Universal Secure Access to Health Care Act of 2003

        [Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1935 Introduced in Senate (IS)]

108th CONGRESS
1st Session
S. 1935

To amend the Public Health Service Act to require employers to offer
health care coverage for all employees, to amend the Social Security
Act to guarantee comprehensive health care coverage for all children
born after 2001, and for other purposes.

_______________________________________________________________________

IN THE SENATE OF THE UNITED STATES

November 23, 2003

Mr. Corzine introduced the following bill; which was read twice and
referred to the Committee on Finance

_______________________________________________________________________

A BILL

To amend the Public Health Service Act to require employers to offer
health care coverage for all employees, to amend the Social Security
Act to guarantee comprehensive health care coverage for all children
born after 2001, 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; FINDINGS.

(a) Short Title.--This Act may be cited as the ``Universal Secure
Access to Health Care Act of 2003''.
(b) Findings.--
(1) In 2002, 43,600,000 Americans, nearly 17.2 percent of
the total nonelderly population, were uninsured.
(2) The number of uninsured has grown by nearly 10,000,000
over the past decade.
(3) While 61 percent of Americans receive health insurance
coverage through their employers, millions of Americans lack
access to such coverage either because their employer does not
offer such coverage or the employer cannot afford to pay for
such coverage.
(4) Today, fewer Americans have health insurance through
their employment to cover themselves and their dependents than
10 years ago.
(5) Eighty-two percent of the individuals that are
uninsured in the United States are in working families.
(6) Low-wage workers have more difficulty obtaining
affordable health care coverage since such workers are less
likely than high-wage workers to have such coverage offered as
a benefit by an employer, and prohibitive premiums for
individually purchased coverage often prevents such workers
from purchasing such coverage independently.
(7) The consequences of our nation's significant uninsured
population are devastating.
(8) The uninsured are significantly more likely to delay or
forego needed health care.
(9) The uninsured are less likely to receive preventive
health care.
(10) Delaying or foregoing health care treatment when such
treatment is needed can produce unnecessarily dire and
expensive results. More severe health care conditions may arise
and more expensive health care treatments, such as costly
hospitalizations, may be necessary even though such conditions
or treatments could have been avoided by the initial provision
of adequate and timely health care. The uninsured, for example,
are more likely to be hospitalized for conditions that could
have been avoided, such as pneumonia and uncontrolled diabetes,
than the insured. The uninsured with various forms of cancer
are also more likely to be diagnosed with late stage cancer
than the insured.

SEC. 2. AMENDMENT TO THE PUBLIC HEALTH SERVICE ACT.

The Public Health Service Act (42 U.S.C. 201 et seq.) is amended by
adding at the end the following:

``TITLE XXVIII--UNIVERSAL HEALTH INSURANCE COVERAGE

``Subtitle A--Employer Mandated Health Insurance Coverage

``SEC. 2801. EMPLOYER MANDATED HEALTH INSURANCE COVERAGE.

``(a) In General.--Each employer shall offer to enroll each of its
employees and their families in a standard health benefit plan.
``(b) Standard Health Benefit Plan.--For purposes of this title,
the term `standard health benefit plan' means a plan that provides
benefits for health care items and services that are actuarily
equivalent or greater in value than the benefits offered as of January
1, 2000, under the Blue Cross/Blue Shield Standard Option Plan provided
under the Federal Employees Health Benefit Program under chapter 89 of
title 5, United States Code.
``(c) Part-Time Employees.--Subsection (a) shall apply to part-time
employees.

``SEC. 2802. TYPE OF COVERAGE.

``(a) In General.--Each standard health benefit plan offered by an
employer under section 2801(a) shall conform to the requirements of
this section.
``(b) Prohibition Against Discrimination.--A standard health
benefit plan offered by an employer under section 2801(a) shall not
establish rules for eligibility of any individual to enroll under the
plan or exclude or otherwise limit any individual from coverage under
the plan based on--
``(1) medical history;
``(2) health status;
``(3) a preexisting medical condition, disease, or
disorder; or
``(4) genetic information.
``(c) Open Enrollment.--A standard health benefit plan offered by
an employer under section 2801(a) shall offer an annual open enrollment
period during which an individual may change enrollment from such plan
to another standard health benefit plan offered by such employer.
``(d) Medically Necessary Services.--A standard health benefit plan
offered by an employer under section 2801(a) shall, if such plan
provides coverage for a certain health care item or service, provide
coverage for such item or service if a doctor determines that such item
or service is medically necessary.
``(e) Date of Initial Coverage.--In the case of an employee
enrolled in a standard health benefit plan provided by an employer
under section 2801(a), the coverage under such plan shall commence not
later than 5 days after the day on which the employee first performs an
hour of service as an employee of that employer. No waiting period
beyond this initial 5-day period may be imposed regarding such
coverage.

``SEC. 2803. PREMIUMS.

``(a) In General.--Each employer shall--
``(1) contribute to the cost of any standard health benefit
plan that an employee has enrolled in in accordance with this
section; and
``(2) withhold from wages of an employee, the employee
share of the premium assessed for coverage under the standard
health benefit plan.
``(b) Contribution.--
``(1) Employer share.--
``(A) Full-time employees.--Each employer who has
enrolled an employee in a standard health benefit plan
shall contribute not less than 72 percent of the
monthly premium for such employee.
``(B) Part-time employees.--
``(i) Pro-rated portion paid.--Each
employer who has enrolled a part-time employee
in a standard health benefit plan shall pay a
portion of the monthly premium for such
employee that is pro-rated to correspond with
the number of hours of work that such employee
has provided during the past month.
``(ii) Exception.--No employer contribution
is required under this section with respect to
an employee who works less than 10 hours per
week.
``(2) Employee share.--
``(A) In general.--Each employee enrolled in a
standard health benefit plan under section 2801(a)
shall pay the remaining portion of the monthly premium
after payment by the employer as required under
subsection (a).
``(B) Part-time employees.--An employee who is
enrolled in a standard health benefit plan under
section 2801(a) and works for such employer for not
more than 30 hours and not less than 10 hours per week
shall be eligible for a subsidy to aid such employee in
paying his or her portion of the monthly premium.
``(3) Low-income employees.--An employee who is enrolled in
a standard health benefit plan under section 2801(a) whose
family income does not exceed 250 percent of the poverty line
(as defined by the Office of Management and Budget, and revised
annually in accordance with section 673(2) of the Community
Services Block Grant Act (42 U.S.C. 9902(2)) as applicable to a
family of the size involved, shall be eligible to receive a
subsidy from the State as described in subtitle B to aid in
payment of premiums.

``SEC. 2804. ENFORCEMENT.

``(a) State Ineligibility for Public Health Service Act Funds.--An
employer that is a State or political subdivision of a State or an
agency or instrumentality of a State or political subdivision that does
not comply with the requirements of this title shall not be eligible to
receive a grant, contract, cooperative agreement, loan, or loan
guarantee under this Act.
``(b) Civil Penalty for Private Employers.--
``(1) In general.--Any nongovernmental employer that does
not comply with this title shall be subject to a civil penalty
of not more than 10 percent of the total amount of the
employer's expenditures for wages for employees in that year.
``(2) Assessment procedure.--A civil money penalty under
this section shall be assessed by the Secretary and collected
in a civil action brought by the United States in a United
States district court. The Secretary shall not assess such a
penalty on an employer until the employer has been given notice
and an opportunity to present its views on such charge.
``(3) Amount of penalty.--In determining the amount of the
penalty, or the amount agreed to in compromise, the Secretary
shall consider the gravity of the noncompliance and the
demonstrated good faith of the employer charged in attempting
to achieve rapid compliance after notification of a violation
of this title.

``SEC. 2805. DEFINITIONS.

``In this title:
``(1) Employer.--The term `employer' means, with respect to
a calendar year and plan year, an employer that employed an
average of at least 50 full-time employees on business days
during the preceding calendar year and employs not less than 50
employees on the first day of the plan year.
``(2) Part-time employee.--The term `part-time employee'
means any individual employed by an employer who works less
than 40 hours a week.
``(3) Waiting period.--The term `waiting period' means,
with respect to a plan and an individual who is a potential
beneficiary or participant in the plan, the period that must
pass with respect to the individual before the individual is
eligible to be covered for benefits under the terms of the
plan.noncompliance by the Secretary.

``SEC. 2806. EFFECTIVE DATE.

``This title shall take effect 2 years after the date of enactment
of the Universal Secure Access to Health Care Act of 2003.

``Subtitle B--Individual and Employer Subsidies

``SEC. 2811. SUBSIDY PROGRAM.

``(a) In General.--The Secretary shall establish a Federal program
to award grants to States for State premium assistance programs.
``(b) Federal Program.--
``(1) In general.--The Secretary shall establish a Federal
program that shall set all standards for administration of
State programs, receive applications from States for the
establishment of such programs, and receive reports from States
regarding the developments of such programs.
``(2) Regulations.--The Secretary shall promulgate
regulations specifying requirements for State programs under
this subtitle, including--
``(A) standards for determining eligibility for
premium assistance;
``(B) standards for States operating programs under
this subtitle which ensure that such programs are
operated in a uniform manner with respect to
application procedures, data processing systems, and
such other administrative activities as the Secretary
determines to be necessary; and
``(C) standards for accepting reports regarding
developments of such programs.
``(3) Content.--The regulations described in paragraph (2)
shall require that a State program--
``(A) enable an individual to file an application
for assistance with an agency designated by the State
at any time, in person, by mail, or online;
``(B) provide for the use of an application form
developed by the Secretary;
``(C) make applications accessible at locations
where individuals are most likely to obtain the
applications;
``(D) require individuals to submit revised
applications to reflect changes in estimated family
incomes, including changes in employment status of
family members, during the year, and the State shall
revise the amount of any premium assistance based on
such a revised application; and
``(E) provide for verification of the information
supplied in applications under this subtitle, including
examining return information disclosed to the State.
``(4) Application.--The Secretary shall develop an
application form for assistance to be used by a State which
shall--
``(A) be simple in form and understandable to the
average individual;
``(B) require the provision of information
necessary to make a determination as to whether an
individual is eligible for assistance, including a
declaration of estimated income by the individual
based, at the election of the individual--
``(I) on multiplying by a factor of 4 the
individual's family income for the 3-month
period immediately preceding the month in which
the application is made; or
``(II) on estimated income for the entire
year for which the application is submitted;
and
``(C) require attachment of such documentation as
deemed necessary by the Secretary in order to ensure
eligibility for assistance.
``(c) State Administration.--
``(1) In general.--A State shall have in effect a program
for furnishing premium assistance in accordance with this
subtitle.
``(2) Designation of state agency.--A State may designate
any appropriate State agency to administer the program under
this subtitle.
``(3) Effectiveness of eligibility.--A determination by a
State that an individual is eligible for premium assistance
shall be effective for the calendar year for which such
determination is made unless a revised application indicates
that an individual is no longer eligible for assistance.

