Private Option Health Care Act




Statement of Congressman Ron Paul
United States House of Representatives
Statement Introducing the Private Option Health Care Act (HR 5444)

May 27, 2010

Madam Speaker, I rise to introduce the Private Option Health Care Act. This bill places individuals back in control of health care by replacing the recently passed tax-spend-and-regulate health care law with reforms designed to restore a free market health care system.

The major problems with American health care are rooted in government policies that encourage excessive reliance on third-party payers. The excessive reliance on third-party payers removes incentives for individual patients to concern themselves with health care costs. Laws and policies promoting Health Maintenance Organizations (HMOs) resulted from a desperate attempt to control spiraling costs. However, instead of promoting an efficient health care system, HMOs further took control over health care away from patients and physicians. Furthermore, the third-party payer system creates a two-tier health care system where people whose employers can afford to offer “Cadillac” plans have access to top quality health care, while people unable to obtain health insurance from their employers face obstacles in obtaining quality health care.

The Private Option Health Care Act gives control of health care back into the hands of individuals through tax credits and tax deductions, improving Health Savings Accounts and Flexible Savings Accounts. Specifically, the bill:

A. Provides all Americans with a tax credit for 100% of health care expenses. The tax credit is fully refundable against both income and payroll taxes;
B. Allows individuals to roll over unused amounts in cafeteria plans and Flexible Savings Accounts (FSA);
C. Provides a tax credit for premiums for high-deductible insurance policies connected with a Health Savings Accounts (HSAs) and allows seniors to use funds in HSAs to pay for medigap policies;
D. Repeals the 7.5% threshold for the deduction of medical expenses, thus making all medical expenses tax deductible.

This bill also creates a competitive market in heath insurance. It achieves this goal by exercising Congress’s authority under the Commerce Clause to allow individuals to purchase health insurance across state lines. The near-monopoly position many health insurers have in many states and the high prices and inefficiencies that result, is a direct result of state laws limiting people’s ability to buy health insurance that meets their needs, instead of a health insurance plan that meets what state legislators, special interests, and health insurance lobbyists think they should have. Ending this ban will create a truly competitive marketplace in health insurance and give insurance companies more incentive to offer quality insurance at affordable prices.

The Private Option Health Care Act also provides an effective means of ensuring that people harmed during medical treatment receive fair compensation while reducing the burden of costly malpractice litigation on the health care system. The bill achieves this goal by providing a tax credit for negative outcomes insurance purchased before medical treatment. The insurance will provide compensation for any negative outcomes of the medical treatment. Patients can receive this insurance without having to go through lengthy litigation and without having to give away a large portion of their awards to trial lawyers.

Finally, the Private Option Health Care Act also lowers the prices of prescription drugs by reducing barriers to the importation of Food and Drug Administration (FDA)-approved pharmaceuticals. Under my bill, anyone wishing to import a drug simply submits an application to the FDA, which then must approve the drug unless the FDA finds the drug is either not approved for use in the United States or is adulterated or misbranded. This process will make safe and available imported medicines affordable to millions of Americans. Letting the free market work is the best means of lowering the cost of prescription drugs.

Madam Speaker, the Private Option Health Care Act allows Congress to correct the mistake it made last month by replacing the new health care law with health care measures that give control to health care to individuals, instead of the federal government and politically-influential corporations. I urge my colleagues to support this bill.

The bill is displayed below:

Private Option Health Care Act

HR 5444 IH

111th CONGRESS 2d Session

H. R. 5444

To amend the Internal Revenue Code of 1986 to repeal the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 and to replace it with provisions reforming the health care system by putting patients back in charge of health care.

