person or the provider of such services.

`(d) HEALTH-RELATED ADMINISTRATIVE SERVICES- For purposes of this section, the term `health-related administrative services' means--

`(1) the processing of claims or performance of other administrative services in connection with accident or health coverage under a taxable health insurance policy if the charge for such services is not included in the premiums under such policy, and

`(2) processing claims, arranging for provision of accident or health coverage, or performing other administrative services in connection with an applicable self-insured health plan (as defined in section 4502(c)) established or maintained by a person other than the person performing the services.

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

`SEC. 4502. SELF-INSURED HEALTH PLANS.

`(a) IMPOSITION OF TAX- In the case of any applicable self-insured health plan, there is hereby imposed a tax for each month equal to 1.5 percent of the sum of--

`(1) the accident or health coverage expenditures for such month under such plan, and

`(2) the administrative expenditures for such month under such plan to the extent such expenditures are not subject to tax under section 4501.

In determining the amount of expenditures under paragraph (2), rules similar to the rules of subsection (d)(3) apply.

`(b) LIABILITY FOR TAX-

`(1) IN GENERAL- The tax imposed by subsection (a) shall be paid by the plan sponsor.

`(2) PLAN SPONSOR- For purposes of paragraph (1), the term `plan sponsor' means--

`(A) the employer in the case of a plan established or maintained by a single employer,

`(B) the employee organization in the case of a plan established or maintained by an employee organization, or

`(C) in the case of--

`(i) a plan established or maintained by 2 or more employers or jointly by 1 or more employers and 1 or more employee organizations,

`(ii) a voluntary employees' beneficiary association under section 501(c)(9), or

`(iii) any other association plan,

the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the plan.

`(c) APPLICABLE SELF-INSURED HEALTH PLAN- For purposes of this section, the term `applicable self-insured health plan' means any plan for providing accident or health coverage if any portion of such coverage is provided other than through an insurance policy.

`(d) ACCIDENT OR HEALTH COVERAGE EXPENDITURES- For purposes of this section--

`(1) IN GENERAL- The accident or health coverage expenditures of any applicable self-insured health plan for any month are the aggregate expenditures paid in such month for accident or health coverage provided under such plan to the extent such expenditures are not subject to tax under section 4501.

`(2) TREATMENT OF REIMBURSEMENTS- In determining accident or health coverage expenditures during any month of any applicable self-insured health plan, reimbursements (by insurance or otherwise) received during such month shall be taken into account as a reduction in accident or health coverage expenditures.

`(3) CERTAIN EXPENDITURES DISREGARDED- Paragraph (1) shall not apply to any expenditure for the acquisition or improvement of land or for the acquisition or improvement of any property to be used in connection with the provision of accident or health coverage which is subject to the allowance under section 167, except that, for purposes of paragraph (1), allowances under section 167 shall be considered as expenditures.

`SEC. 4503. TRANSFER TO ACCOUNTS.

`For fiscal year 2000 and each subsequent fiscal year, there are hereby appropriated and transferred to the Medical Education Trust Fund under title XXII of the Social Security Act amounts equivalent to taxes received in the Treasury under sections 4501 and 4502, of which--

`(1) there shall be allocated and transferred to the Medical School Account of such Trust Fund an amount which bears the same ratio to the total amount available under section 2202(b)(1) of such Act for the fiscal year (reduced by the balance in such account at the end of the preceding fiscal year) as the amount transferred to such Trust Fund under this section bears to the total amounts transferred to such Trust Fund (excluding amounts transferred under subsections (c)(3) and (d) of section 2201 of such Act) for such fiscal year; and

`(2) the remainder shall be allocated and transferred to the Non-Medicare Teaching Hospital Indirect Account and the Non-Medicare Teaching Hospital Direct Account of such Trust Fund, in the same proportion as the amounts transferred to such account under section 1886(l) of such Act relate to the total amounts transferred under such section for such fiscal year.

Such amounts shall be transferred in the same manner as under section 9601.

`SEC. 4504. DEFINITIONS AND SPECIAL RULES.