``SEC. 2812. SUBSIDIES FOR LOW-INCOME WORKERS.

``(a) In General.--A low-income worker shall be eligible for
premium assistance if such worker is eligible under subsection (b).
``(b) Eligibility.--A low-income worker is eligible for premium
assistance under subsection (a) if the State determines that such
worker has a family income which does not exceed 250 percent of the
poverty line (as defined by the Office of Management and Budget, and
revised annually in accordance with section 673(2) of the Community
Services Block Grant Act (42 U.S.C. 9902(2)) as applicable to a family
of the size involved.
``(c) Amount of Assistance.--The amount of premium assistance for a
month for a low-income worker determined to be eligible under
subsection (b) shall be determined by the Secretary.
``(d) Payments.--The amount of the premium assistance available to
a low-income worker shall be paid by the State in which the individual
resides directly to the standard health plan in which the individual is
enrolled. Payments under the preceding sentence shall commence in the
first month during which the individual is enrolled in a standard
health benefit plan and determined to be eligible for premium
assistance under this subtitle.

``SEC. 2813. SUBSIDIES FOR SMALL BUSINESS EMPLOYERS.

``(a) In General.--A small business employer that offers to enroll
its employees and their families in a standard health benefit plan
shall be eligible for premium assistance if the State determines that
such employer qualifies for such assistance under subsection (b).
``(b) Eligibility.--A small business employer is eligible for
premium assistance if such employer employs an average of not more than
75 full-time employees on business days during the preceding calendar
year and employs not more than 75 employees on the first day of the
plan year.
``(c) Amount of Assistance.--The amount of premium assistance for a
small business employer for a month shall be determined by the
Secretary.
``(d) Payments.--The amount of the premium assistance available to
a small business employer shall be paid by the State in which the
business is located directly to the standard health benefit plan in
which the employee of such business is enrolled. Payments under the
preceding sentence shall commence in the first month during which the
employee is enrolled in a standard health benefit plan and the employer
is determined to be eligible for premium assistance under this
subtitle.

``Subtitle C--Election of Coverage

``SEC. 2815. ELECTION OF COVERAGE.

``(a) In General.--A small business employer as described in
subsection (b) may elect to enroll its employees in--
``(1) a plan provided under the Federal Employees Health
Benefit Program under chapter 89 of title 5, United States
Code; or
``(2) the medicare program under title XVIII of the Social
Security Act (42 U.S.C. 1395 et seq.), if such employees are
not less than 50 years of age.
``(b) Small Business Employer.--In this section, the term `small
business employer' means an employer that employs an average of not
more than 75 full-time employees on business days during the preceding
calendar year and employs not more than 75 employees on the first day
of the plan year.

``Subtitle D--Community Rating

``SEC. 2821. COMMUNITY RATING.

``(a) In General.--Each State shall establish community rating
areas in which standard health benefit plans shall offer a standard
premium in accordance with this subtitle for enrollment for all
eligible individuals.
``(b) Community Rating Areas.--
``(1) In general.--In accordance with this subtitle, each
State shall, subject to approval of the Secretary, provide for
the division of the State into 1 or more community rating
areas.
``(2) Revision of areas.--Each State may, subject to
approval of the Secretary, redraw the boundaries of such
community rating areas as described in paragraph (1) if such
revision is reasonable or necessary.
``(3) Multiple areas.--With respect to a community rating
area--
``(A) no metropolitan statistical area in a State
may be incorporated into more than 1 such area in the
State;
``(B) the number of individuals residing within
such an area may not be less than 250,000; and
``(C) no area incorporated in a community rating
area may be incorporated into another such area.
``(4) Nondiscrimination.--In establishing boundaries for
community rating areas, a State shall not directly or through
contractual arrangements--
``(A) deny or limit access to or the availability
of health care services, or otherwise discriminate in
connection with the provision of health care services;
or
``(B) limit, segregate, or classify an individual
in any way which would deprive or tend to deprive such
individual of health care services, or otherwise
adversely affect his or her access to health care
services;
on the basis of race, national origin, sex, religion, language,
income, age, sexual orientation, disability, health status, or
anticipated need for health services.
``(5) Coordinating multiple community rating areas.--
Nothing in this section shall be construed as preventing a
State from coordinating the activities of 1 or more community
rating areas in the State.
``(6) Interstate community rating areas.--Community rating
areas with respect to interstate areas shall be established in
accordance with rules established by the Secretary.
``(7) Coordination in multi-state areas.--One or more
States may coordinate their operations in contiguous community
rating areas. Such coordination may include, the adoption of
joint operating rules, contracting with standard health benefit
plans, enforcement activities, and establishment of fee
schedules for health providers.
``(c) Open Enrollment.--Each State, based on rules and procedures
established by the Secretary, shall specify a uniform annual open
enrollment period for each community rating area during which all
eligible individuals are permitted the opportunity to change enrollment
among the standard health benefit plans offered to such individuals in
such area under this Act. The initial annual open enrollment period
shall be for a period of 90 days.
``(d) Standard Premium.--Each standard health benefit plan shall
establish within each community rating area in which the plan is to be
offered a standard premium for enrollment of eligible individuals who
seek enrollment in such plan.
``(e) Uniform Premiums Within Community Rating Areas.--
``(1) In general.--Subject to paragraphs (2) and (3), the
standard premium for each group health plan to which this
section applies shall be the same, but shall not include the
costs of premium processing and enrollment.
``(2) Application to enrollees.--
``(A) In general.--The premium charged for coverage
in a group health plan which covers eligible employees
and eligible individuals shall be the product of--
``(i) the standard premium (established
under paragraph (1));
``(ii) in the case of enrollment other than
individual enrollment, the family adjustment
factor specified under subparagraph (B); and
``(iii) the age adjustment factor
(specified under subparagraph (C)).
``(B) Family adjustment factor.--
``(i) In general.--The Secretary shall
specify family adjustment factors that reflect
the relative actuarial costs of benefit
packages based on family classes of enrollment
(as compared with such costs for individual
enrollment).
``(ii) Classes of enrollment.--For purposes
of this subtitle, there are 4 classes of
enrollment:
``(I) Coverage only of an
individual (referred to in this
subtitle as the `individual' enrollment
or class of enrollment).
``(II) Coverage of a married couple
without children (referred to in this
subtitle as the `couple-only'
enrollment or class of enrollment).
``(III) Coverage of an individual
and one or more children (referred to
in this subtitle as the `single parent'
enrollment or class of enrollment).
``(IV) Coverage of a married couple
and one or more children (referred to
in this subtitle as the `dual parent'
enrollment or class of enrollment).
``(iii) References to family and couple
classes of enrollment.--In this subtitle:
``(I) Family.--The terms `family
enrollment' and `family class of
enrollment' refer to enrollment in a
class of enrollment described in any
subclause of clause (ii) (other than
subclause (I)).
``(II) Couple.--The term `couple
class of enrollment' refers to
enrollment in a class of enrollment
described in subclause (II) or (IV) of
clause (ii).
``(iv) Spouse; married; couple.--
``(I) In general.--In this
subtitle, the terms `spouse' and
`married' mean, with respect to an
individual, another individual who is
the spouse of, or is married to, the
individual, as determined under
applicable State law.
``(II) Couple.--The term `couple'
means an individual and the
individual's spouse.
``(C) Age adjustment factor.--The Secretary shall
specify uniform age categories and maximum rating
increments for age adjustment factors that reflect the
relative actuarial costs of benefit packages among
enrollees. For individuals who have attained age 18 but
not age 65, the highest age adjustment factor may not
exceed 3 times the lowest age adjustment factor.''.

SEC. 3. TAX DEDUCTION FOR SELF-EMPLOYED.

(a) In General.--Paragraph (1) of section 162(l) of the Internal
Revenue Code of 1986 is amended to read as follows:
``(l) Allowance of deduction.--In the case of an individual
who is an employee within the meaning of section 401(c)(1),
there shall be allowed as a deduction under this section an
amount equal to 100 percent of the amount paid during the
taxable year for insurance which constitutes medical care for
the taxpayer, the taxpayer's spouse, and taxpayer's
dependents.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2004.

SEC. 4. ACCESS TO MEDICARE BENEFITS FOR INDIVIDUALS 62-TO-65 YEARS OF
AGE.

(a) In General.--Title XVIII of the Social Security Act is
amended--
(1) by redesignating section 1859 and part D as section
1858 and part E, respectively; and
(2) by inserting after such section the following new part:

``Part D--Purchase of Medicare Benefits by Certain Individuals Age 62-
to-65 Years of Age

``SEC. 1859. PROGRAM BENEFITS; ELIGIBILITY.

