[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 2985 Introduced in Senate (IS)]
<DOC>
114th CONGRESS
2d Session
S. 2985
To eliminate the individual and employer health coverage mandates under
the Patient Protection and Affordable Care Act, to expand beyond that
Act the choices in obtaining and financing affordable health insurance
coverage, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 25, 2016
Mr. Cassidy introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To eliminate the individual and employer health coverage mandates under
the Patient Protection and Affordable Care Act, to expand beyond that
Act the choices in obtaining and financing affordable health insurance
coverage, 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; PURPOSES; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``World's Greatest
Healthcare Plan Act of 2016''.
(b) Purposes.--The purposes of this Act are as follows:
(1) Elimination of individual and employer mandates under
aca.--To eliminate mandates on individuals and employers, and
other tax requirements, imposed under Patient Protection and
Affordable Care Act.
(2) Providing states with alternative, affordable coverage
options.--To provide greater flexibility in providing States
with options in making affordable health insurance coverage
available by eliminating certain mandates under PPACA, while
retaining essential consumer protections, by promoting health
savings accounts to pay for such coverage and long-term care
coverage, while permitting States to continue coverage as
provided under PPACA.
(c) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; purposes; table of contents.
Sec. 2. Definitions.
TITLE I--REVISIONS OF PPACA
Subtitle A--Elimination of Individual and Employer Mandates
Sec. 101. Repeal of individual health insurance mandate.
Sec. 102. Repeal of employer health insurance mandate.
Sec. 103. Clarifying employer's ability to reimburse employee premiums
for purchase of individual health insurance
coverage.
Subtitle B--Limitation on Application of PPACA Plan Requirements
Sec. 121. Limiting application of requirements to consumer protections.
Sec. 122. Offering of basic health insurance; protection of assets from
liability or attachment or seizure.
Subtitle C--Universal Health Insurance Tax Benefit
Sec. 131. Universal health insurance tax benefit.
Sec. 132. Application of portion of unused tax credits by States for
indigent health care.
Sec. 133. Medicaid option of enrollment under private plan and
contribution to an HSA.
TITLE II--IMPROVING HEALTH SAVINGS ACCOUNTS TO PROMOTE ACCOUNTABILITY
Sec. 201. Transition to non-deductible HSAs.
Sec. 202. Elimination of medical expense deduction.
Sec. 203. Treatment of HSA after death of account beneficiary.
Sec. 204. Treatment of direct primary care.
TITLE III--STATE FLEXIBILITY IN REGULATION OF HEALTH INSURANCE COVERAGE
Sec. 301. State flexibility in regulation of health insurance coverage.
TITLE IV--MEDICAID PAYMENT REFORM
Sec. 401. Medicaid payment reform.
TITLE V--INCREASING PRICE TRANSPARENCY AND FREEDOM OF PRACTICE
Sec. 501. Ensuring access to emergency services without excessive
charges for out-of-network services.
Sec. 502. Publishing of cash price for care paid through health savings
accounts.
Sec. 503. Liberating the local practice of health care.
SEC. 2. DEFINITIONS.
Except as otherwise provided, in this Act:
(1) Basic health insurance.--The term ``basic health
insurance'' has the meaning given such term in section 122(a).
(2) Default health insurance coverage.--The term ``default
health insurance coverage'' has the meaning given such term in
section 121(b)(4)(B).
(3) Exchange.--The term ``Exchange'' means an Exchange
established under title I of PPACA.
(4) Health insurance coverage; group health plan, etc.--The
terms defined in section 2791 of the Public Health Service Act,
including ``health insurance coverage'', ``group health plan''
``individual market'', shall apply.
(5) Limited benefit insurance.--The term ``limited benefit
insurance'' has the meaning given such term in section 122(b).
(6) PPACA.--The term ``PPACA'' means the Patient Protection
and Affordable Care Act (Public Law 111-148).
(7) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.
(8) State.--The term ``State'' includes the District of
Columbia, Puerto Rico, the United States Virgin Islands,
American Samoa, Guam, and the Northern Mariana Islands.
TITLE I--REVISIONS OF PPACA
Subtitle A--Elimination of Individual and Employer Mandates
SEC. 101. REPEAL OF INDIVIDUAL HEALTH INSURANCE MANDATE.
Section 5000A of the Internal Revenue Code of 1986 is amended by
adding at the end the following new subsection:
``(h) Termination.--This section shall not apply with respect to
any month beginning more than 30 days after the date of the enactment
of the World's Greatest Healthcare Plan Act of 2016.''.
SEC. 102. REPEAL OF EMPLOYER HEALTH INSURANCE MANDATE.
(a) In General.--Chapter 43 of the Internal Revenue Code of 1986 is
amended--
(1) by striking section 4980H; and
(2) by striking the item relating to section 4980H from the
table of sections for such chapter.
(b) Repeal of Related Reporting Requirements.--Subpart D of part
III of subchapter A of chapter 61 of such Code is amended by striking
section 6056 and by striking the item relating to section 6056 in the
table of sections for such subpart.
(c) Conforming Amendments.--
(1) Section 6724(d)(1)(B) of such Code is amended--
(A) by inserting ``or'' at the end of clause
(xxiii);
(B) by striking ``, or'' at the end of clause
(xxiv) and inserting a period; and
(C) by striking clause (xxv).
(2) Section 6724(d)(2) of such Code is amended by inserting
``or'' at the end of subparagraph (GG), by striking
subparagraph (HH), and by redesignating subparagraph (II) as
subparagraph (HH).
(3) Section 1513 of the Patient Protection and Affordable
Care Act is amended by striking subsection (c).
(d) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
months and other periods beginning more than 30 days after the
date of the enactment of this Act.
(2) Repeal of study and report.--The amendment made by
subsection (c)(3) shall take effect on the date of the
enactment of this Act.
SEC. 103. CLARIFYING EMPLOYER'S ABILITY TO REIMBURSE EMPLOYEE PREMIUMS
FOR PURCHASE OF INDIVIDUAL HEALTH INSURANCE COVERAGE.
An employer health care arrangement, such as a health or medical
reimbursement arrangement or other employment plans, under which an
employer reimburses an employee for the premiums for the purchase of
individual health insurance coverage does not constitute a group health
plan for any purposes, including for purposes of applying any of the
following:
(1) The Public Health Service Act (including sections 2711
and 2714 of such Act (42 U.S.C. 300gg-11, 300gg-14)).
(2) The Patient Protection and Affordable Care Act (Public
Law 111-148).
(3) The Internal Revenue Code of 1986.
(4) The Employee Retirement Income Security Act of 1974 (29
U.S.C. 1001 et seq.).
(5) The HIPAA privacy regulations (as defined in section
1180(b)(3) of the Social Security Act, 42 U.S.C. 1320d-
9(b)(3)).
(6) The Health Insurance Portability and Accountability Act
of 1996 (Public Law 104-191).
(7) COBRA continuation coverage under title XXII of the
Public Health Service Act (42 U.S.C. 300bb-1 et seq.), section
4980B of the Internal Revenue Code of 1986, or part 6 of
subtitle B of title I of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1161 et seq.).
Subtitle B--Limitation on Application of PPACA Plan Requirements
SEC. 121. LIMITING APPLICATION OF REQUIREMENTS TO CONSUMER PROTECTIONS.
(a) Removal of PPACA Plan Requirements, Other Than Certain Consumer
Protections.--
(1) In general.--Notwithstanding any other provision of
law, with respect to group health plans and health insurance
coverage whether or not offered through an Exchange, except as
provided in paragraphs (2) and (3), the provisions of title
XXVII of the Public Health Service Act (42 U.S.C. 300gg et
seq.) as in effect before the date of the enactment of PPACA
shall apply instead of the provisions of such title as in
effect after such date.
(2) PPACA consumer protections continuing to be applied.--
The following sections of the Public Health Service Act, that
were added or amended by subtitles A and C of title I of PPACA,
shall continue to apply to group health plans and to health
insurance coverage offered in the individual and group market:
(A) No lifetime or annual limits.--Section 2711
(relating to no lifetime or annual limits), except in
the case of limited benefit insurance (as defined in
section 122(b)).
(B) Dependent coverage through age 26.--Section
2714 (relating to extension of dependent coverage).
(C) Modified guaranteed availability.--Section 2702
(relating to guaranteed availability of coverage),
subject to paragraph (3) and subsection (c).
(D) Guaranteed renewability.--Section 2703
(relating to guaranteed renewability of coverage).
(E) Prohibiting pre-existing condition
exclusions.--Section 2704 (relating to prohibition on
preexisting conditions).
(F) Prohibiting discrimination based on health
status.--Section 2705 (relating to prohibiting
discrimination against individual participants and
beneficiaries based on health status), subject to
subsection (c).
(G) Non-discrimination in health care.--Section
2706 (relating to non-discrimination in health care).
(3) Application of a late enrollment penalty for those
without continuous coverage.--
(A) In general.--In the case of an individual who
seeks to enroll in health insurance coverage and who,
as of the effective date of such enrollment, does not
have a continuous period of at least 12-months of
creditable coverage, there shall be imposed a late
enrollment penalty in the form of an increase in the
monthly premiums for coverage of under the plan of 20
percent of the monthly premium otherwise determined for
each consecutive full 12-month period (ending before
such effective date) in which the individual was not
enrolled in creditable coverage. Such increase shall
apply during a period, to be specified under
regulations of the Secretary but in no case longer than
3 times the length of the most recent period in which
the individual did not have continuous coverage.
(B) State waiver.--A State may apply to the
Secretary for a waiver of the provisions of
subparagraph (A) and the application of alternative
provisions providing incentives for State residents to
enroll in creditable coverage and maintain continuous
creditable coverage. The Secretary shall approve such
waiver if the Secretary determines that the alternative
provisions provide similar or greater incentives for
such enrollment than the incentives otherwise
applicable.
(4) Coordinating implementation of pre-ppaca phsa
provisions with ppaca consumer protections.--
(A) In general.--In applying this subsection, the
provisions described in paragraph (2) shall be treated
as if they were included in title XXVII of the Public
Health Service Act, as in effect on the day before the
date of enactment of PPACA, and, with respect to group
health plans and health insurance coverage offered in
connection with such plans, in part 7 of subtitle B of
title I of the Employee Retirement and Income Security
Act of 1974 (29 U.S.C. 181 et seq.), and, with respect
to group health plans, in chapter 100 of the Internal
Revenue Code of 1986 as follows:
(i) Lifetime limits; dependent coverage.--
The provisions described in paragraphs (2)(A)
and (2)(B) shall be treated as included--
(I) with respect to group health
plans (and health insurance coverage
offered with respect to such plans),
under subpart 2 of part A of title
XXVII of the Public Health Service Act
and subpart B of part 7 of subtitle B
of title I of the Employee Retirement
and Income Security Act of 1974;
(II) with respect to group health
plans, under subchapter B of chapter
100 of the Internal Revenue Code of
1986; and
(III) with respect to individual
health insurance coverage, under
subpart 2 of part B of title XXVII of
the Public Health Service Act.