IN THE HOUSE OF REPRESENTATIVES

May 27, 2010

Mr. PAUL introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committees on Appropriations, House Administration, Ways and Means, Education and Labor, Natural Resources, the Judiciary, and Rules, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned


A BILL

To amend the Internal Revenue Code of 1986 to repeal the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 and to replace it with provisions reforming the health care system by putting patients back in charge of health care.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title- This Act may be cited as the `Private Option Health Care Act’.
    (b) Table of Contents- The table of contents of this Act is as follows:
    • Sec. 1. Short title; table of contents.
    • Sec. 2. Repeal of Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act of 2010.
    • Sec. 3. Refundable credit for health care costs.
    • Sec. 4. Disposition of unused health benefits in cafeteria plans and flexible spending arrangements.
    • Sec. 5. Strengthening health savings accounts.
    • Sec. 6. Repeal of 7.5 percent threshold on deduction for medical expenses.
    • Sec. 7. Purchase of health insurance across State lines.
    • Sec. 8. Facilitation of importation of drugs approved by Food and Drug Administration.
    • Sec. 9. Credit for purchase by patient of insurance against negative outcomes resulting from surgery.
    • Sec. 10. Exclusion from gross income for medical malpractice awards granted in binding arbitration.

SEC. 2. REPEAL OF PATIENT PROTECTION AND AFFORDABLE CARE ACT AND HEALTH CARE AND EDUCATION RECONCILIATION ACT OF 2010.

    (a) PPACA- Effective as of the enactment of the Patient Protection and Affordable Care Act, such Act is repealed, and the provisions of law amended or repealed by such Act are restored or revised as if such Act had not been enacted.
    (b) Repeal of HCERA- Effective as of the enactment of the Health Care and Education Reconciliation Act of 2010, such Act is repealed, and the provisions of law amended or repealed by such Act are restored or revised as if such Act had not been enacted.

SEC. 3. REFUNDABLE CREDIT FOR HEALTH CARE COSTS.

    (a) In General- Section 35 of the Internal Revenue Code of 1986 (relating to health insurance costs of eligible individuals) is amended to read as follows:

`SEC. 35. HEALTH INSURANCE COSTS.

    `(a) In General- In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle an amount equal to the sum of–
    • `(1) the amount paid by the taxpayer for insurance which constitutes medical care for the taxpayer and the taxpayer’s spouse and dependents, plus
    • `(2) the amount contributed to a health savings account of the individual (or the individual’s spouse).
    `(b) Limitation- The credit allowed by subsection (a) for the taxable year shall not exceed the sum of–
    • `(1) the taxpayer’s net income tax for the taxable year, plus
    • `(2) the taxpayer’s Social Security taxes (as defined in section 24(d)) for such taxable year.
    For purposes of paragraph (1), the term `net income tax’ means the sum of the regular tax liability plus the tax imposed by section 55, reduced by the credits allowable under this part (other than this subpart).
    `(c) Denial of Double Benefit-
    • `(1) IN GENERAL- Any amount allowed as a credit under this section shall not be taken into account in determining the amount of any deduction under this chapter.
    • `(2) COORDINATION WITH HEALTH SAVINGS ACCOUNT CONTRIBUTIONS- For purposes of paragraph (1), amounts taken into account under subsection (a) for a taxable year shall be treated as being attributable to amounts paid for insurance to the extent of such payments.’.
    (b) Conforming Amendments-
    • (1) Section 223(b) of such Code, as amended by section 5, is amended by adding at the end the following new paragraph:
    • `(4) COORDINATION WITH CREDIT FOR HEALTH INSURANCE- The limitation under paragraph (1) shall be reduced by the amount treated as being taken into account under section 35(a)(2).’.
    • (2) Section 223(e)(3)(B) of such Code, as amended by section 5, is amended by inserting `nor treated as being taken into account under section 35(a)(2)’ before the period at the end.
    • (3) Section 4973(g) of such Code is amended–
      • (A) in paragraph (1) by inserting `or a credit under section 35′ after `section 223′, and
      • (B) in paragraph (2)(B)(i) by striking `maximum’ and inserting `sum of the amount treated as being taken into account under section 35(a)(2) plus the’.
    • (4) Section 162 of such Code is amended by striking subsection (l).
    • (5) Chapter 77 of such Code is amended by striking section 7527 and by striking the item relating to section 7527 in the table of sections for such chapter.
    • (6) Subpart B of part III of subchapter A of chapter 61 of such Code is amended by striking section 6050T and by striking the item relating to section 6050T in the table of sections for such chapter.
    • (7) Section 6103(l) of such Code is amended by striking paragraph (18).
    • (8) Section 6103(p) of such Code is amended–
      • (A) in paragraph (3)(A) by striking `(17), or (18)’ and inserting `or (17)’, and
      • (B) in paragraph (4) by striking `or (18)’ after `any other person described in subsection (l)(10), (16)’ each place it appears.
    • (9) Section 7213A(a)(1)(B) of such Code is amended by striking `subsection (l)(18) or (n) of section 6103′ and inserting `section 6103(n)’.
    • (10) Section 6724(d)(1)(B) of such Code is amended by striking clause (xiii).
    • (11) Section 6724(d)(2) of such Code is amended by striking subparagraph (DD).
    • (12) The item relating to section 35 in the table of sections for subpart C of part IV of subchapter A of chapter 1 of such Code is amended to read as follows:
    • `Sec. 35. Health insurance costs.’.
    (c) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2009.