``(a) Entitlement to Medicare Benefits for Enrolled Individuals.--
``(1) In general.--An individual enrolled under this part
is entitled to the same benefits under this title as an
individual entitled to benefits under part A and enrolled under
part B.
``(2) Definitions.--For purposes of this part:
``(A) Federal or state cobra continuation
provision.--The term `Federal or State COBRA
continuation provision' has the meaning given the term
`COBRA continuation provision' in section 2791(d)(4) of
the Public Health Service Act and includes a comparable
State program, as determined by the Secretary.
``(B) Federal health insurance program defined.--
The term `Federal health insurance program' means any
of the following:
``(i) Medicare.--Part A or part B of this
title (other than by reason of this part).
``(ii) Medicaid.--A State plan under title
XIX.
``(iii) FEHBP.--The Federal employees
health benefit program under chapter 89 of
title 5, United States Code.
``(iv) TRICARE.--The TRICARE program (as
defined in section 1072(7) of title 10, United
States Code).
``(v) Active duty military.--Health
benefits under title 10, United States Code, to
an individual as a member of the uniformed
services of the United States.
``(C) Group health plan.--The term `group health
plan' has the meaning given such term in section
2791(a)(1) of the Public Health Service Act.
``(b) Eligibility of Individuals Age 62-to-65 Years of Age.--
``(1) In general.--Subject to paragraph (2), an individual
who meets the following requirements with respect to a month is
eligible to enroll under this part with respect to such month:
``(A) Age.--As of the last day of the month, the
individual has attained 62 years of age, but has not
attained 65 years of age.
``(B) Medicare eligibility (but for age).--The
individual would be eligible for benefits under part A
or part B for the month if the individual were 65 years
of age.
``(C) Not eligible for coverage under group health
plans or federal health insurance programs.--The
individual is not eligible for benefits or coverage
under a Federal health insurance program (as defined in
subsection (a)(2)(B)) or under a group health plan
(other than such eligibility merely through a Federal
or State COBRA continuation provision) as of the last
day of the month involved.
``(2) Limitation on eligibility if terminated enrollment.--
If an individual described in paragraph (1) enrolls under this
part and coverage of the individual is terminated under section
1859A(d) (other than because of age), the individual is not
again eligible to enroll under this subsection unless the
following requirements are met:
``(A) New coverage under group health plan or
federal health insurance program.--After the date of
termination of coverage under such section, the
individual obtains coverage under a group health plan
or under a Federal health insurance program.
``(B) Subsequent loss of new coverage.--The
individual subsequently loses eligibility for the
coverage described in subparagraph (A) and exhausts any
eligibility the individual may subsequently have for
coverage under a Federal or State COBRA continuation
provision.
``(3) Change in health plan eligibility does not affect
coverage.--In the case of an individual who is eligible for and
enrolls under this part under this subsection, the individual's
continued entitlement to benefits under this part shall not be
affected by the individual's subsequent eligibility for
benefits or coverage described in paragraph (1)(C), or
entitlement to such benefits or coverage.

``SEC. 1859A. ENROLLMENT PROCESS; COVERAGE.

``(a) In General.--An individual may enroll in the program
established under this part only in such manner and form as may be
prescribed by regulations, and only during an enrollment period
prescribed by the Secretary consistent with the provisions of this
section. Such regulations shall provide a process under which--
``(1) individuals eligible to enroll as of a month are
permitted to pre-enroll during a prior month within an
enrollment period described in subsection (b); and
``(2) each individual seeking to enroll under section
1859(b) is notified, before enrolling, of the deferred monthly
premium amount the individual will be liable for under section
1859C(b) upon attaining 65 years of age as determined under
section 1859B(c)(3).
``(b) Enrollment Periods.--
``(1) Individuals 62-to-65 years of age.--In the case of
individuals eligible to enroll under this part under section
1859(b)--
``(A) Initial enrollment period.--If the individual
is eligible to enroll under such section for July 2002,
the enrollment period shall begin on May 1, 2002, and
shall end on August 31, 2002. Any such enrollment
before July 1, 2002, is conditioned upon compliance
with the conditions of eligibility for July 2002.
``(B) Subsequent periods.--If the individual is
eligible to enroll under such section for a month after
July 2002, the enrollment period shall begin on the
first day of the second month before the month in which
the individual first is eligible to so enroll and shall
end 4 months later. Any such enrollment before the
first day of the third month of such enrollment period
is conditioned upon compliance with the conditions of
eligibility for such third month.
``(2) Authority to correct for government errors.--The
provisions of section 1837(h) apply with respect to enrollment
under this part in the same manner as they apply to enrollment
under part B.
``(c) Date Coverage Begins.--
``(1) In general.--The period during which an individual is
entitled to benefits under this part shall begin as follows,
but in no case earlier than July 1, 2002:
``(A) In the case of an individual who enrolls
(including pre-enrolls) before the month in which the
individual satisfies eligibility for enrollment under
section 1859, the first day of such month of
eligibility.
``(B) In the case of an individual who enrolls
during or after the month in which the individual first
satisfies eligibility for enrollment under such
section, the first day of the following month.
``(2) Authority to provide for partial months of
coverage.--Under regulations, the Secretary may, in the
Secretary's discretion, provide for coverage periods that
include portions of a month in order to avoid lapses of
coverage.
``(3) Limitation on payments.--No payments may be made
under this title with respect to the expenses of an individual
enrolled under this part unless such expenses were incurred by
such individual during a period which, with respect to the
individual, is a coverage period under this section.
``(d) Termination of Coverage.--
``(1) In general.--An individual's coverage period under
this part shall continue until the individual's enrollment has
been terminated at the earliest of the following:
``(A) General provisions.--
``(i) Notice.--The individual files notice
(in a form and manner prescribed by the
Secretary) that the individual no longer wishes
to participate in the insurance program under
this part.
``(ii) Nonpayment of premiums.--The
individual fails to make payment of premiums
required for enrollment under this part.
``(iii) Medicare eligibility.--The
individual becomes entitled to benefits under
part A or enrolled under part B (other than by
reason of this part).
``(B) Termination based on age.--The individual
attains 65 years of age.
``(2) Effective date of termination.--
``(A) Notice.--The termination of a coverage period
under paragraph (1)(A)(i) shall take effect at the
close of the month following for which the notice is
filed.
``(B) Nonpayment of premium.--The termination of a
coverage period under paragraph (1)(A)(ii) shall take
effect on a date determined under regulations, which
may be determined so as to provide a grace period in
which overdue premiums may be paid and coverage
continued. The grace period determined under the
preceding sentence shall not exceed 60 days; except
that it may be extended for an additional 30 days in
any case where the Secretary determines that there was
good cause for failure to pay the overdue premiums
within such 60-day period.
``(C) Age or medicare eligibility.--The termination
of a coverage period under paragraph (1)(A)(iii) or
(1)(B) shall take effect as of the first day of the
month in which the individual attains 65 years of age
or becomes entitled to benefits under part A or
enrolled for benefits under part B (other than by
reason of this part).

``SEC. 1859B. PREMIUMS.

``(a) Amount of Monthly Premiums.--
``(1) Base monthly premiums.--The Secretary shall, during
September of each year (beginning with 2001), determine the
following premium rates which shall apply with respect to
coverage provided under this title for any month in the
succeeding year:
``(A) Base monthly premium for individuals 62 years
of age or older.--A base monthly premium for
individuals 62 years of age or older is equal to \1/12\
of the base annual premium rate computed under
subsection (b) for each premium area.
``(B) Deferred monthly premiums for individuals 62
years of age or older.--The Secretary shall, during
September of each year (beginning with 2001), determine
under subsection (c) the amount of deferred monthly
premiums that shall apply with respect to individuals
who first obtain coverage under this part under section
1859(b) in the succeeding year.
``(2) Establishment of premium areas.--For purposes of this
part, the term `premium area' means such an area as the
Secretary shall specify to carry out this part. The Secretary
from time to time may change the boundaries of such premium
areas. The Secretary shall seek to minimize the number of such
areas specified under this paragraph.
``(b) Base Annual Premium for Individuals 62 Years of Age or
Older.--
``(1) National, per capita average.--The Secretary shall
estimate the average, annual per capita amount that would be
payable under this title with respect to individuals residing
in the United States who meet the requirement of section
1859(b)(1)(A) as if all such individuals were eligible for (and
enrolled) under this title during the entire year (and assuming
that section 1862(b)(2)(A)(i) did not apply).
``(2) Geographic adjustment.--The Secretary shall reduce,
as determined appropriate, the amount determined under
paragraph (1) for a premium area (specified under subsection
(a)(3)) that has costs below the national average, in order to
assure participation in all areas throughout the United States.
``(3) Base annual premium.--The base annual premium under
this subsection for months in a year for individuals 62 years
of age or older residing in a premium area is equal to the
average, annual per capita amount estimated under paragraph (1)
for the year, adjusted for such area under paragraph (2).
``(c) Deferred Premium Rate for Individuals 62 Years of Age or
Older.--The deferred premium rate for individuals with a group of
individuals who obtain coverage under section 1859(b) in a year shall
be computed by the Secretary as follows:
``(1) Estimation of national, per capita annual average
expenditures for enrollment group.--The Secretary shall
estimate the average, per capita annual amount that will be
paid under this part for individuals in such group during the
period of enrollment under section 1859(b). In making such
estimate for coverage beginning in a year before 2006, the
Secretary may base such estimate on the average, per capita
amount that would be payable if the program had been in
operation over a previous period of at least 4 years.
``(2) Difference between estimated expenditures and
estimated premiums.--Based on the characteristics of
individuals in such group, the Secretary shall estimate during
the period of coverage of the group under this part under
section 1859(b) the amount by which--
``(A) the amount estimated under paragraph (1);
exceeds
``(B) the average, annual per capita amount of
premiums that will be payable for months during the
year under section 1859C(a) for individuals in such
group (including premiums that would be payable if
there were no terminations in enrollment under clause
(i) or (ii) of section 1859A(d)(1)(A)).
``(3) Actuarial computation of deferred monthly premium
rates.--The Secretary shall determine deferred monthly premium
rates for individuals in such group in a manner so that--
``(A) the estimated actuarial value of such
premiums payable under section 1859C(b), is equal to
``(B) the estimated actuarial present value of the
differences described in paragraph (2).
Such rate shall be computed for each individual in the group in
a manner so that the rate is based on the number of months
between the first month of coverage based on enrollment under
section 1859(b) and the month in which the individual attains
65 years of age.
``(4) Determinants of actuarial present values.--The
actuarial present values described in paragraph (3) shall
reflect--
``(A) the estimated probabilities of survival at
ages 62 through 84 for individuals enrolled during the
year; and
``(B) the estimated effective average interest
rates that would be earned on investments held in the
trust funds under this title during the period in
question.