(ii) Remaining provisions.--The provision
described in paragraph (2) (other than in
subparagraph (A) or (B) of such paragraph)
shall be treated as included--
(I) with respect to group health
plans (and health insurance coverage
offered with respect to such plans),
under subpart 1 of part A of title
XXVII of the Public Health Service Act
and subpart A of part 7 of subtitle B
of title I of the Employee Retirement
and Income Security Act of 1974;
(II) also with respect to group
health plans, under subchapter A of
chapter 100 of the Internal Revenue
Code of 1986; and
(III) with respect to individual
health insurance coverage, under
subpart 1 of part B of title XXVII of
the Public Health Service Act.
(B) Conflicting provisions.--In the case described
in paragraph (1) where there is a conflict between a
provision described in paragraph (2) and a provision of
law described in paragraph (1), the provision described
in paragraph (2) shall control and the Secretary, in
consultation with the Secretary of the Treasury and the
Secretary of Labor, shall establish such rules as may
be necessary to carry out this subparagraph.
(5) Conforming amendments.--
(A) ERISA.--Section 715 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1185d) is
amended--
(i) in subsection (a), by striking
``subsection (b)'' and inserting ``subsections
(b) and (c)''; and
(ii) by adding at the end the following new
subsection:
``(c) Additional Exception.--Pursuant to section 121 of the World's
Greatest Healthcare Plan Act of 2016, the provisions of part A of title
XXVII of the Public Health Service Act referred to in subsection (a),
other than those provisions specified in section 121(a)(2) of the
World's Greatest Healthcare Plan Act of 2016, shall not apply to plans
and coverage described in subsection (a), whether or not the plans or
coverage are offered through an Exchange established under the Patient
Protection and Affordable Care Act.''.
(B) IRC.--Section 9815 of the Internal Revenue Code
of 1986 is amended--
(i) in subsection (a), by striking
``subsection (b)'' and inserting ``subsections
(b) and (c)''; and
(ii) by adding at the end the following new
subsection:
``(c) Additional Exception.--Pursuant to section 121 of the World's
Greatest Healthcare Plan Act of 2016, the provisions of part A of title
XXVII of the Public Health Service Act referred to in subsection (a),
other than those provisions specified in section 121(a)(2) of the
World's Greatest Healthcare Plan Act of 2016, shall not apply to plans
described in subsection (a).''.
(b) State Flexibility in Ensuring Orderly Health Insurance Market
Outside of an Exchange.--
(1) In general.--With respect to health insurance coverage
offered in a State, the State may, in consultation with the
Secretary, take such steps, such as limiting the availability
of general open enrollment periods, imposing delays in the
effectiveness for coverage, permitting differentials in
premiums based on age and other factors, as the State
determines necessary in order to ensure an orderly market for
health insurance coverage in the State that is not offered
through an Exchange. Such steps may include the establishment
of such initial open enrollment period during which qualified
residents may enroll in health insurance coverage without the
imposition of any underwriting as the State determines to be
appropriate in ensuring initial access to such coverage.
(2) Flexibility in imposing additional requirements.--
Nothing in this section shall be construed as preventing a
State from continuing to apply, to health insurance coverage
issued in the State, requirements under the provisions of title
XXVII of the Public Health Service Act (as amended by subtitles
A and C of title I of PPACA) that are not continued under
subsection (a).
(3) State flexibility with respect to exchanges.--A State
may waive such provisions of part 2 of subtitle D of title I of
PPACA, in relation to the establishment of an Exchange in such
State, as the State determines appropriate in order for the
State to implement and administer a market-based system for the
availability of health insurance coverage throughout the State.
(4) State default enrollment option.--
(A) Enrollment, subject to individual opt-out.--
Subject to subparagraph (D), a State may elect to
provide for the enrollment of residents of the State
who are uninsured in default health insurance coverage
(as defined in subparagraph (B)) and establishing a
Roth HSA for such residents who do not have a Roth HSA
unless the resident has affirmatively elected not to be
so enrolled and not to have such an account.
respectively. If a State makes such an election, the
State shall permit eligible residents to enroll in such
coverage on a continuous basis.
(B) Default health insurance coverage defined.--In
this paragraph, the term ``default health insurance
coverage'' means, with respect to a State, health
insurance coverage that--
(i) is a high deductible health plan
(within the meaning of section 223(c)(2) of the
Internal Revenue Code of 1986) with
prescription drug coverage limited to generic
drugs for a limited number of chronic
conditions (commonly referred to as tier I
pharmacy benefit);
(ii) meets such requirements as may apply
to qualify for the payment of plan premiums
from a health savings account under section 223
of such Code (such as age-related premiums and
limitation on imposition of preexisting
condition exclusions);
(iii) has a provider network for covered
benefits that is adequate (as determined
consistent with guidelines issued by the
Secretary) to ensure access to health benefits
under such plan;
(iv) provides for coverage of childhood
immunizations without cost sharing requirements
to the extent such immunizations have in effect
a recommendation from the Advisory Committee on
Immunization Practices of the Centers for
Disease Control and Prevention with respect to
the individual involved; and
(v) meets such other requirements as the
State may specify.
(C) Roth hsa.--In this paragraph, the term ``Roth
HSA'' shall have the meaning given such term by section
530A(c) of the Internal Revenue Code of 1986.
(D) Simple process for individuals to opt-out.--As
a condition of a State providing for the enrollment
function described in subparagraph (A), the State shall
establish an easy-to-use and transparent means by which
individuals may elect not to be enrolled in default
health insurance coverage or to have a Roth HSA
established on the individual's behalf, or both.
(c) Inapplicability of Required Essential Health Benefits.--
(1) In general.--Notwithstanding any other provision of
law, no health benefits plan shall be required by reason of
Federal law to comply with the requirements of sections
1301(a)(1)(B) and 1302 of PPACA (42 U.S.C. 18021(a)(1)(B),
18022).
(2) State flexibility.--Nothing in this subsection shall be
construed as preventing a State from applying, at its option
with respect to health insurance coverage offered through an
Exchange or otherwise in the State, the requirements referred
to in paragraph (1).
(d) Effective Date; Transition.--
(1) In general.--Subsections (a), (b), and (c) shall apply
to plan years beginning after the date of the enactment of this
Act.
(2) Sunsetting required contribution for aca reinsurance
program.--No contribution shall be required under section 1341
of PPACA (42 U.S.C. 18061) from any group health plan or health
insurance issuer for portions of plans years occurring in
months beginning more than 30 days after the date of the
enactment of this Act.
(e) Secretarial Guidance.--The Secretary of Health and Human
Services, in coordination with the Secretary of Labor and the Secretary
of the Treasury, shall provide such guidance as may be necessary for
the coordinated implementation of this section on a timely basis.
(f) Transferring Health Plan Records Upon Changing Plans.--
(1) In general.--In the case of an individual who is
covered under health insurance coverage or as a beneficiary or
participant in a group health plan (as such terms are defined
in section 2791 of the Public Health Service Act), if such
coverage is ended and the individual obtains other health
insurance coverage, group health plan coverage, or other
creditable coverage (as defined for purposes of title XXVII of
such Act), the issuer of the prior coverage or administrator of
the prior plan shall forward information respecting such prior
coverage to the issuer of the new coverage or administrator of
the new plan or coverage, as the case may be, subject to such
rules as the Secretary establishes regarding the right of the
beneficiary or participant to object to such forwarding of
information.
(2) Treatment as plan requirement under phsa, erisa, irc.--
The requirement of paragraph (1) shall apply as if it were
included in part A of title XXVII of the Public Health Service
Act, including for purposes of applying section 715 of the
Employee Retirement Income Security Act of 1976 (29 U.S.C.
1185d) and section 9815 of the Internal Revenue Code of 1986.
(g) Application of Risk Adjustment.--
(1) In general.--Any issuer that offers health insurance
coverage in the individual market in any of the 50 States or
the District of Columbia shall participate in a risk adjustment
mechanism under this subsection with respect to any health
insurance coverage it so offers in such market, whether or not
such coverage is offered through an Exchange.
(2) Form and design of risk adjustment mechanism.--The
Secretary shall, in consultation with the National Association
of Insurance Commissioners and other interested parties,
develop a mechanism to permit the adjustment of risk among
health insurance coverage offered in the individual market
throughout the 50 States and the District of Columbia. Such
mechanism shall be designed to effect the same type of risk
adjustment among such coverage that is applicable to risk
adjustment of payments among Medicare Advantage organizations
under part C of title XVIII of the Social Security Act (42
U.S.C. 1395w-21 et seq.).
(3) Transition for new coverage.--The mechanism developed
under paragraph (2) shall provide for transitional protection,
over a 3-year period, in the case of health insurance coverage
that has not been previously marketed.
(4) Development of further risk adjustment mechanism.--The
Secretary shall request the National Association of Insurance
Commissioners to develop a permanent model for adjustment of
risk among health insurance issuers with respect to health
insurance coverage offered in the individual market, with the
intention that such a model would substitute for the mechanism
developed under paragraph (2).
(5) Treatment as plan requirement under phsa, erisa, irc.--
The requirement of paragraph (1) shall apply as if it were
included in part A of title XXVII of the Public Health Service
Act, including for purposes of applying section 715 of the
Employee Retirement Income Security Act of 1976 (29 U.S.C.
1185d) and section 9815 of the Internal Revenue Code of 1986.
SEC. 122. OFFERING OF BASIC HEALTH INSURANCE; PROTECTION OF ASSETS FROM
LIABILITY OR ATTACHMENT OR SEIZURE.
(a) Requirement for Exchanges.--
(1) In general.--No tax credit shall be allowable under
section 36B or 36C of the Internal Revenue Code of 1986 for
residents of a State unless any Exchange established in the
State provides for the offering of basic health insurance in
all areas of the State.
(2) Basic health insurance defined.--In this subsection,
the term ``basic health insurance'' means, with respect to a
State, such health insurance coverage as the State may specify
and includes limited benefit insurance (as defined in
subsection (b)).
(b) Limited Benefit Insurance Defined.--
(1) In general.--In this section, the term ``limited
benefit insurance'' means individual health insurance coverage
that, with respect to a plan year, imposes (consistent with
paragraph (2)) an annual limit on the amounts that may be
payable under the coverage with respect to expenses incurred
for items and services furnished in that plan year.
(2) Specification of annual limit; variation in limit for
individual and family coverage.--The Secretary shall specify,
from year to year, the annual limit (or range of annual limits)
that may be applied under paragraph (1). Such a limit may
distinguish between coverage that is only provided for an
individual and coverage that is provided also for family
members of the individual.
(c) Protection of Certain Assets in Case of Individuals Covered
Under Limited Benefit Insurance.--
(1) In general.--Notwithstanding any other provision of
law, if an individual is covered under limited benefit
insurance for a plan year and benefits under such insurance
have reached the annual limit under such insurance for items
and services furnished in the plan year, the individual is not
liable for debt incurred and arising from the provision of
subsequently furnished items and services during the plan year,
regardless of whether benefits are otherwise covered for such
items and services under such policy, insofar as the liability
attributable to such items and services exceeds--
(A) the bankruptcy valuation of the individual's
property at the time the debt is incurred; reduced by
(B) such annual limit of benefits under the limited
benefit insurance for the plan year.
Property in the amount so protected from liability shall be
exempt and immune from attachment or seizure with respect to
any judgment related to such debt.