SEC. 4. DISPOSITION OF UNUSED HEALTH BENEFITS IN CAFETERIA PLANS AND FLEXIBLE SPENDING ARRANGEMENTS.

    (a) In General- Section 125 of the Internal Revenue Code of 1986 (relating to cafeteria plans) is amended by redesignating subsections (i) and (j) as subsections (j) and (k), respectively, and by inserting after subsection (h) the following:
    `(i) Carryforwards or Payments of Certain Unused Health Benefits-
    • `(1) IN GENERAL- For purposes of this title, a plan or other arrangement shall not fail to be treated as a cafeteria plan solely because qualified benefits under such plan include a health flexible spending arrangement under which not more than $500 of unused health benefits may be–
      • `(A) carried forward to the succeeding plan year of such health flexible spending arrangement, or
      • `(B) paid to or on behalf of an employee as compensation as of the end of such plan year or upon the termination of, or failure to re-enroll in, such plan or arrangement.
    • `(2) DISTRIBUTION OF UNUSED HEALTH BENEFITS ON BEHALF OF EMPLOYEE- For purposes of paragraph (1)(B), unused health benefits paid as compensation on behalf of an employee by the employer shall be–
      • `(A) includible in gross income and wages of the employee, whether or not a deduction for such payment is allowable under this title to the employee, and
      • `(B) excludable from–
        • `(i) gross income to the extent provided under section 402(e), 457(a) (with respect to contributions to an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A)), or 220, and
        • `(ii) wages to the extent otherwise provided for amounts so excludable.
    • `(3) HEALTH FLEXIBLE SPENDING ARRANGEMENT- For purposes of this subsection, the term `health flexible spending arrangement’ means a flexible spending arrangement (as defined in section 106(c)) that is a qualified benefit and only permits reimbursement for expenses for medical care (as defined in section 213(d)(1)) (without regard to subparagraphs (C) and (D) thereof).
    • `(4) UNUSED HEALTH BENEFITS- For purposes of this subsection, the term `unused health benefits’ means the excess of–
      • `(A) the maximum amount of reimbursement allowable during a plan year under a health flexible spending arrangement, over
      • `(B) the actual amount of reimbursement during such year under such arrangement.’.
    (b) Effective Date- The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 2009.

SEC. 5. STRENGTHENING HEALTH SAVINGS ACCOUNTS.