``SEC. 1859C. PAYMENT OF PREMIUMS.

``(a) Payment of Base Monthly Premium.--
``(1) In general.--The Secretary shall provide for payment
and collection of the base monthly premium, determined under
section 1859B(a)(1) for the age (and age cohort, if applicable)
of the individual involved and the premium area in which the
individual principally resides, in the same manner as for
payment of monthly premiums under section 1840, except that,
for purposes of applying this section, any reference in such
section to the Federal Supplementary Medical Insurance Trust
Fund is deemed a reference to the Trust Fund established under
section 1859D.
``(2) Period of payment.--In the case of an individual who
participates in the program established by this title, the base
monthly premium shall be payable for the period commencing with
the first month of the individual's coverage period and ending
with the month in which the individual's coverage under this
title terminates.
``(b) Payment of Deferred Premium for Individuals Covered After
Attaining Age 62.--
``(1) Rate of payment.--
``(A) In general.--In the case of an individual who
is covered under this part for a month pursuant to an
enrollment under section 1859(b), subject to
subparagraph (B), the individual is liable for payment
of a deferred premium in each month during the period
described in paragraph (2) in an amount equal to the
full deferred monthly premium rate determined for the
individual under section 1859B(c).
``(B) Special rules for those who disenroll
early.--
``(i) In general.--If such an individual's
enrollment under such section is terminated
under clause (i) or (ii) of section
1859A(d)(1)(A), subject to clause (ii), the
amount of the deferred premium otherwise
established under this paragraph shall be pro-
rated to reflect the number of months of
coverage under this part under such enrollment
compared to the maximum number of months of
coverage that the individual would have had if
the enrollment were not so terminated.
``(ii) Rounding to 12-month minimum
coverage periods.--In applying clause (i), the
number of months of coverage (if not a multiple
of 12) shall be rounded to the next highest
multiple of 12 months, except that in no case
shall this clause result in a number of months
of coverage exceeding the maximum number of
months of coverage that the individual would
have had if the enrollment were not so
terminated.
``(2) Period of payment.--The period described in this
paragraph for an individual is the period beginning with the
first month in which the individual has attained 65 years of
age and ending with the month before the month in which the
individual attains 85 years of age.
``(3) Collection.--In the case of an individual who is
liable for a premium under this subsection, the amount of the
premium shall be collected in the same manner as the premium
for enrollment under such part is collected under section 1840,
except that any reference in such section to the Federal
Supplementary Medical Insurance Trust Fund is deemed to be a
reference to the Medicare Early Access Trust Fund established
under section 1859D.
``(c) Application of Certain Provisions.--The provisions of section
1840 (other than subsection (h)) shall apply to premiums collected
under this section in the same manner as they apply to premiums
collected under part B, except that any reference in such section to
the Federal Supplementary Medical Insurance Trust Fund is deemed a
reference to the Trust Fund established under section 1859D.

``SEC. 1859D. MEDICARE EARLY ACCESS TRUST FUND.

``(a) Establishment of Trust Fund.--
``(1) In general.--There is hereby created on the books of
the Treasury of the United States a trust fund to be known as
the `Medicare Early Access Trust Fund' (in this section
referred to as the `Trust Fund'). The Trust Fund shall consist
of such gifts and bequests as may be made as provided in
section 201(i)(1) and such amounts as may be deposited in, or
appropriated to, such fund as provided in this title.
``(2) Premiums.--Premiums collected under section 1859B
shall be transferred to the Trust Fund.
``(b) Incorporation of Provisions.--
``(1) In general.--Subject to paragraph (2), subsections
(b) through (i) of section 1841 shall apply with respect to the
Trust Fund and this title in the same manner as they apply with
respect to the Federal Supplementary Medical Insurance Trust
Fund and part B, respectively.
``(2) Miscellaneous references.--In applying provisions of
section 1841 under paragraph (1)--
``(A) any reference in such section to `this part'
is construed to refer to this part D;
``(B) any reference in section 1841(h) to section
1840(d) and in section 1841(i) to sections 1840(b)(1)
and 1842(g) are deemed references to comparable
authority exercised under this part; and
``(C) payments may be made under section 1841(g) to
the trust funds under sections 1817 and 1841 as
reimbursement to such funds for payments they made for
benefits provided under this part.

``SEC. 1859E. OVERSIGHT AND ACCOUNTABILITY.

``(a) Through Annual Reports of Trustees.--The Board of Trustees of
the Medicare Early Access Trust Fund under section 1859D(b)(1) shall
report on an annual basis to Congress concerning the status of the
Trust Fund and the need for adjustments in the program under this part
to maintain financial solvency of the program under this part.
``(b) Periodic GAO Reports.--The Comptroller General of the United
States shall periodically submit to Congress reports on the adequacy of
the financing of coverage provided under this part. The Comptroller
General shall include in such report such recommendations for
adjustments in such financing and coverage as the Comptroller General
deems appropriate in order to maintain financial solvency of the
program under this part.

``SEC. 1859F. ADMINISTRATION AND MISCELLANEOUS.

``(a) Treatment for Purposes of This Title.--Except as otherwise
provided in this part--
``(1) an individual enrolled under this part shall be
treated for purposes of this title as though the individual was
entitled to benefits under part A and enrolled under part B;
and
``(2) benefits described in section 1859 shall be payable
under this title to such an individual in the same manner as if
such individual was so entitled and enrolled.
``(b) Not Treated as Medicare Program for Purposes of Medicaid
Program.--For purposes of applying title XIX (including the provision
of medicare cost-sharing assistance under such title), an individual
who is enrolled under this part shall not be treated as being entitled
to benefits under this title.
``(c) Not Treated as Medicare Program for Purposes of COBRA
Continuation Provisions.--In applying a COBRA continuation provision
(as defined in section 2791(d)(4) of the Public Health Service Act),
any reference to an entitlement to benefits under this title shall not
be construed to include entitlement to benefits under this title
pursuant to the operation of this part.''.
(b) Conforming Amendments to Social Security Act Provisions.--
(1) Section 201(i)(1) of the Social Security Act (42 U.S.C.
401(i)(1)) is amended by striking ``or the Federal
Supplementary Medical Insurance Trust Fund'' and inserting
``the Federal Supplementary Medical Insurance Trust Fund, and
the Medicare Early Access Trust Fund''.
(2) Section 201(g)(1)(A) of such Act (42 U.S.C.
401(g)(1)(A)) is amended by striking ``and the Federal
Supplementary Medical Insurance Trust Fund established by title
XVIII'' and inserting
``, the Federal Supplementary Medical Insurance Trust Fund, and
the Medicare Early Access Trust Fund established by title
XVIII''.
(3) Section 1820(i) of such Act (42 U.S.C. 1395i-4(i)) is
amended by striking ``part D'' and inserting ``part E''.
(4) Part C of title XVIII of such Act is amended--
(A) in section 1851(a)(2)(B) (42 U.S.C. 1395w-
21(a)(2)(B)), by striking ``1859(b)(3)'' and inserting
``1858(b)(3)'';
(B) in section 1851(a)(2)(C) (42 U.S.C. 1395w-
21(a)(2)(C)), by striking ``1859(b)(2)'' and inserting
``1858(b)(2)'';
(C) in section 1852(a)(1) (42 U.S.C. 1395w-
22(a)(1)), by striking ``1859(b)(3)'' and inserting
``1858(b)(3)'';
(D) in section 1852(a)(3)(B)(ii) (42 U.S.C. 1395w-
22(a)(3)(B)(ii)), by striking ``1859(b)(2)(B)'' and
inserting ``1858(b)(2)(B)'';
(E) in section 1853(a)(1)(A) (42 U.S.C. 1395w-
23(a)(1)(A)), by striking ``1859(e)(4)'' and inserting
``1858(e)(4)''; and
(F) in section 1853(a)(3)(D) (42 U.S.C. 1395w-
23(a)(3)(D)), by striking ``1859(e)(4)'' and inserting
``1858(e)(4)''.
(5) Section 1853(c) of such Act (42 U.S.C. 1395w-23(c)) is
amended--
(A) in paragraph (1), by striking ``and (7)'' and
inserting ``, (7), and (8)'', and
(B) by adding at the end the following:
``(8) Adjustment for early access.--In applying this
subsection with respect to individuals entitled to benefits
under part D, the Secretary shall provide for an appropriate
adjustment in the Medicare+Choice capitation rate as may be
appropriate to reflect differences between the population
served under such part and the population under parts A and
B.''.
(c) Other Conforming Amendments.--
(1) Section 138(b)(4) of the Internal Revenue Code of 1986
is amended by striking ``1859(b)(3)'' and inserting
``1858(b)(3)''.
(2)(A) Section 602(2)(D)(ii) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1162(2)) is amended by
inserting ``(not including an individual who is so entitled
pursuant to enrollment under section 1859A)'' after ``Social
Security Act''.
(B) Section 2202(2)(D)(ii) of the Public Health Service Act
(42 U.S.C. 300bb-2(2)(D)(ii)) is amended by inserting ``(not
including an individual who is so entitled pursuant to
enrollment under section 1859A)'' after ``Social Security
Act''.
(C) Section 4980B(f)(2)(B)(i)(V) of the Internal Revenue
Code of 1986 is amended by inserting ``(not including an
individual who is so entitled pursuant to enrollment under
section 1859A)'' after ``Social Security Act''.

SEC. 5. ACCESS TO MEDICARE BENEFITS FOR DISPLACED WORKERS 55-TO-62
YEARS OF AGE.