(2) Bankruptcy valuation defined.--In this subsection, the
term ``bankruptcy valuation'' means, with respect to property
of an individual as of a date, the value of the property as of
such date as determined as if the individual were a debtor in a
bankruptcy case that could have been filed under title 11 of
the United States Code and the property could not be exempt
under section 522 of such title.
(3) No requirement for providers to furnish subsequent
services without ensuring payment.--Except as may be explicitly
provided in other law (such as under section 1867 of the Social
Security Act (42 U.S.C. 1395dd), popularly known as EMTALA), a
health care provider is not required to furnish any items or
services to an individual who has exhausted benefits under
limited benefit insurance for a plan year without the
individual (or another person on the individual's behalf)
providing for such advance or guarantee of payment for such
items and services as may be arranged between the health care
provider and the individual.
Subtitle C--Universal Health Insurance Tax Benefit
SEC. 131. UNIVERSAL HEALTH INSURANCE TAX BENEFIT.
(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. UNIVERSAL HEALTH INSURANCE TAX CREDIT.
``(a) In General.--In the case of a taxpayer who is a qualified
resident, there shall be allowed as a credit against the tax imposed by
this subtitle for any taxable year an amount equal to the universal
health credit amount of the taxpayer for the taxable year.
``(b) Universal Health Credit Amount.--For purposes of this
section--
``(1) In general.--The term `universal health credit
amount' means the sum of the amounts determined under paragraph
(2) with respect to all months of the taxpayer for the taxable
year.
``(2) Monthly credit amount.--
``(A) In general.--Subject to paragraph (3), the
amount determined under this paragraph with respect to
any month shall be an amount equal to the sum of--
``(i) \1/12\ of $2,500 in the case of any
month the first day of which the taxpayer is a
qualified resident and is covered by creditable
coverage (twice such amount in the case of a
joint return if both spouses are so covered by
creditable coverage and are qualified
residents), plus
``(ii) \1/12\ of an amount equal to $1,500
multiplied by the number of qualifying children
(within the meaning of section 152(c)) who are
qualified residents and--
``(I) for whom the taxpayer is
allowed a deduction under section 151
for the taxable year in which such
month ends, and
``(II) who are covered by
creditable coverage on the first day of
such month.
``(B) Carryforward of monthly credit amount in case
credit amount exceeds hsa contributions and premium
payments.--In the case of any month for which the
credit amount determined with respect to the taxpayer
under subparagraph (A) exceeds the limitation amount
determined with respect to the taxpayer for such month
under paragraph (3), such excess may be carried forward
to any subsequent month during the taxable year for
purposes of determining the credit amount for such
month under this paragraph.
``(3) Monthly limitation.--
``(A) In general.--The amount determined under
paragraph (2) for any month of the taxpayer shall not
exceed the sum of--
``(i) the amounts contributed to a health
savings account of the taxpayer for such month,
plus
``(ii) the premiums paid by the taxpayer
for creditable coverage.
``(B) Carryforward of monthly limitation in case
hsa contributions and premium payments exceed monthly
credit amount.--In the case of any month for which the
amount determined with respect to the taxpayer under
subparagraph (A) exceeds the credit amount determined
with respect to the taxpayer for such month under
paragraph (2), such excess may be carried forward to
any subsequent month during the taxable year for
purposes of determining the limitation under
subparagraph (A).
``(4) Adjustment for limited benefit insurance.--In the
case of a taxpayer whose only health insurance coverage for a
month is limited benefit insurance (as defined in section
122(b) of the World's Greatest Healthcare Plan Act of 2016),
the amount determined under paragraph (2) shall be decreased by
such proportion as the Secretary, in consultation with the
Secretary of Health and Human Services, determines appropriate,
taking into account the ratio of the actuarial value of such
limited benefit insurance to the average actuarial value of
health insurance coverage that is not limited benefit
insurance.
``(5) Adjustment for geographic area and age of covered
individual.--The amount determined under paragraph (2) shall be
adjusted, in a manner specified by the Secretary, in
consultation with and based on data collected by the Secretary
of Health and Human Services, to take into account the age and
area of residence of a taxpayer or other covered individual
based on the ratio of the average cost of typical individual
health insurance coverage for an individual of such age and
residing in such area to the national average cost of such
typical health insurance coverage. Such adjustment shall be
made in a manner so that the application of this paragraph is
estimated not to change the aggregate amount of the credits
allowable under this section for taxable years ending in a
year.
``(c) Coordination With Employer-Provided Health Insurance Tax
Subsidy.--
``(1) Credit limited by employer-provided health insurance
tax subsidy.--The credit allowed under this section for any
taxable year shall not exceed an amount equal to the excess (if
any) of--
``(A) the maximum credit which would be allowed for
all months of the taxpayer during the taxable year
(determined under subsection (b)(2) and without regard
to this subsection, the limitation under subsection
(b)(3), and any reduction under subsection (d)(1)),
over
``(B) the taxpayer's employer-provided health
insurance tax subsidy for the taxable year.
``(2) Recapture of excess employer-provided health
insurance tax subsidy.--In the case of a taxpayer for whom the
amount described in subparagraph (B) of paragraph (1) exceeds
the amount described in subparagraph (A) of such paragraph for
any taxable year, the credit allowed under this section shall
be treated as zero and the tax imposed by this chapter for the
taxable year shall be increased by the amount of such excess.
``(3) Employer-provided health insurance tax subsidy.--For
purposes of this subsection--
``(A) In general.--The term `employer-provided
health insurance tax subsidy' means, with respect to
any taxpayer for a taxable year, the sum of--
``(i) the Federal income tax subsidy of the
taxpayer for the taxable year, plus
``(ii) the Federal payroll tax subsidy of
the taxpayer for the taxable year.
``(B) Federal income tax subsidy.--The term
`Federal income tax subsidy' means, with respect to any
taxpayer for the taxable year, the excess (if any) of--
``(i) the amount of tax that would have
been imposed by this chapter for the taxable
year had such tax been determined without
regard to this section and by including amounts
otherwise excluded from gross income which were
paid by or on behalf of the taxpayer for
employer-provided insurance that constitutes
medical care, over
``(ii) the amount of tax imposed by this
chapter for the taxable year (determined
without regard to this section).
``(C) Federal payroll tax subsidy.--The term
`Federal payroll tax subsidy' means, with respect to
any taxpayer for the taxable year, the excess (if any)
of--
``(i) the sum of--
``(I) the amount of tax that would
have been imposed by chapter 21 with
respect to any wages of the taxpayer
paid during the taxable year had such
tax been determined by including
amounts otherwise excluded from wages
which were paid by or on behalf of the
taxpayer during the taxable year for
employer-provided insurance that
constitutes medical care, plus
``(II) the amount of tax that would
have been imposed by chapter 2 on any
self-employment income of the taxpayer
for such taxable year had self-
employment income been determined
without regard to any deduction from
gross income for amounts paid for
insurance which constitutes medical
care for the taxpayer, the taxpayer's
spouse, and any qualifying children
(within the meaning of section 152) for
whom the taxpayer is allowed a
deduction under section 151 for the
taxable year, over
``(ii) the amount of tax imposed with
respect to the taxpayer during such taxable
year under chapter 21 and for such taxable year
under chapter 2.
``(4) No credit or recapture for insurance provided by
employer electing exclusion regime.--In the case of an
individual who for any month is covered by insurance that
constitutes medical care and that is provided by an employer
with respect to which an election is in effect for such month
under section 131(b) of the World's Greatest Healthcare Plan
Act of 2016--
``(A) the monthly credit amount determined under
subsection (b)(2) for such month with respect to such
individual shall be zero, and
``(B) such month shall not be taken into account
for purposes of determining any recapture under
paragraph (2) with respect to such individual.
``(d) Reconciliation of Credit and Advance Credit.--
``(1) In general.--The amount of the credit allowed under
this section for any taxable year (after the application of
subsections (b) and (c)) shall be reduced (but not below zero)
by the amount of any advance payment of such credit under
subsection (e)(1).
``(2) Excess advance payments.--
``(A) In general.--If the advance payments to a
taxpayer under subsection (e)(1) 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.--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 not 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 The applicable dollar amount is:
(expressed as a percent of
poverty line) is:
Less than 200%..................................... $600
At least 200% but less than 300%................... $1,500
At least 300% but less than 400%................... $2,500
``(e) Special Rules.--For purpose of this section--
``(1) Advance payment program.--
``(A) In general.--The Secretary of the Treasury,
in consultation with the Secretary of Health and Human
Services, shall establish a program--
``(i) to make advance determinations with
respect to the eligibility of individuals for
the credit allowed under this section, and
``(ii) to make advance payments of the
credit allowed under this section, at the
election of any such individual so eligible,
directly to the health savings account of any
such individual, or, as a subsidy to the cost
of health insurance coverage provided to any
such individual, to the health insurance issuer
providing such coverage or the person that
administers the plan benefits with respect to
such coverage.
``(B) Program requirements.--Such program shall be
established under rules similar to the rules of section
1412 of the Patient Protection and Affordable Care Act,
as in effect on the day before the date of the
enactment of this section, except that advance
determinations and advance payments shall be made on
request of the individual with respect to whom the
determination is to be made.
``(2) Information requirements.--
``(A) In general.--Each person providing insurance
coverage which constitutes medical care, and each
trustee of a health savings account, shall provide the
following information to the Secretary and to the
taxpayer with respect to such coverage or such account:
``(i) The total premium for the coverage
without regard to the credit under this
section.
``(ii) The aggregate amount of any advance
payment of such credit made with respect to
such coverage or to such account.
``(iii) The name, address, age, and TIN of
the primary insured or account holder (as the
case may be) and the name, age, and TIN of each
other individual obtaining coverage under such
policy of insurance.
``(iv) Any information provided to such
person necessary to determine eligibility for,
and the amount of, such credit.
``(v) Information necessary to determine
whether a taxpayer has received excess advance
payments.
``(B) Exception.--Subparagraph (A) shall not apply
to any coverage with respect to which reporting under
section 6051 is required.
``(3) Indexing.--
``(A) In general.--In the case of any calendar year
beginning after 2016, each of the dollar amounts in
subsection (b)(2) and in the table contained under
subsection (d)(2)(B) shall be equal to such dollar
amount multiplied by the ratio of--
``(i) the current dollar gross domestic
product (as determined based on the third
estimate of the Bureau of Economic Analysis of
the Department of Commerce for the second
quarter of the previous year), to
``(ii) the current dollar gross domestic
product (as so determined) for the second
quarter of 2015.
``(B) Rounding.--If any dollar amount adjusted
under subparagraph (A) is not a multiple of $50, such
amount shall be rounded to the next lowest multiple of
$50.
``(f) Definitions.--For purposes of this section--
``(1) Creditable coverage.--The term `creditable coverage'
has the meaning given such term for purposes of title XXVII of
the Public Health Service Act.
``(2) Qualified resident.--The term `qualified resident'
means an individual who is a citizen or national of the United
States or otherwise lawfully residing in the United States
under color of law.''.
(b) Election by Employer To Make Excise Tax Applicable and To Be
Governed Solely by Exclusion Regime.--
(1) In general.--If an eligible employer makes the election
under this subsection (at such time and in such form and manner
as the Secretary shall prescribe) the tax imposed by section
4980I of the Internal Revenue Code of 1986 shall apply to any
excess benefit with respect to employer-sponsored health
coverage provided by such employer and the credit and recapture
under section 36C of such Code shall not apply with respect to
individuals covered by such coverage. Such election, once made,
may be revoked only with the consent of the Secretary.