    (a) Repeal of Requirement for Coverage Under High Deductible Health Plan-
    • (1) IN GENERAL- Section 223 of the Internal Revenue Code of 1986 (relating to health savings accounts) is amended by striking subsections (a), (b), and (c) and inserting the following:
    `(a) Deduction Allowed- In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the aggregate amount paid in cash during such taxable year by or on behalf of such individual to a health savings account of such individual.
    `(b) Limitations-
    • `(1) IN GENERAL- The amount allowable as a deduction to a taxpayer under subsection (a) for the taxable year shall not exceed $8,000 ($16,000 in the case of a joint return).
    • `(2) COORDINATION WITH OTHER CONTRIBUTIONS- The limitation which would (but for this paragraph) apply under this subsection to a taxpayer for any taxable year shall be reduced (but not below zero) by the sum of–
      • `(A) the aggregate amount paid for such taxable year to Archer MSAs of the taxpayer, and
      • `(B) the aggregate amount contributed to health savings accounts of the taxpayer which is excludable from the taxpayer’s gross income for such taxable year under section 106(d) (and such amount shall not be allowed as a deduction under subsection (a)).
    • `(3) DENIAL OF DEDUCTION TO DEPENDENTS- No deduction shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins.’.
    • (2) CONFORMING AMENDMENTS-
      • (A) Section 223 of such Code is amended by redesignating subsections (d), (e), (f), (g), and (h) as subsections (c), (d), (e), (f), and (g), respectively.
      • (B) Section 223(f) of such Code (as redesignated by subparagraph (A)) is amended to read as follows:
    `(f) Cost-of-Living Adjustment-
    • `(1) IN GENERAL- In the case of any taxable year beginning in a calendar year after 2010, each dollar amount in subsection (b)(1) shall be increased by an amount equal to–
      • `(A) such dollar amount, multiplied by
      • `(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable year begins, determined by substituting `calendar year 2009′ for `calendar year 1992′ in subparagraph (B) thereof.
    • `(2) ROUNDING- If any increase under paragraph (1) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.’.
      • (C) Section 26(b)(2)(S) of such Code is amended by striking `section 223(f)(4)’ and inserting `section 223(e)(4)’.
      • (D) Each of the following sections of such Code is amended by striking `section 223(d)’ and inserting `section 223(c)’:
        • (i) Section 35(g)(3).
        • (ii) Section 106(d)(1).
        • (iii) Section 220(f)(5)(A).
        • (iv) Section 848(e)(1)(B)(v).
        • (v) Section 4973(a)(5).
        • (vi) Section 4973(g).
        • (vii) Section 4975(c)(6).
        • (viii) Section 4975(e)(1)(E).
        • (ix) Section 6051(a)(12).
      • (E) Section 4973(g) of such Code is amended–
        • (i) in paragraph (1) by striking `section 223(f)(5)’ and inserting `section 223(e)(5)’,
        • (ii) in paragraph (2)(A) by striking `section 223(f)(2)’ and inserting `section 223(e)(2)’, and
        • (iii) in the matter following paragraph (2) by striking `section 223(f)(3)’ and inserting `section 223(e)(3)’.
      • (F) Section 4975(c)(6) of such Code is amended by striking `section 223(e)(2)’ and inserting `section 223(d)(2)’.
      • (G) Section 6693(a)(2)(C) of such Code is amended by striking `section 223(h)’ and inserting `section 223(g)’.
    (b) Deduction Allowed for Premium Payments for High Deductible Policies- Section 223(c)(2)(C) of such Code (as amended by subsection (a)) is amended by striking `or’ at the end of clause (iii), by striking the period at the end of clause (iv) and inserting `, or’, and by inserting after clause (iv) the following new clause:
        • `(v) a high deductible health plan.’.
    (c) Purchase of Medigap Policies Permitted- Clause (iv) of section 223(c)(2)(C) of such Code (as amended by this section) is amended by striking `other than’ and inserting `, including’.
    (d) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2009.

SEC. 6. REPEAL OF 7.5 PERCENT THRESHOLD ON DEDUCTION FOR MEDICAL EXPENSES.

    (a) In General- Subsection (a) of section 213 of the Internal Revenue Code of 1986 (relating to deduction for medical expenses) is amended by striking `to the extent that such expenses exceed 7.5 percent of adjusted gross income’.
    (b) Effective Date- The amendment made by this section shall apply to taxable years beginning after December 31, 2009.