(a) Eligibility.--Section 1859 of the Social Security Act, as
inserted by section 4(a)(2), is amended by adding at the end the
following new subsection:
``(c) Displaced Workers and Spouses.--
``(1) Displaced workers.--Subject to paragraph (3), an
individual who meets the following requirements with respect to
a month is eligible to enroll under this part with respect to
such month:
``(A) Age.--As of the last day of the month, the
individual has attained 55 years of age, but has not
attained 62 years of age.
``(B) Medicare eligibility (but for age).--The
individual would be eligible for benefits under part A
or B for the month if the individual were 65 years of
age.
``(C) Loss of employment-based coverage.--
``(i) Eligible for unemployment
compensation.--The individual meets the
requirements relating to period of covered
employment and conditions of separation from
employment to be eligible for unemployment
compensation (as defined in section 85(b) of
the Internal Revenue Code of 1986), based on a
separation from employment occurring on or
after January 1, 2001. The previous sentence
shall not be construed as requiring the
individual to be receiving such unemployment
compensation.
``(ii) Loss of employment-based coverage.--
Immediately before the time of such separation
of employment, the individual was covered under
a group health plan on the basis of such
employment, and, because of such loss, is no
longer eligible for coverage under such plan
(including such eligibility based on the
application of a Federal or State COBRA
continuation provision) as of the last day of
the month involved.
``(iii) Previous creditable coverage for at
least 1 year.--As of the date on which the
individual loses coverage described in clause
(ii), the aggregate of the periods of
creditable coverage (as determined under
section 2701(c) of the Public Health Service
Act) is 12 months or longer.
``(D) Exhaustion of available cobra continuation
benefits.--
``(i) In general.--In the case of an
individual described in clause (ii) for a month
described in clause (iii)--
``(I) the individual (or spouse)
elected coverage described in clause
(ii); and
``(II) the individual (or spouse)
has continued such coverage for all
months described in clause (iii) in
which the individual (or spouse) is
eligible for such coverage.
``(ii) Individuals to whom cobra
continuation coverage made available.--An
individual described in this clause is an
individual--
``(I) who was offered coverage
under a Federal or State COBRA
continuation provision at the time of
loss of coverage eligibility described
in subparagraph (C)(ii); or
``(II) whose spouse was offered
such coverage in a manner that
permitted coverage of the individual at
such time.
``(iii) Months of possible cobra
continuation coverage.--A month described in
this clause is a month for which an individual
described in clause (ii) could have had
coverage described in such clause as of the
last day of the month if the individual (or the
spouse of the individual, as the case may be)
had elected such coverage on a timely basis.
``(E) Not eligible for coverage under federal
health insurance program or group health plans.--The
individual is not eligible for benefits or coverage
under a Federal health insurance program or under a
group health plan (whether on the basis of the
individual's employment or employment of the
individual's spouse) as of the last day of the month
involved.
``(2) Spouse of displaced worker.--Subject to paragraph
(3), an individual who meets the following requirements with
respect to a month is eligible to enroll under this part with
respect to such month:
``(A) Age.--As of the last day of the month, the
individual has not attained 62 years of age.
``(B) Married to displaced worker.--The individual
is the spouse of an individual at the time the
individual enrolls under this part under paragraph (1)
and loses coverage described in paragraph (1)(C)(ii)
because the individual's spouse lost such coverage.
``(C) Medicare eligibility (but for age);
exhaustion of any cobra continuation coverage; and not
eligible for coverage under federal health insurance
program or group health plan.--The individual meets the
requirements of subparagraphs (B), (D), and (E) of
paragraph (1).
``(3) Change in health plan eligibility affects continued
eligibility.--For provision that terminates enrollment under
this section in the case of an individual who becomes eligible
for coverage under a group health plan or under a Federal
health insurance program, see section 1859A(d)(1)(C).
``(4) Reenrollment permitted.--Nothing in this subsection
shall be construed as preventing an individual who, after
enrolling under this subsection, terminates such enrollment from
subsequently reenrolling under this subsection if the individual is
eligible to enroll under this subsection at that time.''.
(b) Enrollment.--Section 1859A of such Act, as so inserted, is
amended--
(1) in subsection (a), by striking ``and'' at the end of
paragraph (1), by striking the period at the end of paragraph
(2) and inserting ``; and'', and by adding at the end the
following new paragraph:
``(3) individuals whose coverage under this part would
terminate because of subsection (d)(1)(B)(ii) are provided
notice and an opportunity to continue enrollment in accordance
with section 1859E(c)(1).'';
(2) in subsection (b), by inserting after Notwithstanding
any other provision of law, (1) the following:
``(2) Displaced workers and spouses.--In the case of
individuals eligible to enroll under this part under section
1859(c), the following rules apply:
``(A) Initial enrollment period.--If the individual
is first eligible to enroll under such section for July
2005, the enrollment period shall begin on May 1, 2002,
and shall end on August 31, 2002. Any such enrollment
before July 1, 2002, is conditioned upon compliance
with the conditions of eligibility for July 2002.
``(B) Subsequent periods.--If the individual is
eligible to enroll under such section for a month after
July 2002, the enrollment period based on such
eligibility shall begin on the first day of the second
month before the month in which the individual first is
eligible to so enroll (or reenroll) and shall end 4
months later.'';
(3) in subsection (d)(1), by amending subparagraph (B) to
read as follows:
``(B) Termination based on age.--
``(i) At age 65.--Subject to clause (ii),
the individual attains 65 years of age.
``(ii) At age 62 for displaced workers and
spouses.--In the case of an individual enrolled
under this part pursuant to section 1859(c),
subject to subsection (a)(1), the individual
attains 62 years of age.'';
(4) in subsection (d)(1), by adding at the end the
following new subparagraph:
``(C) Obtaining access to employment-based coverage
or federal health insurance program for individuals
under 62 years of age.--In the case of an individual
who has not attained 62 years of age, the individual is
covered (or eligible for coverage) as a participant or
beneficiary under a group health plan or under a
Federal health insurance program.'';
(5) in subsection (d)(2), by amending subparagraph (C) to
read as follows:
``(C) Age or medicare eligibility.--
``(i) In general.--The termination of a
coverage period under paragraph (1)(A)(iii) or
(1)(B)(i) shall take effect as of the first day
of the month in which the individual attains 65
years of age or becomes entitled to benefits
under part A or enrolled for benefits under
part B.
``(ii) Displaced workers.--The termination
of a coverage period under paragraph (1)(B)(ii)
shall take effect as of the first day of the
month in which the individual attains 62 years
of age, unless the individual has enrolled
under this part pursuant to section 1859(b) and
section 1859E(c)(1).''; and
(6) in subsection (d)(2), by adding at the end the
following new subparagraph:
``(D) Access to coverage.--The termination of a
coverage period under paragraph (1)(C) shall take
effect on the date on which the individual is eligible
to begin a period of creditable coverage (as defined in
section 2701(c) of the Public Health Service Act) under
a group health plan or under a Federal health insurance
program.''.
(c) Premiums.--Section 1859B of such Act, as so inserted, is
amended--
(1) in subsection (a)(1), by adding at the end the
following:
``(B) Base monthly premium for individuals under 62
years of age.--A base monthly premium for individuals
under 62 years of age, equal to \1/12\ of the base
annual premium rate computed under subsection (d)(3)
for each premium area and age cohort.''; and
(2) by adding at the end the following new subsection:
``(d) Base Monthly Premium for Individuals Under 62 Years of Age.--
``(1) National, per capita average for age groups.--
``(A) Estimate of amount.--The Secretary shall
estimate the average, annual per capita amount that
would be payable under this title with respect to
individuals residing in the United States who meet the
requirement of section 1859(c)(1)(A) within each of the
age cohorts established under subparagraph (B) as if
all such individuals within such cohort were eligible
for (and enrolled) under this title during the entire
year (and assuming that section 1862(b)(2)(A)(i) did
not apply).
``(B) Age cohorts.--For purposes of subparagraph
(A), the Secretary shall establish separate age cohorts
in 5-year age increments for individuals who have not
attained 60 years of age and a separate cohort for
individuals who have attained 60 years of age.
``(2) Geographic adjustment.--The Secretary shall adjust
the amount determined under paragraph (1)(A) for each premium
area (specified under subsection (a)(3)) in the same manner and
to the same extent as the Secretary provides for adjustments
under subsection (b)(2).
``(3) Base annual premium.--The base annual premium under
this subsection for months in a year for individuals in an age
cohort under paragraph (1)(B) in a premium area is equal to 165
percent of the average, annual per capita amount estimated
under paragraph (1) for the age cohort and year, adjusted for
such area under paragraph (2).
``(4) Pro-ration of premiums to reflect coverage during a
part of a month.--If the Secretary provides for coverage of
portions of a month under section 1859A(c)(2), the Secretary
shall pro-rate the premiums attributable to such coverage under
this section to reflect the portion of the month so covered.''.
(d) Administrative Provisions.--Section 1859F of such Act, as so
inserted, is amended by adding at the end the following:
``(d) Additional Administrative Provisions.--
``(1) Process for continued enrollment of displaced workers
who attain 62 years of age.--The Secretary shall provide a
process for the continuation of enrollment of individuals whose
enrollment under section 1859(c) would be terminated upon
attaining 62 years of age. Under such process such individuals
shall be provided appropriate and timely notice before the date
of such termination and of the requirement to enroll under this
part pursuant to section 1859(b) in order to continue
entitlement to benefits under this title after attaining 62
years of age.
``(2) Arrangements with states for determinations relating
to unemployment compensation eligibility.--The Secretary may
provide for appropriate arrangements with States for the
determination of whether individuals in the State meet or would
meet the requirements of section 1859(c)(1)(C)(i).''.
(e) Conforming Amendment to Heading to Part.--The heading of part D
of title XVIII of the Social Security Act, as so inserted, is amended
by striking ``62'' and inserting ``55''.