(2) Eligible employer.--For purposes of this subsection,
the term ``eligible employer'' means an employer in existence
before the date of the enactment of this Act.
(3) Controlled groups.--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 eligible employer.
(4) Regulations.--The Secretary of the Treasury shall
prescribe such regulations as may be necessary to prevent the
avoidance of the purposes of this subsection.
(c) Excise Tax on High Cost Employer-Sponsored Health Insurance
Only To Apply to Employers Making Election.--Section 4980I(d)(1)(B) of
such Code (relating to exceptions) is amended by striking ``or'' at the
end of clauses (i) and (ii), by striking the period at the end of
clause (iii) and inserting ``, or'', and by adding at the end the
following new clause:
``(iv) any group health plan made available
by an employer which does not have in effect an
election under section 131(b) of the World's
Greatest Healthcare Plan Act of 2016.''.
(d) Disqualification From Exchange Plan Subsidies for Individual
Once They Elect Tax Benefits.--Section 36B(c)(1) of such Code is
amended by adding at the end the following new subparagraph:
``(E) Denial of credit for those electing universal
credit.--In the case of an individual who is allowed a
credit under section 36C for any taxable year, no
credit shall be allowed under this section to such
individual for such taxable year or any subsequent
taxable year.''.
(e) Guidance.--The Secretary of the Treasury shall issue such
guidance as is necessary--
(1) to assist employees and employers in adjusting Federal
income tax withholding to take into account the universal
health insurance tax credit under section 36C of the Internal
Revenue Code of 1986 (and any advance payment thereof), and
(2) to require employers to report to each employee with
respect to periods not longer than quarterly the employer-
provided health insurance tax subsidy (as defined in section
36C(c)(3) of such Code) with respect to such employee for such
period.
(f) Clerical Amendment.--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. Universal health insurance tax credit.''.
(g) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2015.
SEC. 132. APPLICATION OF PORTION OF UNUSED TAX CREDITS BY STATES FOR
INDIGENT HEALTH CARE.
(a) Computation of Unused Credits.--The Secretary, in consultation
with the Secretary of the Treasury, shall calculate for each State for
each year, beginning with 2017, using the most recent data available --
(1) the maximum aggregate amount of credits under section
36C of the Internal Revenue Code of 1986 that would have been
allowed for the year for qualified residents of the State for
taxable years ending in the year if all eligible qualified
residents had qualified for such credits;
(2) the aggregate amount of credits under such section that
were allowed for taxable years ending in that year by qualified
residents of such State; and
(3) 25 percent of the amount by which--
(A) the amount determined under paragraph (1) with
respect to qualified residents of the State for such
year; exceeds
(B) the amount determined under paragraph (2) for
such State for that year.
(b) Appropriation.--For the purpose of making grants to States
under this section, there is hereby appropriated to the Secretary, out
of any funds in the Treasury not otherwise appropriated, for each year
(beginning with 2017) an amount equivalent to the amount determined
under subsection (a)(3) for all States for the year in which such
fiscal year ends, subject to adjustment under subsection (d)(2).
(c) Grants to States for Indigent Assistance.--
(1) Application.--A State may file with the Secretary (in a
form and manner specified by the Secretary) an application to
provide assistance in furnishing health services to indigent
individuals residing in the State. Such application shall
demonstrate the manner in which such assistance is furnished in
an equitable manner to individuals residing in all parts of the
State.
(2) Amount of funds.--From the funds appropriated under
subsection (b) for a year, the amount of funds paid to any
State in any year under this section with an application filed
in accordance with paragraph (1) is equal to an amount
specified in the application, but not to exceed the amount
computed under subsection (a)(3) for the State and the year.
(3) Use of funds.--Funds paid to a State under this
subsection may be used only to assist in the furnishing of
health services to uninsured individuals residing in the State
or for purposes of increasing the payment adjustments made
under sections 1886(d)(5)(F) and 1923 of the Social Security
Act (42 U.S.C. 1395ww(d)(5)(F), 1396r-4) to hospitals that
serve a disproportionate share of such individuals in the
State.
(d) Initial Estimate; Final Calculation and Reconciliation.--
(1) Use of estimates.--The calculations under subsection
(a) for a year shall initially be estimated before the
beginning of the year. Payments under this section to a State
for a year shall be made, subject to reconciliation under
paragraph (2), based on the amount so estimated.
(2) Reconciliation based on final calculation.--The
calculations under subsection (a) for a year shall also be made
after the end of the year. Insofar as the amount calculated
under this paragraph for subsection (a)(3) for a State for a
year exceeds (or is less than) by a material amount from the
amount for subsection (a)(3) estimated and applied for the
State and year under paragraph (1), the amount calculated under
subsection (a)(3) for the State for the 2nd year beginning
after such year, shall be reduced or increased, respectively by
the amount of such excess or deficit.
SEC. 133. MEDICAID OPTION OF ENROLLMENT UNDER PRIVATE PLAN AND
CONTRIBUTION TO AN HSA.
(a) In General.--Notwithstanding any other provision of law, a
State plan under title XIX of the Social Security Act (42 U.S.C. 1396
et seq.) may make available to an individual, who is entitled to
medical assistance for a full range of acute care items and services
under such title and at the individual's option, instead of the medical
assistance otherwise provided, medical assistance consisting of
coverage under a health plan that qualifies for a tax credit under
section 36C of the Internal Revenue Code of 1986, but only if, for each
year the individual receives medical assistance in the form of such
coverage, the State also deposits into a health savings account for the
individual an amount equal to the amount (if any) by which the amount
of the tax credit for the individual under such section exceeds the
cost of coverage of the individual under the plan.
(b) FFP Treatment.--The payments by a State described in subsection
(a) for coverage under a health plan and for deposit into a health
savings account shall be treated as medical assistance for purposes of
section 1903 of the Social Security Act (42 U.S.C. 1396b) and section
1903A of such Act (as added by section 401) and subject to Federal
financial participation, including the application of State matching
payments, in the same manner as other medical assistance furnished
under title XIX of such Act, except that such amount shall be reduced
by the amount of any health insurance credits provided under section
36C of the Internal Revenue Code of 1986 with respect to such coverage
or deposit.
TITLE II--IMPROVING HEALTH SAVINGS ACCOUNTS TO PROMOTE ACCOUNTABILITY
SEC. 201. TRANSITION TO NON-DEDUCTIBLE HSAS.
(a) Non-Deductible HSAs.--Subchapter F of chapter 1 of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
part:
``PART IX--HEALTH SAVINGS ACCOUNTS
``Sec. 530A. Roth HSAs.
``SEC. 530A. ROTH HSAS.
``(a) In General.--With the exception of the taxes imposed by
section 511 (relating to imposition of tax on unrelated business income
of charitable organizations), a Roth HSA shall be exempt from taxation
under this subtitle. No deduction shall be allowed for any contribution
to a Roth HSA.
``(b) Dollar Limitation.--
``(1) In general.--The aggregate amount of contributions
for any taxable year to all Roth HSAs maintained for the
benefit of an individual shall not exceed the sum of the
monthly limitations for any month 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 creditable coverage as of the first day of
such month, $5,000, and
``(B) in the case of an eligible individual who has
family creditable coverage as of the first day of such
month, the amount in effect under subparagraph (A) for
the taxable year multiplied by the number of
individuals (including the eligible individual) covered
under such family creditable coverage as of such day.
``(3) Additional contributions for individuals 55 or
older.--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 $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 Roth HSAs
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 Roth HSAs
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.
``(6) Denial of deduction to dependents.--No contribution
may be made to a Roth HSA under this section by 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 creditable coverage.--
``(i) In general.--If, at any time during
the testing period, the individual is not an
eligible individual, then--
``(I) the 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 shall be increased by the
aggregate amount of all contributions
to the Roth HSA 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.--
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) Roth HSA.--For purposes of this section--
``(1) In general.--The term `Roth HSA' means a trust
created or organized in the United States as a Roth HSA
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) 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.--For purposes of this
section--
``(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) as in effect
on the day before the date of the enactment of the
World's Greatest Healthcare Plan Act of 2016) 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.
``(B) Limitation on health insurance purchased from
account.--Such term shall not include any payment for
health benefits coverage that is not creditable
coverage (as defined in section 36C).
``(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).
``(3) Account beneficiary.--The term `account beneficiary'
means the individual on whose behalf the Roth HSA was
established.
``(4) Certain rules to apply.--Rules similar to the
following rules shall apply for purposes of this section:
``(A) Section 219(f)(3) (relating to time when
contributions deemed made).
``(B) Except as provided in section 106(d), section
219(f)(5) (relating to employer payments).
``(C) Section 408(g) (relating to community
property laws).
``(D) Section 408(h) (relating to custodial
accounts).
``(d) Eligible Individual; Creditable Coverage.--For purposes of
this section--
``(1) Eligible individual.--The term `eligible individual'
means, with respect to any month, any individual who is covered
under creditable coverage as of the 1st day of such month.
``(2) Creditable coverage.--The term `creditable coverage'
shall have the meaning given such term in section 36C(f)(1).
``(e) Tax Treatment of Distributions.--
``(1) Amounts used for qualified medical expenses.--Any
amount paid or distributed out of a Roth HSA 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 Roth HSA
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 Roth HSA of an
individual, paragraph (2) shall not apply to
distributions from the Roth HSAs 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
exceeds the contribution limitation with respect to the
individual for the taxable year.
``(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 Roth
HSA of such beneficiary which is includible in gross
income under paragraph (2) shall be increased by 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 (as defined in section 223) or a Roth HSA to
the account beneficiary to the extent the amount
received is paid into a Roth HSA 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 or a Roth
HSA 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 or Roth HSA which was not
includible in the individual's gross income because of
the application of this paragraph.
``(6) Transfer of account incident to divorce.--The
transfer of an individual's interest in a Roth HSA 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 Roth HSA with respect to which such spouse is the
account beneficiary.
``(7) Treatment after death of account beneficiary.--If an
individual acquires an account beneficiary's interest in a
health savings account by reason of the death of the account
beneficiary, such health savings account shall be treated as if
the individual were the account beneficiary.
``(f) Cost-of-Living Adjustment.--
``(1) In general.--In the case of any calendar year
beginning after 2016, the $5,000 dollar amount in subsection
(b)(2) 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,
determined--
``(i) by substituting `calendar year 2015'
for `calendar year 1992' in subparagraph (B)
thereof, and
``(ii) by substituting `CPI medical care
component' for `CPI'.
``(2) CPI medical care component.--For purposes of this
paragraph, the term `CPI medical care component' means the
medical care component for the Consumer Price Index for All
Urban Consumers published by the Department of Labor.
``(3) Rounding.--If the amount of any increase under the
preceding sentence is not a multiple of $50, such increase
shall be rounded to the next lowest multiple of $50.
``(g) Reports.--The Secretary may require--
``(1) the trustee of a Roth HSA 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 creditable
coverage 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.''.