`(a) DEFINITIONS- For purposes of this subchapter--

`(1) ACCIDENT OR HEALTH COVERAGE- The term `accident or health coverage' means any coverage which, if provided by an insurance policy, would cause such policy to be a taxable health insurance policy (as defined in section 4501(c)).

`(2) INSURANCE POLICY- The term `insurance policy' means any policy or other instrument whereby a contract of insurance is issued, renewed, or extended.

`(3) PREMIUM- The term `premium' means the gross amount of premiums and other consideration (including advance premiums, deposits, fees, and assessments) arising from policies issued by a person acting as the primary insurer, adjusted for any return or additional premiums paid as a result of endorsements, cancellations, audits, or retrospective rating. Amounts returned where the amount is not fixed in the contract but depends on the experience of the insurer or the discretion of management shall not be included in return premiums.

`(4) UNITED STATES- The term `United States' includes any possession of the United States.

`(b) TREATMENT OF GOVERNMENTAL ENTITIES-

`(1) IN GENERAL- For purposes of this subchapter--

`(A) the term `person' includes any governmental entity, and

`(B) notwithstanding any other law or rule of law, governmental entities shall not be exempt from the taxes imposed by this subchapter except as provided in paragraph (2).

`(2) EXEMPT GOVERNMENTAL PROGRAMS-

`(A) IN GENERAL- In the case of an exempt governmental program--

`(i) no tax shall be imposed under section 4501 on any premium received pursuant to such program or on any amount received for health-related administrative services pursuant to such program, and

`(ii) no tax shall be imposed under section 4502 on any expenditures pursuant to such program.

`(B) EXEMPT GOVERNMENTAL PROGRAM- For purposes of this paragraph, the term `exempt governmental program' means--

`(i) the insurance programs established by parts A and B of title XVIII of the Social Security Act,

`(ii) the medical assistance program established by title XIX of the Social Security Act,

`(iii) any program established by Federal law for providing medical care (other than through insurance policies) to individuals (or the spouses and dependents thereof) by reason of such individuals being--

`(I) members of the Armed Forces of the United States, or

`(II) veterans, and

`(iv) any program established by Federal law for providing medical care (other than through insurance policies) to members of Indian tribes (as defined in section 4(d) of the Indian Health Care Improvement Act).

`(c) NO COVER OVER TO POSSESSIONS- Notwithstanding any other provision of law, no amount collected under this subchapter shall be covered over to any possession of the United States.'.

(b) CLERICAL AMENDMENT- The table of chapters for subtitle D of the Internal Revenue Code of 1986 is amended by inserting after the item relating to chapter 36 the following new item:

`CHAPTER 37. Health related assessments.'

(c) EFFECTIVE DATE- The amendments made by this section shall apply with respect to premiums received, and expenses incurred, with respect to coverage for periods after September 30, 1999.

SEC. 6. MEDICAL EDUCATION ADVISORY COMMISSION.

(a) ESTABLISHMENT- There is hereby established an advisory commission to be known as the Medical Education Advisory Commission (in this section referred to as the `Advisory Commission').

(b) DUTIES-

(1) IN GENERAL- The Advisory Commission shall--

(A) conduct a thorough study of all matters relating to--

(i) the operation of the Medical Education Trust Fund established under section 2201 of the Social Security Act (as added by section 2);

(ii) alternative and additional sources of graduate medical education funding;

(iii) alternative methodologies for compensating teaching hospitals for graduate medical education;

(iv) policies designed to maintain superior research and educational capacities in an increasing competitive health system;

(v) the role of medical schools in graduate medical education;

(vi) policies designed to expand eligibility for graduate medical education payments to children's hospitals that operate graduate medical education programs; and

(vii) policies designed to expand eligibility for graduate medical education payments to institutions other than teaching hospitals;

(B) develop recommendations, including the use of demonstration projects, on the matters studied under subparagraph (A) in consultation with the Secretary of Health and Human Services and the entities described in paragraph (2);

(C) not later than January 2001, submit an interim report to the Committee on Finance of the Senate, the Committee on Ways and Means of the House of Representatives, and the Secretary of Health and Human Services; and

(D) not later than January 2003, submit a final report to the Committee on Finance of the Senate, the Committee on Ways and Means of the House of Representatives, and the Secretary of Health and Human Services.