SEC. 6. PROVISIONS TO MAKE FEHBP COVERAGE AVAILABLE FOR THE SELF-
EMPLOYED.

Chapter 89 of title 5, United States Code, is amended by adding at
the end the following:
``Sec. 8915. Expanded access to coverage for the self-employed
``(a) The Office of Personnel Management (referred to in this
section as the `Office') shall administer a health insurance program
for eligible individuals who are non-Federal employees in accordance
with this section.
``(b) The term `eligible individual' means a self-employed
individual as defined in section 401(c)(1) of the Internal Revenue Code
of 1986.
``(c) The Office shall prescribe regulations to apply the
provisions of this chapter to the greatest extent practicable to
eligible individuals covered under this section.
``(d) In no event shall the enactment of this section result in--
``(1) any increase in the level of individual or Government
contributions required under this chapter, including copayments
or deductibles;
``(2) any decrease in the types of benefits offered under
this chapter; or
``(3) any other change that would adversely affect the
coverage afforded under this chapter to employees and
annuitants and members of family under this chapter.
``(e) The Office shall develop methods to facilitate enrollment
under this section, including the use of the Internet.
``(f) The Office may enter into contracts for the performance of
appropriate administrative functions under this chapter.
``(g) Each contract entered into under section 8902 shall require a
carrier to offer to eligible individuals under this chapter, throughout
each term for which the contract remains effective, the same benefits
(subject to the same maximums, limitations, exclusions, and other
similar terms or conditions) as would be offered under such contract or
applicable health benefits plan to employees, annuitants, and members
of family.
``(h)(1) The Office may waive the requirements of this section, if
the Office determines, based on a petition submitted by a carrier
that--
``(A) the carrier is unable to offer the applicable health
benefits plan because of a limitation in the capacity of the
plan to deliver services or assure financial solvency;
``(B) the applicable health benefits plan is not sponsored
by a carrier licensed under applicable State law; or
``(C) bona fide enrollment restrictions make the
application of this chapter inappropriate, including
restrictions common to plans which are limited to individuals
having a past or current employment relationship with a
particular agency or other authority of the Government.
``(2) The Office may require a petition under this subsection to
include--
``(A) a description of the efforts the carrier
proposes to take in order to offer the applicable
health benefits plan under this chapter; and
``(B) the proposed date for offering such a health
benefits plan.
``(3) A waiver under this section may be for any period determined
by the Office. The Office may grant subsequent waivers under this
section.
``(i) The Office shall provide for the implementation of procedures
to provide for an annual open enrollment period during which eligible
individuals may enroll with a plan or contract for coverage under this
section.
``(j) Except as the Office may by regulation prescribe, any
reference to this chapter (or any requirement of this chapter), made in
any provision of law, shall not be considered to include this section
(or any requirement of this section).
``(k) This section shall take effect on the date of enactment of
this section and shall apply to contracts that take effect with respect
to calendar year 2002 and each calendar year thereafter.''.

SEC. 7. MEDIKIDS HEALTH INSURANCE.

(a) Benefits for All Children Born After 2002.--
(1) In general.--The Social Security Act is amended by
adding at the end the following:

``TITLE XXII--MEDIKIDS PROGRAM

``SEC. 2201. ELIGIBILITY.

``(a) Eligibility of Individuals Born After December 31, 2002; All
Children Under 23 Years of Age in Sixth Year.--An individual who meets
the following requirements with respect to a month is eligible to
enroll under this title with respect to such month:
``(1) Age.--
``(A) First year.--During the first year in which
this title is effective, the individual has not
attained 6 years of age.
``(B) Second year.--During the second year in which
this title is effective, the individual has not
attained 11 years of age.
``(C) Third year.--During the third year in which
this title is effective, the individual has not
attained 16 years of age.
``(D) Fourth year.--During the fourth year in which
this title is effective, the individual has not
attained 21 years of age.
``(E) Fifth and subsequent years.--During the fifth
year in which this title is effective and each
subsequent year, the individual has not attained 23
years of age.
``(2) Citizenship.--The individual is a citizen or national
of the United States or is permanently residing in the United
States under color of law.
``(b) Enrollment Process.--An individual may enroll in the program
established under this title only in such manner and form as may be
prescribed by regulations, and only during an enrollment period
prescribed by the Secretary consistent with the provisions of this
section. Such regulations shall provide a process under which--
``(1) individuals who are born in the United States after
December 31, 2002, are deemed to be enrolled at the time of
birth and a parent or guardian of such an individual is
permitted to pre-enroll in the month prior to the expected
month of birth;
``(2) individuals who are born outside the United States
after such date and who become eligible to enroll by virtue of
immigration into (or an adjustment of immigration status in)
the United States are deemed enrolled at the time of entry or
adjustment of status;
``(3) eligible individuals may otherwise be enrolled at
such other times and manner as the Secretary shall specify,
including the use of outstationed eligibility sites as
described in section 1902(a)(55)(A) and the use of presumptive
eligibility provisions like those described in section 1920A;
and
``(4) at the time of automatic enrollment of a child, the
Secretary provides for issuance to a parent or custodian of the
individual a card evidencing coverage under this title and for
a description of such coverage.
The provisions of section 1837(h) apply with respect to enrollment
under this title in the same manner as they apply to enrollment under
part B of title XVIII.
``(c) Date Coverage Begins.--
``(1) In general.--The period during which an individual is
entitled to benefits under this title shall begin as follows,
but in no case earlier than January 1, 2003:
``(A) In the case of an individual who is enrolled
under paragraph (1) or (2) of subsection (b), the date
of birth or date of obtaining appropriate citizenship
or immigration status, as the case may be.
``(B) In the case of an another individual who
enrolls (including pre-enrolls) before the month in
which the individual satisfies eligibility for
enrollment under subsection (a), the first day of such
month of eligibility.
``(C) In the case of an another individual who
enrolls during or after the month in which the
individual first satisfies eligibility for enrollment
under such subsection, the first day of the following
month.
``(2) Authority to provide for partial months of
coverage.--Under regulations, the Secretary may, in the
Secretary's discretion, provide for coverage periods that
include portions of a month in order to avoid lapses of
coverage.
``(3) Limitation on payments.--No payments may be made
under this title with respect to the expenses of an individual
enrolled under this title unless such expenses were incurred by
such individual during a period which, with respect to the
individual, is a coverage period under this section.
``(d) Expiration of Eligibility.--An individual's coverage period
under this part shall continue until the individual's enrollment has
been terminated because the individual no longer meets the requirements
of subsection (a) (whether because of age or change in immigration
status).
``(e) Entitlement to MediKids Benefits for Enrolled Individuals.--
An individual enrolled under this section is entitled to the benefits
described in section 2202.
``(f) Low-Income Information.--At the time of enrollment of a child
under this title, the Secretary shall make an inquiry as to whether or
not the family income of the family that includes the child is less
than 150 percent of the poverty line for a family of the size involved.
If the family income is below such level, the Secretary shall encode in
the identification card issued in connection with eligibility under
this title a code indicating such fact. The Secretary also shall
provide for a toll-free telephone line at which providers can verify
whether or not such a child is in a family the income of which is below
such level.
``(g) Construction.--Nothing in this title shall be construed as
requiring (or preventing) an individual who is enrolled under this
section from seeking medical assistance under a State medicaid plan
under title XIX or child health assistance under a State child health
plan under title XXI.

``SEC. 2202. BENEFITS.

``(a) Secretarial Specification of Benefit Package.--
``(1) In general.--The Secretary shall specify the benefits
to be made available under this title consistent with the
provisions of this section and in a manner designed to meet the
health needs of enrollees.
``(2) Updating.--The Secretary shall update the
specification of benefits over time to ensure the inclusion of
age-appropriate benefits to reflect the enrollee population.
``(3) Annual updating.--The Secretary shall establish
procedures for the annual review and updating of such benefits
to account for changes in medical practice, new information
from medical research, and other relevant developments in
health science.
``(4) Input.--The Secretary shall seek the input of the
pediatric community in specifying and updating such benefits.
``(5) Limitation on updating.--In no case shall updating of
benefits under this subsection result in a failure to provide
benefits required under subsection (b).
``(b) Inclusion of Certain Benefits.--
``(1) Medicare core benefits.--Such benefits shall include
(to the extent consistent with other provisions of this
section) at least the same benefits (including coverage,
access, availability, duration, and beneficiary rights) that
are available under parts A and B of title XVIII.
``(2) All required medicaid benefits.--Such benefits shall
also include all items and services for which medical
assistance is required to be provided under section
1902(a)(10)(A) to individuals described in such section,
including early and periodic screening, diagnostic services,
and treatment services.
``(3) Inclusion of prescription drugs.--Such benefits also
shall include (as specified by the Secretary) prescription
drugs and biologicals.
``(4) Cost-sharing.--
``(A) In general.--Subject to subparagraph (B),
such benefits also shall include the cost-sharing (in
the form of deductibles, coinsurance, and copayments)
applicable under title XVIII with respect to comparable
items and services, except that no cost-sharing shall
be imposed with respect to early and periodic screening
and diagnostic services included under paragraph (2).
``(B) No cost-sharing for lowest income children.--
Such benefits shall not include any cost-sharing for
children in families the income of which (as determined
for purposes of section 1905(p)) does not exceed 150
percent of the official income poverty line (referred
to in such section) applicable to a family of the size
involved.
``(C) Refundable credit for cost-sharing for other
low-income children.--For a refundable credit for cost-
sharing in the case of children in certain families,
see section 35 of the Internal Revenue Code of 1986.
``(c) Payment Schedule.--The Secretary, with the assistance of the
Medicare Payment Advisory Commission, shall develop and implement a
payment schedule for benefits covered under this title. To the extent
feasible, such payment schedule shall be consistent with comparable
payment schedules and reimbursement methodologies applied under parts A
and B of title XVIII.
``(d) Input.--The Secretary shall specify such benefits and payment
schedules only after obtaining input from appropriate child health
providers and experts.
``(e) Enrollment in Health Plans.--The Secretary shall provide for
the offering of benefits under this title through enrollment in a
health benefit plan that meets the same (or similar) requirements as
the requirements that apply to Medicare+Choice plans under part C of
title XVIII. In the case of individuals enrolled under this title in
such a plan, the Medicare+Choice capitation rate described in section
1853(c) shall be adjusted in an appropriate manner to reflect
differences between the population served under this title and the
population under title XVIII.