(b) Limit on Contributions to Deductible Health Savings Accounts.--
Section 223 of such Code is amended by adding at the end the following
new subsection:
``(i) Limited Contributions After 2016.--
``(1) In general.--No contribution may be accepted by a
health savings account after December 31, 2016.
``(2) Exceptions.--Paragraph (1) shall not apply--
``(A) in the case of a rollover contribution
described in subsection (f)(5) or section 220(f)(5), or
``(B) in the case of a month for which an
individual is covered by insurance that constitutes
medical care and that is provided by an employer with
respect to which an election is in effect for such
month under section 131(b) of the World's Greatest
Healthcare Plan Act of 2016.''.
(c) Clerical Amendment.--The table of parts for subchapter F of
chapter 1 of such Code is amended by adding a the end the following new
item:
Part IX. Roth Health Savings Accounts.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2016.
SEC. 202. ELIMINATION OF MEDICAL EXPENSE DEDUCTION.
Section 213 of the Internal Revenue Code of 1986 is amended by
adding at the end the following new subsection:
``(g) Termination.--Except in the case of long-term care premiums
(as defined in subsection (d)(10)), subsection (a) shall not apply to
any amounts paid during any taxable year beginning after December 31,
2015.''.
SEC. 203. TREATMENT OF HSA AFTER DEATH OF ACCOUNT BENEFICIARY.
(a) In General.--Section 223(f)(8) of the Internal Revenue Code of
1986 is amended to read as follows:
``(8) Treatment after death of account beneficiary.--If an
individual acquires an account beneficiary's interest in a
health savings account by reason of the death of the account
beneficiary, such health savings account shall be treated as if
the individual were the account beneficiary.''.
(b) Effective Date.--The amendment made by this section shall apply
with respect to interests acquired after the date of the enactment of
this Act.
SEC. 204. TREATMENT OF DIRECT PRIMARY CARE.
(a) HSAs.--
(1) Roth hsa.--Section 530A(c)(2)(A) of the Internal
Revenue Code of 1986, as added by this Act, is amended by
adding at the end the following: ``Such term shall include the
payment of a monthly or other prepaid amount for the furnishing
(or access to the furnishing) by a physician or group of
physicians of physician professional services (and ancillary
services).''.
(2) HSA.--Section 223(d)(2)(A) of such Code is amended by
adding at the end the following: ``Such term shall include the
payment of a monthly or other prepaid amount for the furnishing
(or access to the furnishing) by a physician or group of
physicians of physician professional services (and ancillary
services).''.
(b) Not Treated as Health Insurance Coverage.--
(1) In general.--For purposes of title XXVII of the Public
Health Service Act, subtitle B of title I of the Employee
Retirement and Income Security Act of 1974, PPACA, and this
Act, the offering of direct primary care shall not be treated
as the offering of health insurance coverage and shall not be
subject to regulations as such coverage under such Acts.
(2) Direct primary care defined.--In this subsection, the
term ``direct primary care'' means the furnishing (or access to
the furnishing) by a physician or group of physicians of
physician professional services (and ancillary services) in
return for payment of a monthly or other prepaid amount.
TITLE III--STATE FLEXIBILITY IN REGULATION OF HEALTH INSURANCE COVERAGE
SEC. 301. STATE FLEXIBILITY IN REGULATION OF HEALTH INSURANCE COVERAGE.
(a) In General.--States are given the flexibility under section
122(b) to revise their regulations of the health insurance marketplace,
without regard to many of the requirements imposed under PPACA, in
order to promote freedom of choice of affordable health insurance
coverage options offered outside of an Exchange.
(b) Construction.--Nothing in the Employee Retirement and Income
Security Act of 1974 or of any amendments made by the Health Insurance
Portability and Accountability Act of 1996 shall be interpreted as
preventing an employer from offering, or making an employer
contribution towards, individual health insurance coverage for
employees and dependent family members.
TITLE IV--MEDICAID PAYMENT REFORM
SEC. 401. MEDICAID PAYMENT REFORM.
(a) In General.--Title XIX of the Social Security Act (42 U.S.C.
1396 et seq.) is amended by inserting after section 1903 the following
section:
``SEC. 1903A. REFORMED PAYMENT TO STATES.
``(a) Reformed Payment System.--
``(1) In general.--For quarters beginning on or after the
implementation date (as defined in subsection (k)(1)), in lieu
of amounts otherwise payable to a State under this title
(including any payments attributable to section 1923), except
as otherwise provided in this section, the amount payable to
such State shall be equal to the sum of the following:
``(A) Adjusted aggregate beneficiary-based
amount.--The aggregate beneficiary-based amount
specified in subsection (b) for the quarter and the
State, adjusted under subsection (e).
``(B) Chronic care quality bonus.--The amount (if
any) of the chronic care quality bonus payment
specified in subsection (f) for the quarter for the
State.
``(2) Requirement of state share.--
``(A) In general.--A State shall make, from non-
Federal funds, expenditures in an amount equal to its
State share (as determined under subparagraph (B)) for
a quarter for items, services, and other costs for
which, but for paragraph (1), Federal funds would have
been payable under this title.
``(B) State share.--The State share for a State for
a quarter in a fiscal year is equal to the product of--
``(i) the aggregate beneficiary-based
amount specified in subsection (b) for the
quarter and the State; and
``(ii) the ratio of--
``(I) the State percentage
described in subparagraph (D)(ii) for
such State and fiscal year; to
``(II) the Federal percentage
described in subparagraph (D)(i) for
such State and fiscal year.
``(C) Nonpayment for failure to pay state share.--
``(i) In general.--If a State fails to
expend the amount required under subparagraph
(A) for a quarter in a fiscal year, the amount
payable to the State under paragraph (1) shall
be reduced by the product of the amount by
which the State payment is less than the State
share and the ratio of--
``(I) the Federal percentage
described in subparagraph (D)(i) for
such State and fiscal year; to
``(II) the State percentage
described in subparagraph (D)(ii) for
such State and fiscal year.
``(ii) Grace period.--A State shall not be
considered to have failed to provide payment of
its required State share for a quarter under
subparagraph (A) if the aggregate State payment
towards the State's required State share for
the 4-quarter period beginning with such
quarter exceeds the required State share amount
for such 4-quarter period.
``(D) Federal and state percentages.--In this
paragraph, with respect to a State and a fiscal year:
``(i) Federal percentage.--The Federal
percentage described in this clause is 75
percent or, if higher, the Federal medical
assistance percentage for such State for such
fiscal year.
``(ii) State percentage.--The State
percentage described in this clause is 100
percent minus the Federal percentage described
in clause (i).
``(E) Rules for crediting toward state share.--
``(i) General limitation to matchable
expenditures.--A payment for expenditures shall
not be counted toward the State share under
subparagraph (A) unless Federal payments may be
used for such expenditures consistent with
paragraph (3)(B).
``(ii) Further limitations on allowable
expenditures.--A payment for expenditures shall
not be counted towards the State share under
subparagraph (A) if the expenditure is for any
of the following:
``(I) Abortion.--Expenditures for
an abortion.
``(II) Intergovernmental
transfers.--An expenditure that is
attributable to an intergovernmental
transfer.
``(III) Certified public
expenditures.--An expenditure that is
attributable to certified public
expenditures.
``(iii) Crediting fraud and abuse
recoveries.--Amounts recovered by a State
through the operation of its Medicaid fraud and
abuse control unit described in section 1903(q)
shall be fully counted toward the State share
under subparagraph (A).
``(F) Construction.--Nothing in the paragraph shall
be construed as preventing a State from expending, from
non-Federal funds, an amount under this title in excess
of the amount of the State share.
``(G) Determination based upon submitted claims.--
In applying this paragraph with respect to expenditures
of a State for a quarter, the determination of the
expenditures for such State for such quarter shall be
made after the end of the period (which, as of the date
of the enactment of this section, is 2 years) for which
the Secretary accepts claims for payment under this
title with respect to such quarter.
``(3) Use of federal payments.--
``(A) Application of medicaid limitations.--A State
may only use Federal payments received under subsection
(a) for expenditures for which Federal funds would have
been payable under this title but for this section.
``(B) Limitation for certain eligibles.--
``(i) Application of 100 percent federal
poverty line limit on eligibility.--Subject to
clause (iii), a State may not use such Federal
payments to provide medical assistance for an
individual who has an income (as determined
under clause (ii)) that exceeds 100 percent of
the poverty line (as defined in section
2110(c)(5)) applicable to a family of the size
involved.
``(ii) Determination of income using
modified adjusted gross income without any 5
percent increase.--In determining income for
purposes of clause (i) under section
1902(e)(14) (relating to modified adjusted
gross income), the following rules shall apply:
``(I) Application of spend down.--
The State shall take into account the
costs incurred for medical care or for
any other type of remedial care
recognized under State law in the same
manner and to the same extent that such
State takes such costs into account for
purposes of section 1902(a)(17).
``(II) Disregard of 5 percent
increase.--Subparagraph (I) of section
1902(e)(14) (relating to a 5 percent
reduction) shall not apply.
``(iii) Exception.--Clause (i) shall not
apply to an individual who is--
``(I) a woman described in clause
(i) of section 1903(v)(4)(A);
``(II) a child who is an individual
described in clause (i) of section
1905(a);
``(III) enrolled in a State plan
under this title as of the date of the
enactment of this section for the
period of continuous enrollment; or
``(IV) described in section
1902(e)(14)(D) (relating to modified
adjusted gross income).
``(iv) Clarification related to community
spouse.--Nothing in this subparagraph shall
supersede the application of section 1924
(related to community spouse income and
assets).
``(4) Exceptions for pass-through payments.--
``(A) In general.--Paragraph (1) shall not apply,
and amounts shall continue to be payable under this
title (and not under this subsection), in the case of
the following payments (and related administrative
costs and expenditures):
``(i) Payments to territories.--Payments to
a State other than the 50 States and the
District of Columbia.
``(ii) Medicare cost sharing.--Payments
attributable to Medicare cost sharing under
section 1905(p).
``(iii) Pediatric vaccines.--Payments
attributable to section 1928.
``(iv) Emergency services for certain
individuals.--Payments for treatment of
emergency medical conditions attributable to
the application of section 1903(v)(2).
``(v) Indian health care facilities.--
Payments for medical assistance described in
the third sentence of section 1905(b).
``(vi) Employer-sponsored insurance
(esi).--Payments for medical assistance
attributable to payments to employers for
employer-sponsored health benefits coverage.
``(vii) Other populations with limited
benefit coverage.--Other payments that are
determined by the Secretary to be related to a
specified population for which the medical
assistance under this title is limited and does
not include any inpatient, nursing facility, or
long-term care services.
``(B) Certain expenses.--Paragraph (1) shall not
apply, and amounts shall continue to be payable under
this title (and not under this subsection), in the case
of the following:
``(i) Administration of medicare
prescription drug benefit.--Expenditures
described in section 1935(b) (relating to
administration of the Medicare prescription
drug benefit).
``(ii) Payments for hit bonuses.--Payments
under section 1903(a)(3)(F) (relating to
payments to encourage the adoption and use of
certified EHR technology).
``(iii) Payments for design, development,
and installation of mmis and eligibility
systems.--Payments under subparagraphs (A)(i)
and (H)(i) of section 1903(a)(3) for
expenditures for design, development, and
installation of the Medicaid management
information systems and mechanized verification
and information retrieval systems (related to
eligibility).