SEC. 7. PURCHASE OF HEALTH INSURANCE ACROSS STATE LINES.

    Notwithstanding any other Federal or State law, any individual residing in a State in the United States may purchase health insurance coverage from a health insurance issuer located in any other such State so long as such issuer is in compliance withal relevant laws of the State of its incorporation (or the State where it is domiciled or primarily does business).

SEC. 8. FACILITATION OF IMPORTATION OF DRUGS APPROVED BY FOOD AND DRUG ADMINISTRATION.

    (a) In General- Chapter VIII of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 381 et seq.) is amended–
    • (1) by striking section 804; and
    • (2) in section 801(d)–
      • (A) by striking paragraph (2); and
      • (B) by striking `(d)(1)’ and all that follows through the end of paragraph (1) and inserting the following:
    `(d)(1)(A) A person who meets applicable legal requirements to be an importer of drugs described in subparagraph (B) may import such a drug (without regard to whether the person is a manufacturer of the drug) if the person submits to the Secretary an application to import the drug and the Secretary approves the application.
    `(B) For purposes of subparagraph (A), the drugs described in this subparagraph are drugs that are subject to section 503(b)(1) or that are composed wholly or partly of insulin.
    `(C) The Secretary shall approve an application under subparagraph (A) if the application demonstrates that the drug to be imported meets all requirements under this Act for the admission of the drug into the United States, including demonstrating that–
    • `(i) an application for the drug has been approved under section 505, or as applicable, under section 351 of the Public Health Service Act; and
    • `(ii) the drug is not adulterated or misbranded.
    `(D) Not later than 60 days after the date on which an application under subparagraph (A) is submitted to the Secretary, the Secretary shall–
    • `(i) approve the application; or
    • `(ii) refuse to approve the application and provide to the person who submitted the application the reason for such refusal.
    `(E) This paragraph may not be construed as affecting any right secured by patent.’.
    (b) Conforming Amendments- Section 801(d) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 381(d)) is amended–
    • (1) by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively;
    • (2) in subclause (III) of paragraph (2)(A)(i) (as redesignated by this subsection), by striking `paragraph (4)’ and inserting `paragraph (3)’; and
    • (3) in paragraph (3) (as redesignated by this subsection), by striking `paragraph (3)’ each place such term appears and inserting `paragraph (2)’.

SEC. 9. CREDIT FOR PURCHASE BY PATIENT OF INSURANCE AGAINST NEGATIVE OUTCOMES RESULTING FROM SURGERY.

    (a) In General- Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable credits) is amended by inserting after section 25D the following new section:

`SEC. 25E. COST OF INSURANCE PURCHASED BY PATIENT AGAINST NEGATIVE OUTCOMES RESULTING FROM SURGERY.

    `(a) In General- In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the cost of negative outcomes insurance covering the individual or the spouse or any dependent (as defined in section 152) of the individual.
    `(b) Negative Outcomes Insurance- For purposes of this section, the term `negative outcomes insurance’ means insurance covering any negative side effect of surgery, including those caused by malpractice from the action or inaction of a physician.’.
    (b) Conforming Amendment- The table of sections for such subpart A of such Code is amended by inserting after the item relating to section 25D the following new item:
    • `Sec. 25E. Cost of insurance purchased by patient against negative outcomes resulting from surgery.’.
    (c) Effective Date- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 10. EXCLUSION FROM GROSS INCOME FOR MEDICAL MALPRACTICE AWARDS GRANTED IN BINDING ARBITRATION.

    (a) In General- Section 104 of the Internal Revenue Code of 1986 (relating to compensation for injuries or sickness) is amended by redesignated subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection:
    `(d) Medical Malpractice Binding Arbitration Awards- In the case of damages awarded for medical malpractice in binding arbitration, gross income does not include such damages (whether for lost wages or otherwise).’.
    (b) Effective Date- The amendment made by subsection (a) shall apply to damages awarded after the date of the enactment of this Act.