``SEC. 2203. PREMIUMS.

``(a) Amount of Monthly Premiums.--
``(1) In general.--The Secretary shall, during September of
each year (beginning with 2002), establish a monthly MediKids
premium. Subject to paragraph (2), the monthly MediKids premium
for a year is equal to \1/12\ of the annual premium rate
computed under subsection (b).
``(2) Elimination of monthly premium for demonstration of
equivalent coverage (including coverage under low-income
programs).--The amount of the monthly premium imposed under
this section for an individual for a month shall be zero in the
case of an individual who demonstrates to the satisfaction of
the Secretary that the individual has basic health insurance
coverage for that month. For purposes of the previous sentence
enrollment in a medicaid plan under title XIX, a State child
health insurance plan under title XXI, or under the medicare
program under title XVIII is deemed to constitute basic health
insurance coverage described in such sentence.
``(b) Annual Premium.--
``(1) National, per capita average.--The Secretary shall
estimate the average, annual per capita amount that would be
payable under this title with respect to individuals residing
in the United States who meet the requirement of section
2201(a)(1) as if all such individuals were eligible for (and
enrolled) under this title during the entire year (and assuming
that section 1862(b)(2)(A)(i) did not apply).
``(2) Annual premium.--Subject to subsection (d), the
annual premium under this subsection for months in a year is
equal to 25 percent of the average, annual per capita amount
estimated under paragraph (1) for the year.
``(c) Payment of Monthly Premium.--
``(1) Period of payment.--In the case of an individual who
participates in the program established by this title, subject
to subsection (d), the monthly premium shall be payable for the
period commencing with the first month of the individual's
coverage period and ending with the month in which the
individual's coverage under this title terminates.
``(2) Collection through tax return.--For provisions
providing for the payment of monthly premiums under this
subsection, see section 59B of the Internal Revenue Code of
1986.
``(3) Protections against fraud and abuse.--The Secretary
shall develop, in coordination with States and other health
insurance issuers, administrative systems to ensure that claims
which are submitted to more than one payor are coordinated and
duplicate payments are not made.
``(d) Reduction in Premium for Certain Low-Income Families.--For
provisions reducing the premium under this section for certain low-
income families, see section 59B(c) of the Internal Revenue Code of
1986.

``SEC. 2204. MEDIKIDS TRUST FUND.

``(a) Establishment of Trust Fund.--
``(1) In general.--There is hereby created on the books of
the Treasury of the United States a trust fund to be known as
the `MediKids Trust Fund' (in this section referred to as the
`Trust Fund'). The Trust Fund shall consist of such gifts and
bequests as may be made as provided in section 201(i)(1) and
such amounts as may be deposited in, or appropriated to, such
fund as provided in this title.
``(2) Premiums.--Premiums collected under section 2203
shall be transferred to the Trust Fund.
``(b) Incorporation of Provisions.--
``(1) In general.--Subject to paragraph (2), subsections
(b) through (i) of section 1841 shall apply with respect to the
Trust Fund and this title in the same manner as they apply with
respect to the Federal Supplementary Medical Insurance Trust
Fund and part B, respectively.
``(2) Miscellaneous references.--In applying provisions of
section 1841 under paragraph (1)--
``(A) any reference in such section to `this part'
is construed to refer to title XXII;
``(B) any reference in section 1841(h) to section
1840(d) and in section 1841(i) to sections 1840(b)(1)
and 1842(g) are deemed references to comparable
authority exercised under this title;
``(C) payments may be made under section 1841(g) to
the Trust Funds under sections 1817 and 1841 as
reimbursement to such funds for payments they made for
benefits provided under this title; and
``(D) the Board of Trustees of the MediKids Trust
Fund shall be the same as the Board of Trustees of the
Federal Supplementary Medical Insurance Trust Fund.

``SEC. 2205. OVERSIGHT AND ACCOUNTABILITY.

``(a) Through Annual Reports of Trustees.--The Board of Trustees of
the MediKids Trust Fund under section 2204(b)(1) shall report on an
annual basis to Congress concerning the status of the Trust Fund and
the need for adjustments in the program under this title to maintain
financial solvency of the program under this title.
``(b) Periodic GAO Reports.--The Comptroller General of the United
States shall periodically submit to Congress reports on the adequacy of
the financing of coverage provided under this title. The Comptroller
General shall include in such report such recommendations for
adjustments in such financing and coverage as the Comptroller General
deems appropriate in order to maintain financial solvency of the
program under this title.

``SEC. 2206. INCLUSION OF CARE COORDINATION SERVICES.

``(a) In General.--
``(1) Program authority.--The Secretary, beginning in 2003,
may implement a care coordination services program in
accordance with the provisions of this section under which, in
appropriate circumstances, eligible individuals may elect to
have health care services covered under this title managed and
coordinated by a designated care coordinator.
``(2) Administration by contract.--The Secretary may
administer the program under this section through a contract
with an appropriate program administrator.
``(3) Coverage.--Care coordination services furnished in
accordance with this section shall be treated under this title
as if they were included in the definition of medical and other
health services under section 1861(s) and benefits shall be
available under this title with respect to such services
without the application of any deductible or coinsurance.
``(b) Eligibility Criteria; Identification and Notification of
Eligible Individuals.--
``(1) Individual eligibility criteria.--The Secretary shall
specify criteria to be used in making a determination as to
whether an individual may appropriately be enrolled in the care
coordination services program under this section, which shall
include at least a finding by the Secretary that for cohorts of
individuals with characteristics identified by the Secretary,
professional management and coordination of care can reasonably
be expected to improve processes or outcomes of health care and
to reduce aggregate costs to the programs under this title.
``(2) Procedures to facilitate enrollment.--The Secretary
shall develop and implement procedures designed to facilitate
enrollment of eligible individuals in the program under this
section.
``(c) Enrollment of Individuals.--
``(1) Secretary's determination of eligibility.--The
Secretary shall determine the eligibility for services under
this section of individuals who are enrolled in the program
under this section and who make application for such services
in such form and manner as the Secretary may prescribe.
``(2) Enrollment period.--
``(A) Effective date and duration.--Enrollment of
an individual in the program under this section shall
be effective as of the first day of the month following
the month in which the Secretary approves the
individual's application under paragraph (1), shall
remain in effect for one month (or such longer period
as the Secretary may specify), and shall be
automatically renewed for additional periods, unless
terminated in accordance with such procedures as the
Secretary shall establish by regulation. Such
procedures shall permit an individual to disenroll for
cause at any time and without cause at re-enrollment
intervals.
``(B) Limitation on reenrollment.--The Secretary
may establish limits on an individual's eligibility to
reenroll in the program under this section if the
individual has disenrolled from the program more than
once during a specified time period.
``(d) Program.--The care coordination services program under this
section shall include the following elements:
``(1) Basic care coordination services.--
``(A) In general.--Subject to the cost-
effectiveness criteria specified in subsection (b)(1),
except as otherwise provided in this section, enrolled
individuals shall receive services described in section
1905(t)(1) and may receive additional items and
services as described in subparagraph (B).
``(B) Additional benefits.--The Secretary may
specify additional benefits for which payment would not
otherwise be made under this title that may be
available to individuals enrolled in the program under
this section (subject to an assessment by the care
coordinator of an individual's circumstance and need
for such benefits) in order to encourage enrollment in,
or to improve the effectiveness of, such program.
``(2) Care coordination requirement.--Notwithstanding any
other provision of this title, the Secretary may provide that
an individual enrolled in the program under this section may be
entitled to payment under this title for any specified health
care items or services only if the items or services have been
furnished by the care coordinator, or coordinated through the
care coordination services program. Under such provision, the
Secretary shall prescribe exceptions for emergency medical
services as described in section 1852(d)(3), and other
exceptions determined by the Secretary for the delivery of
timely and needed care.
``(e) Care Coordinators.--
``(1) Conditions of participation.--In order to be
qualified to furnish care coordination services under this
section, an individual or entity shall--
``(A) be a health care professional or entity
(which may include physicians, physician group
practices, or other health care professionals or
entities the Secretary may find appropriate) meeting
such conditions as the Secretary may specify;
``(B) have entered into a care coordination
agreement; and
``(C) meet such criteria as the Secretary may
establish (which may include experience in the
provision of care coordination or primary care
physician's services).
``(2) Agreement term; payment.--
``(A) Duration and renewal.--A care coordination
agreement under this subsection shall be for one year
and may be renewed if the Secretary is satisfied that
the care coordinator continues to meet the conditions
of participation specified in paragraph (1).
``(B) Payment for services.--The Secretary may
negotiate or otherwise establish payment terms and
rates for services described in subsection (d)(1).
``(C) Liability.--Case coordinators shall be
subject to liability for actual health damages which
may be suffered by recipients as a result of the care
coordinator's decisions, failure or delay in making
decisions, or other actions as a care coordinator.
``(D) Terms.--In addition to such other terms as
the Secretary may require, an agreement under this
section shall include the terms specified in
subparagraphs (A) through (C) of section 1905(t)(3).

``SEC. 2207. ADMINISTRATION AND MISCELLANEOUS.