``(5) Payment of amounts.--
``(A) In general.--Except as the Secretary may
otherwise provide, amounts shall be payable to a State
under this subsection in the same manner as amounts are
payable under subsection (d) of section 1903 to a State
under subsection (a) of such section.
``(B) Information and forms.--
``(i) Submission.--As a condition of
receiving payment under this subsection, a
State shall submit such information, in such
form, and manner, as the Secretary shall
specify, including information necessary to
make the computations under subsections
(c)(2)(C) and (e).
``(ii) Uniform reporting.--The Secretary
shall develop such forms as may be needed to
assure a system of uniform reporting of such
information across States.
``(C) Required reporting of information on medical
loss ratios for managed care.--The information required
to be reported under subparagraph (B)(i) shall include
information on the medical loss ratio with respect to
coverage provided under each Medicaid managed care plan
with a contract with the State under section 1903(m) or
1932.
``(b) Aggregate Beneficiary-Based Amount.--
``(1) In general.--The aggregate beneficiary-based amount
specified in this subsection for a State for a quarter is equal
to the sum of the products, for each of the categories of
Medicaid beneficiaries specified in paragraph (2), of the
following:
``(A) Beneficiary-based quarterly amount.--The
beneficiary-based quarterly amount for such category
computed under subsection (c) for such State for such
quarter.
``(B) Number of individuals in category.--Subject
to subsection (d), the average number of Medicaid
beneficiaries enrolled in such category in the State in
such quarter.
``(2) Categories.--The categories specified in this
paragraph are the following:
``(A) Elderly.--A category of Medicaid
beneficiaries who are 65 years of age or older.
``(B) Blind or disabled.--A category of Medicaid
beneficiaries not described in subparagraph (A) who are
described in section 1937(a)(2)(B)(ii).
``(C) Children.--A category of Medicaid
beneficiaries not described in subparagraph (B) who are
under 21 years of age.
``(D) Other adults.--A category of any Medicaid
beneficiaries who are not described in a previous
subparagraph of this paragraph.
``(c) Computation of Per Beneficiary, Per Category Quarterly
Amount.--
``(1) In general.--For a State, for each category of
beneficiary for a quarter--
``(A) First reform year.--For quarters in the first
reform year (as defined in subsection (k)(2)), the
beneficiary-based quarterly amount is equal to \1/4\ of
the base average per beneficiary Federal payments for
such State for such category determined under paragraph
(2), increased by a factor that reflects the sum of the
following:
``(i) Historical medical care component of
cpi through previous reform year.--The
percentage increase in the historical medical
care component of the Consumer Price Index for
all urban consumers (U.S. city average) from
the midpoint of the base fiscal year (as
defined in paragraph (6)) to the midpoint of
the fiscal year preceding the first reform
year.
``(ii) Projected medical care component of
cpi for the first reform year.--The percentage
increase in the projected medical care
component of the Consumer Price Index for all
urban consumers (U.S. city average) from the
midpoint of the previous fiscal year referred
to in clause (i) to the midpoint of the first
reform year.
``(B) Second and third reform years.--The
beneficiary-based quarterly amount for a State for a
category for quarters in the second reform year or the
third reform year is equal to the beneficiary-based
quarterly amount under this paragraph for such State
and category for the previous reform year increased by
the per beneficiary percentage increase (as defined in
subparagraph (E)) for such category and reform year.
``(C) Fourth through tenth reform years.--The
beneficiary-based quarterly amount for a State for a
category for quarters in a reform year beginning with
the fourth reform year and ending with the tenth reform
year is--
``(i) in the case of a State that is a high
per beneficiary State or a low per beneficiary
State (as defined in paragraph (4)(B)(iii)) for
the category, the amount determined under
clause (i) or (ii) of paragraph (4)(B) for such
State, category, and reform year; or
``(ii) in the case of any other State, the
beneficiary-based quarterly amount under this
paragraph for such State and category for the
previous reform year increased by the per
beneficiary percentage increase for such
category and reform year.
``(D) Eleventh reform year and subsequent reform
years.--The beneficiary-based quarterly amount for a
State for a category for quarters in a reform year
beginning with the eleventh reform year is equal to the
beneficiary-based quarterly amount under this paragraph
for such State and category for the previous reform
year increased by the per beneficiary percentage
increase for such category and reform year.
``(E) Annual percentage increase beginning with
second reform year.--For purposes of this subsection,
the term `per beneficiary percentage increase' means,
for a reform year, the sum of--
``(i) the projected percentage change/
increase, if any, in nominal gross domestic
product from the midpoint of the previous
reform year to the midpoint of the reform year
for which the percentage increase is being
applied; and
``(ii) one percentage point.
``(2) Base per beneficiary, per category amount for each
state.--
``(A) Average per category.--
``(i) In general.--The Secretary shall
determine, consistent with this paragraph and
paragraph (3), a base per beneficiary, per
category amount for each of the 50 States and
the District of Columbia equal to the average
amount, per Medicaid beneficiary, of Federal
payments under this title, including payments
attributable to disproportionate share hospital
payments under section 1923, for each of the
categories of beneficiaries under subsection
(b)(2) for the base fiscal year for each of the
50 States and the District of Columbia.
``(ii) Best available data.--The
determination under clause (i) shall initially
be estimated by the Secretary, based upon the
best available data at the time the
determination is made.
``(iii) Updates.--The determination under
clause (i) shall be updated by the Secretary on
an annual basis based upon improved data. The
Secretary shall adjust the amounts under
subsection (a)(1)(A) to reflect changes in the
amounts so determined based on such updates.
``(B) Exclusion of pass-through payments.--In
computing base per beneficiary, per category amounts
under subparagraph (A)(i) the Secretary shall exclude
payments described in subsection (a)(4).
``(C) Standardization.--
``(i) In general.--In computing each such
amount, the Secretary shall standardize the
amount in order to remove the variation
attributable to the following:
``(I) Risk factors.--Such risk
factors as age, health and disability
status (including high cost medical
conditions), gender, institutional
status, and such other factors as the
Secretary determines to be appropriate,
so as to ensure actuarial equivalence.
``(II) Geographic.--Variations in
costs on a county-by-county basis.
``(ii) Method of standardization.--
``(I) Consultation in development
of risk standardization.--In developing
the methodology for risk
standardization for purposes of clause
(i)(I), the Secretary shall consult
with the Medicaid and CHIP Payment and
Access Commission, the Medicare Payment
Advisory Commission, and the National
Association of Medicaid Directors.
``(II) Method for risk
standardization.--In carrying out
clause (i)(I), the Secretary may apply
the hierarchal condition category
methodology under section
1853(a)(1)(C). If the Secretary uses
such methodology, the Secretary shall
adjust the application of such
methodology to take into account the
differences in services provided under
this title compared to title XVIII,
such as the coverage of long-term care,
pregnancy, and pediatric services.
``(III) Method for geographic
standardization.--The Secretary shall
apply the standardization under clause
(i)(II) in a manner similar to that
applied under section
1853(c)(4)(A)(iii).
``(iii) Application on a national, budget
neutral basis.--The standardization under
clause (i) shall be designed and implemented on
a uniform national basis and shall be budget
neutral so as to not result in any aggregate
change in payments under subsection (a).
``(iv) Response to new risk.--Subject to
clause (iii), the Secretary may adjust the
standardization under clause (i) to respond
promptly to new instances of communicable
diseases and other public health hazards.
``(v) Reference to application of risk
adjustment.--For rules related to the
application of risk adjustment to amounts under
subsection (a)(1)(A), see subsection (e).
``(D) Adjustment for temporary fmap increases.--In
computing each base per beneficiary, per category
amounts under subparagraph (A)(i) the Secretary shall
disregard portions of payments that are attributable to
a temporary increase in the Federal matching rates,
including those attributable to the following:
``(i) PPACA disaster fmap.--Section
1905(aa).
``(ii) ARRA.--Section 5001 of the American
Recovery and Reinvestment Act of 2009 (42
U.S.C. 1396d note).
``(iii) Extraordinary employer pension
contribution.--Section 614 of the Children's
Health Insurance Program Reauthorization Act of
2009 (42 U.S.C. 1396d note).
``(3) Allocation of nonmedical assistance payments.--The
Secretary shall establish rules for the allocation of payments
under this title (other than those payments described in
paragraph (1) or (5) of section 1903(a) and including such
payments attributable to section 1923)--
``(A) among different categories of beneficiaries;
and
``(B) between payments included under subsection
(a)(1) and payments described in subsection (a)(4).
``(4) Transition to a corridor around the national
average.--
``(A) Determination of national average base per
beneficiary, per category amount.--Subject to
subparagraph (C), the Secretary shall determine a
national average base per beneficiary, per category
amount equal to the average of the base per
beneficiary, per category amounts for each of the 50
States and the District of Columbia determined under
paragraph (2), weighted by the average number of
beneficiaries in each such category and State as
determined by the Secretary consistent with subsection
(d) for the base fiscal year.
``(B) Transition adjustment.--
``(i) High per beneficiary states.--In the
case of a high per beneficiary State (as
defined in clause (iii)(I)) for a category, the
beneficiary-based quarterly amount for such
State and category for a quarter in a reform
year (beginning with the fourth reform year and
ending with the tenth reform year) is equal to
the sum of--
``(I) the product of the State-
specific factor for such reform year
(as defined in clause (iv)) and the
beneficiary-based quarterly amount that
would otherwise be determined under
paragraph (1) for such State and
category if the State were a State
described in clause (ii) of paragraph
(1)(C), instead of a State described in
clause (i) of such paragraph; and
``(II) the product of 1 minus the
State-specific factor for such reform
year and the beneficiary-based
quarterly amount that would otherwise
be determined under paragraph (1) for a
State and category if the base per
beneficiary, per category amount
determined under paragraph (2) for the
State and category were equal to 110
percent of the national average base
per beneficiary, per category amount
determined under subparagraph (A) for
such category.
``(ii) Low per beneficiary states.--In the
case of a low per beneficiary State (as defined
in clause (iii)(II)) for a category, the
beneficiary-based quarterly amount for such
State and category for a quarter in a reform
year (beginning with the fourth reform year and
ending with the tenth reform year) is equal to
the sum of--
``(I) the product of the State-
specific factor for such reform year
and the beneficiary-based quarterly
amount that would otherwise be
determined under paragraph (1) for such
State and category if the State were a
State described in clause (ii) of
paragraph (1)(C), instead of a State
described in clause (i) of such
paragraph; and
``(II) the product of 1 minus the
State-specific factor for such reform
year and the beneficiary-based
quarterly amount that would otherwise
be determined under paragraph (1) for a
State and category if the base per
beneficiary, per category amount
determined under paragraph (2) for the
State and category were equal to 90
percent of the national average base
per beneficiary, per category amount
determined under subparagraph (A) for
such category.
``(iii) High and low per beneficiary states
defined.--In this subparagraph:
``(I) High per beneficiary state.--
The term `high per beneficiary State'
means, with respect to a category, a
State for which the base per
beneficiary, per category amount
determined under paragraph (2) for such
category is greater than 110 percent of
the national average base per
beneficiary, per category amount
determined under subparagraph (A) for
such category.