(2) ENTITIES DESCRIBED- The entities described in this paragraph are--

(A) other advisory groups, including the Council on Graduate Medical Education and the Medicare Payment Advisory Commission;

(B) interested parties, including the Association of American Medical Colleges, the Association of Academic Health Centers, and the American Medical Association;

(C) health care insurers, including managed care entities; and

(D) other entities as determined by the Secretary of Health and Human Services.

(c) NUMBER AND APPOINTMENT- The membership of the Advisory Commission shall include 9 individuals who are appointed to the Advisory Commission from among individuals who are not officers or employees of the United States. Such individuals shall be appointed by the Secretary of Health and Human Services, and shall include individuals from each of the following categories:

(1) Physicians who are faculty members of medical schools.

(2) Officers or employees of teaching hospitals.

(3) Officers or employees of health plans.

(4) Deans of medical schools.

(5) Such other individuals as the Secretary determines to be appropriate.

(d) TERMS-

(1) IN GENERAL- Except as provided in paragraph (2), members of the Advisory Commission shall serve for the lesser of the life of the Advisory Commission, or 4 years.

(2) SERVICE BEYOND TERM- A member of the Advisory Commission may continue to serve after the expiration of the term of the member until a successor is appointed.

(e) VACANCIES- If a member of the Advisory Commission does not serve the full term applicable under subsection (d), the individual appointed to fill the resulting vacancy shall be appointed for the remainder of the term of the predecessor of the individual.

(f) CHAIR- The Secretary of Health and Human Services shall designate an individual to serve as the Chair of the Advisory Commission.

(g) MEETINGS- The Advisory Commission shall meet not less than once during each 4-month period and shall otherwise meet at the call of the Secretary of Health and Human Services or the Chair.

(h) COMPENSATION AND REIMBURSEMENT OF EXPENSES- Members of the Advisory Commission shall receive compensation for each day (including travel time) engaged in carrying out the duties of the Advisory Commission. Such compensation may not be in an amount in excess of the maximum rate of basic pay payable for level IV of the Executive Schedule under section 5315 of title 5, United States Code.

(i) STAFF-

(1) STAFF DIRECTOR- The Advisory Commission shall, without regard to the provisions of title 5, United States Code, relating to competitive service, appoint a Staff Director who shall be paid at a rate equivalent to a rate established for the Senior Executive Service under 5382 of title 5, United States Code.

(2) ADDITIONAL STAFF- The Secretary of Health and Human Services shall provide to the Advisory Commission such additional staff, information, and other assistance as may be necessary to carry out the duties of the Advisory Commission.

(j) TERMINATION OF THE ADVISORY COMMISSION- The Advisory Commission shall terminate 90 days after the date on which the Advisory Commission submits its final report under subsection (b)(1)(D).

(k) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated such sums as may be necessary to carry out the purposes of this section.

SEC. 7. DEMONSTRATION PROJECTS.

(a) ESTABLISHMENT- The Secretary of Health and Human Services (in this section referred to as the `Secretary') shall establish, by regulation, guidelines for the establishment and operation of demonstration projects which the Medical Education Advisory Commission recommends under section 6(b)(1)(B).

(b) FUNDING-

(1) IN GENERAL- For any fiscal year after 1999, amounts in the Medical Education Trust Fund under title XXII of the Social Security Act shall be available for use by the Secretary in the establishment and operation of demonstration projects described in subsection (a).

(2) FUNDS AVAILABLE-

(A) LIMITATION- Not more than 1/10 of 1 percent of the funds in such Trust Fund shall be available for the purposes of paragraph (1).

(B) ALLOCATION- Amounts under paragraph (1) shall be paid from the accounts established under paragraphs (2) through (5) of section 2201(a) of the Social Security Act, in the same proportion as the amounts transferred to such accounts bears to the total of amounts transferred to all 4 such accounts for such fiscal year.

(c) LIMITATION- Nothing in this section shall be construed to authorize any change in the payment methodology for teaching hospitals and medical schools established by the amendments made by this Act.

END