``(a) In General.--Except as otherwise provided in this title--
``(1) the Secretary shall enter into appropriate contracts
with providers of services, other health care providers,
carriers, and fiscal intermediaries, taking into account the
types of contracts used under title XVIII with respect to such
entities, to administer the program under this title;
``(2) individuals enrolled under this title shall be
treated for purposes of title XVIII as though the individual
were entitled to benefits under part A and enrolled under part
B of such title;
``(3) benefits described in section 2202 that are payable
under this title to such individuals shall be paid in a manner
specified by the Secretary (taking into account, and based to
the greatest extent practicable upon, the manner in which they
are provided under title XVIII);
``(4) provider participation agreements under title XVIII
shall apply to enrollees and benefits under this title in the
same manner as they apply to enrollees and benefits under title
XVIII; and
``(5) individuals entitled to benefits under this title may
elect to receive such benefits under health plans in a manner,
specified by the Secretary, similar to the manner provided
under part C of title XVIII.
``(b) Coordination With Medicaid and SCHIP.--Notwithstanding any
other provision of law, individuals entitled to benefits for items and
services under this title who also qualify for benefits under title XIX
or XXI or any other Federally funded program may continue to qualify
and obtain benefits under such other title or program, and in such case
such an individual shall elect either--
``(1) such other title or program to be primary payor to
benefits under this title, in which case no benefits shall be
payable under this title and the monthly premium under section
2203 shall be zero; or
``(2) benefits under this title shall be primary payor to
benefits provided under such program or title, in which case
the Secretary shall enter into agreements with States as may be
appropriate to provide that, in the case of such individuals,
the benefits under titles XIX and XXI or such other program
(including reduction of cost-sharing) are provided on a `wrap-
around' basis to the benefits under this title.''.
(2) Conforming amendments to social security act
provisions.--
(A) Section 201(i)(1) of the Social Security Act
(42 U.S.C. 401(i)(1)) is amended by striking ``or the
Federal Supplementary Medical Insurance Trust Fund''
and inserting ``the Federal Supplementary Medical
Insurance Trust Fund, and the MediKids Trust Fund''.
(B) Section 201(g)(1)(A) of such Act (42 U.S.C.
401(g)(1)(A)) is amended by striking ``and the Federal
Supplementary Medical Insurance Trust Fund established
by title XVIII'' and inserting ``, the Federal
Supplementary Medical Insurance Trust Fund, and the
MediKids Trust Fund established by title XVIII''.
(C) Section 1853(c) of such Act (42 U.S.C. 1395w-
23(c)) is amended--
(i) in paragraph (1), by striking ``or
(7)'' and inserting ``, (7), or (8)'', and
(ii) by adding at the end the following:
``(8) Adjustment for medikids.--In applying this subsection
with respect to individuals entitled to benefits under title
XXII, the Secretary shall provide for an appropriate adjustment
in the Medicare+Choice capitation rate as may be appropriate to
reflect differences between the population served under such
title and the population under parts A and B.''.
(3) Maintenance of medicaid eligibility and benefits for
children.--
(A) In general.--In order for a State to continue
to be eligible for payments under section 1903(a) of
the Social Security Act (42 U.S.C. 1396b(a))--
(i) the State may not reduce standards of
eligibility, or benefits, provided under its
State medicaid plan under title XIX of the
Social Security Act or under its State child
health plan under title XXI of such Act for
individuals under 23 years of age below such
standards of eligibility, and benefits, in
effect on the date of the enactment of this
Act; and
(ii) the State shall demonstrate to the
satisfaction of the Secretary of Health and
Human Services that any savings in State
expenditures under title XIX or XXI of the
Social Security Act that results from children
from enrolling under title XXII of such Act
shall be used in a manner that improves
services to beneficiaries under title XIX of
such Act, such as through increases in provider
payment rates, expansion of eligibility,
improved nurse and nurse aide staffing and
improved inspections of nursing facilities, and
coverage of additional services.
(B) Medikids as primary payor.--In applying title
XIX of the Social Security Act, the MediKids program
under title XXII of such Act shall be treated as a
primary payor in cases in which the election described
in section 2207(b)(2) of such Act, as added by
subsection (a), has been made.
(4) Expansion of Medpac membership to 19.--
(A) In general.--Section 1805(c) of the Social
Security Act (42 U.S.C. 1395b-6(c)) is amended--
(i) in paragraph (1), by striking ``17''
and inserting ``19''; and
(ii) in paragraph (2)(B), by inserting
``experts in children's health,'' after ``other
health professionals,''.
(B) Initial terms of additional members.--
(i) In general.--For purposes of staggering
the initial terms of members of the Medicare
Payment Advisory Commission under section
1805(c)(3) of the Social Security Act (42
U.S.C. 1395b-6(c)(3)), the initial terms of the
2 additional members of the Commission provided
for by the amendment under subsection (a)(1)
are as follows:
(I) One member shall be appointed
for 1 year.
(II) One member shall be appointed
for 2 years.
(ii) Commencement of terms.--Such terms
shall begin on January 1, 2002.
(b) MediKids Premium.--
(1) In general.--Subchapter A of chapter 1 of the Internal
Revenue Code of 1986 (relating to determination of tax
liability) is amended by adding at the end the following new
part:

``PART VIII--MEDIKIDS PREMIUM

``Sec. 59B. MediKids premium.

``SEC. 59B. MEDIKIDS PREMIUM.

``(a) Imposition of Tax.--In the case of an individual to whom this
section applies, there is hereby imposed (in addition to any other tax
imposed by this subtitle) a MediKids premium for the taxable year.
``(b) Individuals Subject to Premium.--
``(1) In general.--This section shall apply to an
individual if the taxpayer has a MediKid at any time during the
taxable year.
``(2) Medikid.--For purposes of this section, the term
`MediKid' means, with respect to a taxpayer, any individual
with respect to whom the taxpayer is required to pay a premium
under section 2203(c) of the Social Security Act for any month
of the taxable year.
``(c) Amount of Premium.--For purposes of this section, the
MediKids premium for a taxable year is the sum of the monthly premiums
under section 2203 of the Social Security Act for months in the taxable
year.
``(d) Exceptions Based on Adjusted Gross Income.--
``(1) Exemption for very low-income taxpayers.--
``(A) In general.--No premium shall be imposed by
this section on any taxpayer having an adjusted gross
income not in excess of the exemption amount.
``(B) Exemption amount.--For purposes of this
paragraph, the exemption amount is--
``(i) $17,415 in the case of a taxpayer
having 1 MediKid,
``(ii) $21,945 in the case of a taxpayer
having 2 MediKids,
``(iii) $26,475 in the case of a taxpayer
having 3 MediKids, and
``(iv) $31,005 in the case of a taxpayer
having 4 or more MediKids.
``(C) Phaseout of exemption.--In the case of a
taxpayer having an adjusted gross income which exceeds
the exemption amount but does not exceed twice the
exemption amount, the premium shall be the amount which
bears the same ratio to the premium which would (but
for this subparagraph) apply to the taxpayer as such
excess bears to the exemption amount.
``(D) Inflation adjustment of exemption amounts.--
In the case of any taxable year beginning in a calendar
year after 2001, each dollar amount contained in
subparagraph (C) shall be increased by an amount equal
to the product of--
``(i) such dollar amount, and
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year begins,
determined by substituting `calendar year 2000'
for `calendar year 1992' in subparagraph (B)
thereof.
If any increase determined under the preceding sentence
is not a multiple of $50, such increase shall be
rounded to the nearest multiple of $50.
``(2) Premium limited to 5 percent of adjusted gross
income.--In no event shall any taxpayer be required to pay a
premium under this section in excess of an amount equal to 5
percent of the taxpayer's adjusted gross income.
``(e) Coordination With Other Provisions.--
``(1) Not treated as medical expense.--For purposes of this
chapter, any premium paid under this section shall not be
treated as expense for medical care.
``(2) Not treated as tax for certain purposes.--The premium
paid under this section shall not be treated as a tax imposed
by this chapter for purposes of determining--
``(A) the amount of any credit allowable under this
chapter, or
``(B) the amount of the minimum tax imposed by
section 55.
``(3) Treatment under subtitle f.--For purposes of subtitle
F, the premium paid under this section shall be treated as if
it were a tax imposed by section 1.''.
(2) Technical amendments.--
(A) Subsection (a) of section 6012 of such Code is
amended by inserting after paragraph (9) the following
new paragraph:
``(10) Every individual liable for a premium under section
59B.''.
(B) The table of parts for subchapter A of chapter
1 of such Code is amended by adding at the end the
following new item:

``Part VIII. MediKids premium.''.
(3) Effective date.--The amendments made by this subsection
shall apply to months beginning after December 2002, in taxable
years ending after such date.
(c) Refundable Credit for Cost-Sharing Expenses Under MediKids
Program.--
(1) In general.--Subpart C of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
refundable credits) is amended by redesignating section 35 as
section 36 and by inserting after section 34 the following new
section:

``SEC. 35. COST-SHARING EXPENSES UNDER MEDIKIDS PROGRAM.

``(a) Allowance of Credit.--In the case of an individual who has a
MediKid (as defined in section 59B) at any time during the taxable
year, there shall be allowed as a credit against the tax imposed by
this subtitle an amount equal to 50 percent of the amount paid by the
taxpayer during the taxable year as cost-sharing under section
2202(b)(4) of the Social Security Act.
``(b) Limitation Based on Adjusted Gross Income.--The amount of the
credit which would (but for this subsection) be allowed under this
section for the taxable year shall be reduced (but not below zero) by
an amount which bears the same ratio to such amount of credit as the
excess of the taxpayer's adjusted gross income for such taxable year
over the exemption amount (as defined in section 59B(d)) bears to such
exemption amount.''.
(2) Technical amendments.--
(A) Paragraph (2) of section 1324(b) of title 31,
United States Code, is amended by inserting before the
period ``or from section 35 of such Code''.
(B) The table of sections for subpart C of part IV
of subchapter A of chapter 1 of such Code is amended by
striking the last item and inserting the following new
items:

``Sec. 35. Cost-sharing expenses under
MediKids program.
``Sec. 36. Overpayments of tax.''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31, 2002.
(d) Report on Long-Term Revenues.--Within 1 year after the date of
enactment of this Act, the Secretary of the Treasury shall propose a
gradual schedule of progressive tax changes to fund the program under
title XXII of the Social Security Act, as the number of enrollees grows
in the out-years.
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