``(II) Low per beneficiary state.--
The term `low per beneficiary State'
means, with respect to a category, a
State for which the base per
beneficiary, per category amount
determined under paragraph (2) for such
category is less than 90 percent of the
national average base per beneficiary,
per category amount determined under
subparagraph (A) for such category.
``(iv) State-specific factor.--In this
subparagraph, the term `State-specific factor'
means--
``(I) for the fourth reform year,
\7/8\; and
``(II) for a subsequent reform
year, the State-specific factor under
this clause for the previous reform
year minus \1/8.\
``(C) No additional expenditures.--
``(i) Determination of increase in federal
expenditures.--For each category for each
reform year (beginning with the fourth reform
year and ending with the tenth reform year),
the Secretary shall determine whether the
application of this paragraph--
``(I) to the category for the
reform year will result in an aggregate
increase in the aggregate Federal
expenditures under subsection (a); and
``(II) to all the categories for
the reform year will result in a net
aggregate increase in the aggregate
Federal expenditures under subsection
(a).
``(ii) Adjustment.--If the Secretary
determines under clause (i)(II) that the
application of this paragraph to all the
categories for a reform year will result in a
net aggregate increase in the aggregate Federal
expenditures under subsection (a), the
Secretary shall reduce the national average
base per beneficiary, per category amount
computed under subparagraph (A) for each of the
categories determined under clause (i)(I) for
which there will be an aggregate increase in
the aggregate Federal expenditures under
subsection (a) by such uniform percentage as
will ensure that there is no net aggregate
Federal expenditure increase described in
clause (i)(II) for the reform year.
``(5) Reports on per beneficiary rates; appeals.--
``(A) Report to states.--Not later than 8 months
after the date of the enactment of this section, the
Secretary shall submit to each State the Secretary's
initial determination of--
``(i) the base per beneficiary, per
category amounts under paragraph (2) for such
State; and
``(ii) the national average base per
beneficiary, per category amounts under
paragraph (4)(A).
``(B) Opportunity to appeal.--Not later than 3
months after the date a State receives notice of the
Secretary's initial determination of such base per
beneficiary, per category amounts for such State under
subparagraph (A)(i), the State may file with the
Secretary, in a form and manner specified by the
Secretary, an appeal of such determination.
``(C) Determination on appeal.--Not later than 3
months after receiving such an appeal, the Secretary
shall make a final determination on such amounts for
such State. If no such appeal is received for a State,
the Secretary's initial determination under
subparagraph (A)(i) shall become final.
``(6) Base fiscal year defined.--In this section, the term
`base fiscal year' means the latest fiscal year, ending before
the date of the enactment of this section, for which the
Secretary determines that adequate data are available to make
the computations required under this subsection.
``(d) Not Counting Individuals To Account for Excluded Payments.--
Under rules specified by the Secretary, individuals shall not be
counted as Medicaid beneficiaries for purposes of subsection (b)(1)(B)
and subsection (c)(2)(A) in proportion to the extent that such
individuals are receiving medical assistance for which payments
described under subsection (a)(4)(A) are made.
``(e) Risk Adjustment.--
``(1) In general.--The amount under subsection (a)(1)(A)
shall be adjusted under this subsection in an appropriate
manner, specified by the Secretary and consistent with
paragraph (2), to take into account--
``(A) the factors described in subsection
(c)(2)(C)(i)(I) within a category of beneficiaries; and
``(B) variations in costs on a county-by-county
basis for medical assistance and administrative
expenses.
``(2) Method of adjustment.--
``(A) In general.--The adjustments under paragraph
(1) shall be made in a manner similar to the manner in
which similar adjustments are made under subsection
(c)(2)(C) and consistent with the requirements of
clause (iii) of such subsection and subparagraph (B).
``(B) Biannual update of risk adjustment
methodology.--In applying clause (i)(I) of subsection
(c)(2)(C) for purposes of subparagraph (A), the
Secretary shall, in consultation with the entities
described in clause (ii)(I) of such subsection, update
the risk adjustment methodology applied as appropriate
not less often than every 2 years.
``(f) Chronic Care Quality Bonus Payments.--
``(1) Determination of bonus payments.--If the Secretary
determines that, based on the reports under paragraph (5), with
respect to categories of chronic disease for which chronic care
performance targets had been established under paragraph (3)
for each category of Medicaid beneficiaries specified under
subsection (b)(2) such targets have been met by a State for a
reform year, the Secretary shall make an additional payment to
such State in the amount specified in paragraph (6) for each
quarter in the succeeding reform year. Such payments shall be
made in a manner specified by the Secretary and may only be
used consistent with subsection (a)(3).
``(2) Identification of categories of chronic disease.--The
Secretary shall determine the categories of chronic disease for
which bonus payments may be available under this subsection for
each category of Medicaid beneficiaries.
``(3) Adoption of quality measurement system and
identification of performance targets.--
``(A) System and data.--With respect to the
categories of chronic disease under paragraph (2), the
Secretary shall adopt a quality measurement system that
uses data described in paragraph (4) and is similar to
the Five-Star Quality Rating System used to indicate
the performance of Medicare Advantage plans under part
C of title XVIII.
``(B) Targets.--Using such system and data, the
Secretary shall establish for each reform year the
chronic care performance targets for purposes of the
payments under paragraph (1). Such performance targets
shall be established in consultation with States,
associations representing individuals with chronic
illnesses, entities providing treatment to such
individuals for such chronic illnesses, and other
stakeholders, including the National Association of
Medicaid Directors and the National Governors
Association.
``(4) Data to be used.--The data to be used under paragraph
(3) shall include--
``(A) data collected through methods such as--
``(i) the `Healthcare Effectiveness Data
and Information Set' (also known as `HEDIS')
(or an appropriate successor performance
measurement tool);
``(ii) the `Consumer Assessment of
Healthcare Providers and Systems' (also known
as `CAHPS') (or an appropriate successor
performance measurement tool); and
``(iii) the `Health Outcomes Survey' (also
known as `HOS') (or an appropriate successor
performance measurement tool); and
``(B) other data collected by the State.
``(5) Reports.--
``(A) In general.--Each State shall collect,
analyze, and report to the Secretary, at a frequency
and in a manner to be established by the Secretary,
data described in paragraph (4) that permit the
Secretary to monitor the State's performance relative
to the chronic care performance targets established
under paragraph (3).
``(B) Review and verification.--The Secretary may
review the data collected by the State under
subparagraph (A) to verify the State's analysis of such
data with respect to the performance targets under
paragraph (3).
``(6) Amount of bonus payments.--
``(A) In general.--Subject to subparagraphs (B) and
(C), with respect to each category of Medicaid
beneficiaries, in the case of a State that the
Secretary determines, based on the chronic care
performance targets set under paragraph (3) for a
reform year for such category, performs--
``(i) in the top five States in such
category, subject to subparagraph (C)(ii), the
amount of the bonus for each quarter in the
succeeding reform year shall be 10 percent of
the payment amount otherwise paid to the State
under subsection (a) for individuals enrolled
under the plan within such category;
``(ii) in the next five States in such
category, subject to subparagraph (C)(ii), the
amount of the bonus for each such quarter shall
be 5 percent of the payment amount otherwise
paid to the State under subsection (a) for
individuals enrolled under the plan within such
category;
``(iii) in the next five States in such
category, subject to clauses (i) and (iii) of
subparagraph (C), the amount of the bonus for
each such quarter shall be 3 percent of the
payment amount otherwise paid to the State
under subsection (a) for individuals enrolled
under the plan within such category;
``(iv) in the next five States in such
category, subject to clauses (i) and (iii) of
subparagraph (C), the amount of the bonus for
each such quarter shall be 2 percent of the
payment amount otherwise paid to the State
under subsection (a) for individuals enrolled
under the plan within such category; and
``(v) in the next five States in such
category, subject to clauses (i) and (iii) of
subparagraph (C), the amount of the bonus for
each such quarter shall be 1 percent of the
payment amount otherwise paid to the State
under subsection (a) for individuals enrolled
under the plan within such category.
``(B) Aggregate annual limit for each category of
medicaid beneficiaries.--
``(i) In general.--In no case may the
aggregate amount of bonuses under this
subsection for quarters in a reform year for a
category of Medicaid beneficiaries exceed the
limit specified in clause (ii) for the reform
year.
``(ii) Limit.--The limit specified in this
clause--
``(I) for the second reform year is
equal to $250,000,000; or
``(II) for a subsequent reform year
is equal to the limit specified in this
clause for the previous reform year
increased by the per beneficiary
percentage increase determined under
paragraph (1)(E) of subsection (c).
``(C) Limitation and proration of bonuses based on
application of aggregate limit.--
``(i) No bonus for third or subsequent
tiers unless aggregate limit not reached on
first two tiers.--No bonus shall be payable
under clause (iii), (iv), or (v) of
subparagraph (A) for a category of Medicaid
beneficiaries for a quarter in a reform year
unless the aggregate amount of bonuses under
clauses (i) and (ii) of such subparagraph for
such category and reform year is less than the
limit specified in subparagraph (B)(ii) for the
reform year.
``(ii) Proration for first two tiers.--If
the aggregate amount of bonuses under clauses
(i) and (ii) of subparagraph (A) for a category
of Medicaid beneficiaries for quarters in a
reform year exceeds the limit specified in
subparagraph (B)(ii) for the reform year, the
amount of each such bonus shall be prorated in
a manner so the aggregate amount of such
bonuses is equal to such limit.
``(iii) Proration for next three tiers.--If
the aggregate amount of bonuses under clauses
(i) and (ii) of subparagraph (A) for a category
of Medicaid beneficiaries for quarters in a
reform year is less than the limit specified in
subparagraph (B)(ii) for the reform year, but
the aggregate amount of bonuses under clauses
(i) through (v) of subparagraph (A) for the
category and such quarters in the reform year
exceeds the limit specified in subparagraph
(B)(ii) for the reform year, the amount of each
bonus in clauses (iii), (iv), and (v) of
subparagraph (A) shall be prorated in a manner
so the aggregate amount of all the bonuses
under subparagraph (A) is equal to such limit.
``(g) State Option for Receiving Medicare Payments for Full-Benefit
Dual Eligible Individuals.--
``(1) In general.--Under this subsection a State may elect
for quarters beginning on or after the implementation date in a
reform year to receive payment from the Secretary under
paragraph (3). As a condition of receiving such payment, the
State shall agree to provide to full-benefit dual eligible
individuals eligible for medical assistance under the State
plan--
``(A) the medical assistance to which such eligible
individuals would otherwise be entitled under this
title; and
``(B) any items and services which such eligible
individuals would otherwise receive under title XVIII.
``(2) Provider payment requirement.--
``(A) In general.--A State electing the option
under this subsection shall provide payment to health
care providers for the items and services described
under paragraph (1)(B) at a rate that is not less than
the rate at which payments would be made to such
providers for such items and services under title
XVIII.
``(B) Flexibility in payment methods.--Nothing in
subparagraph (A) shall be construed as preventing a
State from using alternative payment methodologies
(such as bundled payments or the use of accountable
care organizations (as such term is used in section
1899)) for purposes of making payments to health care
providers for items and services provided to dual
eligible individuals in the State under the option
under this subsection.
``(3) Payments to states in lieu of medicare payments.--
With respect to a full-benefit dual eligible individual, in the
case of a State that elects the option under paragraph (1) for
quarters in a reform year--
``(A) the Secretary shall not make any payment
under title XVIII for items and services furnished to
such individual for such quarters; and
``(B) the Secretary shall pay to the State, in
addition to the amounts paid to such State under
subsection (a), the amount that the Secretary would,
but for this subsection, otherwise pay under title
XVIII for items and services furnished to such an
individual in such State for such quarters.
``(4) Full-benefit dual eligible individual defined.--In
this subsection, the term `full-benefit dual eligible
individual' means an individual who meets the requirements of
section 1935(c)(6)(A)(ii).
``(h) Audits.--The Secretary shall conduct such audits on the
number and classification of Medicaid beneficiaries under such
subsections and expenditures under this section as may be necessary to
ensure appropriate payments under this section.
``(i) Treatment of Waivers.--
``(1) No impact on current waivers.--In the case of a
waiver of requirements of this title pursuant to section 1115
or other law that is in effect as of the date of the enactment
of this section, nothing in this section shall be construed to
affect such waiver for the period of the waiver as approved as
of such date.
``(2) Application of budget neutrality to subsequent
waivers and renewals taking section into account.--In the case
of a waiver of requirements of this title pursuant to section
1115 or other law that is approved or renewed after the date of
the enactment of this section, to the extent that such approval
or renewal is conditioned upon a demonstration of budget
neutrality, budget neutrality shall be determined taking into
account the application of this section.
``(j) Report to Congress.--Not later than January 1 of the second
reform year, the Secretary shall submit to Congress a report on the
implementation of this section.
``(k) Definitions.--In this section:
``(1) Implementation date.--The term `implementation date'
means--
``(A) July 1, 2017, if this section is enacted on
or before July 1, 2016; or
``(B) July 1, 2018, if this section is enacted
after July 1, 2016.
``(2) Reform years.--
``(A) The term `reform year' means a fiscal year
beginning with the first reform year.
``(B) The term `first reform year' means the fiscal
year in which the implementation date occurs.
``(C) The terms `second', `third', and successive
similar terms mean, with respect to a reform year, the
second, third, or successive reform year, respectively,
succeeding the first reform year.''.
(b) Conforming Amendments.--
(1) Continued application of clawback provisions.--
(A) Continued application.--Subsections (a) and
(c)(1)(C) of section 1935 of such Act (42 U.S.C. 1396u-
5) are each amended by inserting ``or 1903A(a)'' after
``1903(a)''.
(B) Technical amendment.--Section 1935(d)(1) of the
Social Security Act (42 U.S.C. 1396u-5(d)(1)) is
amended by inserting ``except as provided in section
1903A(g)'' after ``any other provision of this title''.
(2) Payment rules under section 1903.--
(A) Section 1903(a) of such Act (42 U.S.C.
1396b(a)) is amended, in the matter before paragraph
(1), by inserting ``and section 1903A'' after ``except
as otherwise provided in this section''.
(B) Section 1903(d) of such Act (42 U.S.C.
1396b(d)) is amended--
(i) in paragraph (1), by inserting ``and
under section 1903A'' after ``subsections (a)
and (b)'';
(ii) in paragraph (2)--
(I) in subparagraph (A), by
inserting ``or section 1903A'' after
``was made under this section''; and
(II) in subparagraph (B), by
inserting ``or section 1903A'' after
``under subsection (a)'';
(iii) in paragraph (4)--
(I) by striking ``under this
subsection'' and inserting ``, with
respect to this section or section
1903A, under this subsection''; and
(II) by striking ``under this
section'' and inserting ``under the
respective section''; and
(iv) in paragraph (5), by inserting ``or
section 1903A'' after ``overpayment under this
section''.
(3) Conforming waiver authority.--Section 1115(a)(2)(A) of
the Social Security Act (42 U.S.C. 1315(a)(2)(A)) is amended by
striking ``or 1903'' and inserting ``1903, or 1903A''.
(4) Report on additional conforming amendments needed.--Not
later than 6 months after the date of the enactment of this
Act, the Secretary of Health and Human Services shall submit to
Congress a report that includes a description of any additional
technical and conforming amendments to law that are required to
properly carry out this Act.
TITLE V--INCREASING PRICE TRANSPARENCY AND FREEDOM OF PRACTICE
SEC. 501. ENSURING ACCESS TO EMERGENCY SERVICES WITHOUT EXCESSIVE
CHARGES FOR OUT-OF-NETWORK SERVICES.
(a) In General.--Section 1867 of the Social Security Act (42 U.S.C.
1395dd) is amended--
(1) in subsection (d), by adding at the end the following
new paragraph:
``(5) Enforcement with respect to excessive charges.--A
hospital, physician, or other entity that violates the
requirements of subsection (j)(1) with respect to the
furnishing of items and services is subject to a civil money
penalty of not more than $25,000 for each such violation. The
provisions of section 1128A (other than subsections (a) and
(b)) shall apply to a civil money penalty under this paragraph
in the same manner as such provisions apply with respect to a
penalty or proceeding under section 1128A(a).''; and
(2) by adding at the end the following new subsection:
``(j) Protections Against Excessive Out-of-Network Charges for
Emergency Services.--
``(1) In general.--If items or services to screen or treat
an emergency medical condition are furnished under this section
in a participating hospital with respect to an individual and
the individual has not, directly or through a health insurance
issuer, group health plan, or other third party, negotiated a
payment rate for such items and services, subject to paragraph
(2), the charges imposed for such items and services may not be
in excess of the following:
``(A) Physicians' and other professional
services.--For physicians' services or services of a
health care provider to which section 223(f)(9) of the
Internal Revenue Code of 1986 applies (and including
drugs and biologicals furnished in conjunction with and
billed as part of such services), the lesser of--
``(i) the cash price for such services
posted pursuant to such section; or
``(ii) 85 percent of the usual, customary,
and reasonable (UCR) charge for such services,
as determined under rules established by the
department of insurance for the State in which
the services are furnished.
``(B) Hospital services.--For inpatient and
outpatient hospital services for which payment rates
are established under this title (and including drugs
and biologicals furnished in conjunction with and
billed as part of such services), the lesser of--
``(i) the cash price for such services
posted pursuant to section 223(f)(9) of the
Internal Revenue Code of 1986; or
``(ii) 110 percent of the payment rate
applicable to such services in the case of an
individual entitled to benefits under part A
and enrolled under part B.
``(C) Drugs and biologicals.--For drugs and other
pharmaceuticals furnished to which a previous
subparagraph does not apply, the lesser of--
``(i) twice the acquisition cost to the
hospital or other provider for the dose
involved; or
``(ii) the acquisition cost to the hospital
or other provider plus $250.
The dollar amount in clause (ii) shall be increased
from year to year (beginning with the year after the
first year in which this subsection applies) by the
same percentage as the percentage increase in the
consumer price index for all urban consumers (all
items; U.S. city average) for the year involved (as
determined by the Secretary). Any such dollar amount as
so increased that is not a multiple of $5 shall be
rounded to the nearest multiple of $5 (or, if a
multiple of $2.50, to the next highest multiple of $5).
``(D) Other items and services.--For any other
items or services, the lesser of--
``(i) the cash price for such items and
services posted pursuant to section 223(f)(9)
of the Internal Revenue Code of 1986; or
``(ii) 110 percent of the payment basis
that would be applicable to payment for such
items and services under this title in the case
of an individual entitled to benefits under
part A and enrolled under part B.
``(2) Special rule for items and services furnished as a
bundle.--In the case of items and services for which there is a
single price for a group or bundle of such items and services,
the maximum charge permitted under paragraph (1) may not exceed
the lesser of--
``(A) the price charged for such bundled services;
or
``(B) the aggregate of the maximum charges
permitted under paragraph (1) with respect to items and
services included in such bundle.''.
(b) Effective Date.--The amendments made by this section shall
apply to charges imposed for items and services furnished on or after
January 1, 2017.
SEC. 502. PUBLISHING OF CASH PRICE FOR CARE PAID THROUGH HEALTH SAVINGS
ACCOUNTS.
(a) Health Savings Accounts.--Section 223(f) of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
paragraph:
``(9) Cash price transparency required for payments to
health care providers.--
``(A) In general.--A payment to a health care
provider with respect to the furnishing of health care
items and services by such provider shall not be
treated as a qualified medical expense unless health
care provider provides for continuing disclosure (such
as through posting on a publicly accessible website) of
the cash price the health care provider charges for the
furnishing of such items and services.
``(B) Form of disclosure.--The disclosure of prices
under this subsection shall be in a form and manner
specified by the Secretary of Health and Human
Services, in consultation with the Secretary, and shall
be designed--
``(i) to establish a single price for
related items and services in a manner similar
to the manner in which pricing and payment for
such items and services is provided under the
Medicare program under title XVIII of the
Social Security Act, and
``(ii) to make it easy for consumers to
compare the prices for similar items and
services furnished by different providers.
``(C) Failure to furnish services or charge in
excess of stated price.--A health care provider shall
be treated as not meeting the requirement of
subparagraph (A), in the case of items and services for
which the provider is disclosing a cash price, if the
provider--
``(i) refuses to furnish such items or
services at the price listed, or
``(ii) charges more than the price listed
for the furnishing of the items and
services.''.
(b) Roth HSA.--Section 530A(c)(4) of such Code, as added by this
Act, is amended by adding at the end the following new subparagraph:
``(E) Section 223(f)(9) (relating to cash price
transparency required for payments to health care
providers).''.
(c) Enforcement.--If the Secretary determines that a health care
provider has not provided for continuing disclosure of the cash price
of health care provider charges under section 223(f)(9) of the Internal
Revenue Code of 1986, the Secretary may instruct the Secretary of the
Treasury that payments made to such provider shall be not treated, for
purposes of section 223 of the Internal Revenue Code of 1986, as an
amount used for a qualified medical expense for a period of not to
exceed 1 year.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2016.
SEC. 503. LIBERATING THE LOCAL PRACTICE OF HEALTH CARE.
(a) Waiving National Restrictions on Physician-Owned Facilities.--
Section 1877 of the Social Security Act (42 U.S.C. 1395nn) is amended
by adding at the end the following new subsection:
``(j) Waiver Authority.--A physician or other entity may apply to
the Secretary to waive any provision of this section and the Secretary
may waive such provision with respect to such physician or entity if
the Secretary determines that such waiver would--
``(1) increase competition within the health care market;
``(2) reduce the costs of health care; and
``(3) increase the quality of health care.''.
(b) Removing Certain State and Local Licensure or Certification
Restrictions.--
(1) Application for waiver of restrictions.--An individual
who is required to be licensed or certified by a State as a
condition of furnishing items or services as a health care
professional (as defined by the Secretary of Health and Human
Services) may submit to the Secretary an application to waive
any condition of such licensure or certification.
(2) Standard.--The Secretary may grant a waiver submitted
under paragraph (1) if the Secretary determines such waiver
would--
(A) increase competition within the health care
market;
(B) reduce the costs of health care; and
(C) increase the quality of health care.
(3) Preemption.--In the case of a health care professional
granted a waiver under paragraph (2), any requirement with
respect to which such waiver is granted is preempted to the
extent specified in such waiver.
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