to one-half of the total of the sums expended during such quarter under such plan. "(b) The method of computing and paying such amounts shall be as follows:

(1) The Surgeon General shall, prior to the beginning of each quarter, estimate the amount to be paid to the State for such quarter under the provisions of subsection (a), such estimate to be based on (A) a report filed by the State containing its estimate of the total sum to be expended in such quarter in accordance with the provisions of such subsection and stating the amount appropriated or made available by the State and its political subdivisions for such expenditures in such quarter, and if such amount is less than one-half of the total sum of such estimated expenditures, the source or sources from which the difference is expected to be derived, and (B) such other investigation as the Surgeon General may find necessary. "(2) The Surgean General shall then certify to the Secretary of the Treasury the amount so estimated by the Surgeon General, reduced or increased, as the case may be, by any sum by which he finds that its estimate for any prior quarter was greater or less than the amount which should have been paid to the State for such quarter, except to the extent that such sum has been applied to make the amount certified for any prior quarter greater or less than the amount estimated by the Surgeon General for such prior quarter.

"(3) The Secretary of the Treasury shall thereupon, through the fiscal service of the Treasury Department and prior to audit or settlement by the General Accounting Office, pay to the State, at the time or times fixed by the Surgeon General, the amount so certified.

"OPERATION OF STATE PLANS

"SEC. 704. In the case of any State plan for medical aid which has been approved by the Surgeon General, if the Surgeon General, after reasonable notice and opportunity for hearing to the State health agency administering such plan, finds

"(1) that the plan has been so changed as to impose any residence requirement prohibited by section 702 (b), or that in the administration of the plan any such prohibited requirement is imposed, with the knowledge of such State health agency, in a substantial number of cases; or

"(2) that in the administration of the plan there is a failure to comply substantially with any provision required by section 702 (a) to be included in the plan; the Surgeon General shall notify such State health agency that further payments will not be made to the State until the Surgeon General is satisfied that such prohibited requirement is no longer so imposed, and that there is no longer any such failure to comply. Until he is so satisfied he shall make no further certification to the Secretary of the Treasury with respect to such State.

"REGULATIONS

"SEC. 705. The Surgeon General shall have authority to prescribe the rules and regulations necessary to carry out the provisions of this title, including the expansion or restriction of the services and drugs falling within the term 'medical aid' as defined in section 706 (a). All rules, regulations, and amendments thereto with respect to grants to States under this title shall be made after consultation with a conference of the State health authorities. Insofar as practicable, the Surgeon General shall obtain the agreement, prior to the issuance of any such rules, regulations, or amendments, of the State health authorities.

"SEC. 706. As used in this title

"DEFINITIONS

"(a) (1) The term 'medical aid' means making available, free to such persons as may require them, X-ray services, laboratory diagnostic services, respirators, and any drug which is of substantial, accepted, and specific value in the treatment or prevention of pneumonia, streptococcus infection, diabetes, pernicious anemia and other anemias, congestive heart failure, glandular and nervous disorders, nutritional deficiency, typhoid fever, and such other infectious or chronic diseases as the Surgeon General may from time to time prescribe.

"(b) The term 'State' means the several States and the District of Columbia." SEC. 3. Section 1 of the Public Health Service Act, as amended, is amended to read as follows:

"SECTION 1. Title I to VII, inclusive, of this Act may be cited as the 'Public Health Service Act"."

SEC. 4. The Act of July 1, 1944, as amended, is further amended by changing the number of title VII to title VIII and by changing the numbers of sections 701 to 712, inclusive, and references thereto, to sections 801 to 812, respectively.

[S. 1456, 81st Cong., 1st sess.]

A BILL To authorize grants to enable the States to survey, coordinate, supplement, and strengthen their existing health resources so that hospital and medical care may be obtained by all persons

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Voluntary Health Insurance Act".

SEC. 2. The Public Health Service Act (consisting of titles I to VI, inclusive, of the Act of July 1, 1944 (58 Stat. 682), is hereby amended by adding at the end thereof the following new title:

"TITLE VII-HOSPITAL AND MEDICAL CARE

"PART A-DECLARATION OF PURPOSE; DEFINITIONS

"SEC. 701. The purpose of this title is to make a high quality of hospital and medical care available to all persons in each State by (a) strengthening and coordinating existing health resources within the State, (b) encouraging and stimulating voluntary enrollment in prepayment plans for hospital and medical care, with emphasis on employer participation and on making such protection available to persons in rural areas, and (c) providing protection to persons financially unable to pay all or part of subscription charges for prepayment of hospital and medical care (hereinafter referred to as 'subscription charges').

"DEFINITIONS

"SEC. 702. For the purposes of this title

"(a) The term 'hospital and medical care" means surgical, obstetrical and medical services, furnished in a hospital, and hospital services incident thereto, not in excess of sixty days in any year, and including diagnostic and out-patient clinic services furnished in a hospital or a diagnostic clinic.

"(b) The term 'hospital' includes any hospital which has an average patient stay of less than thirty days or any diagnostic clinic, which conforms to standards of maintenance and operation established by the State.

"(c) The term 'voluntary prepayment plan' means any nonprofit or other corporation or association furnishing protection against the cost of hospital and medical care on a voluntary prepayment basis.

"(d) The term 'nonprofit prepayment plan' means any corporation or association, no part of the net earnings of which inures or may lawfully inure to the benefit of any private shareholder or individual, furnishing protection against the cost of hospital and medical care on a voluntary prepayment basis. "(e) The term 'State' includes Alaska, Hawaii, Puerto Rico, and the District of Columbia.

"PART B-HOSPITAL AND MEDICAL CARE UNDER STATE PLANS

"APPROPRIATION

"SEC. 711. For the purpose of enabling each State to carry out the purposes set forth in section 701, as far as practicable under the conditions in such State, there is hereby authorized to be appropriated for each fiscal year a sum sufficient to carry out the purposes of this part. The sums made available under this section shall be used for making payments to States which have submitted, and had approved by the Surgeon General of the Public Health Service, State plans for carrying out the purposes set forth in section 701.

"GENERAL REGULATIONS

"SEC. 712. Within six months after the enactment of this title, the Surgeon General, with the approval of the Federal Hospital and Medical Care Council and the Adminstrator, shall by general regulation prescribe

"(a) the general manner in which the State agency shall determine eligibilty of persons unable to pay subscription charges for prepayment of hospital and medical care;

"(b) the general types of hospital and medical care which may be provided;

"(c) general standards for particpation under this title of voluntary prepayment plans for hospital and medical care;

"(d) general standards for particpation under this title of nonprofit prepayment plans;

"(e) the general manner in which the State agency shall stimulate and assist in enrolling the population in voluntary prepayment plans for hospital and medical care; and

"(f) general methods of administration of the State plan by the designated State agency, subject to the limitations set forth in section 713 (a) (7).

"STATE PLANS

"SEC. 713. (a) Any State desiring to take advantage of this part may submit a State plan which must

"(1) provide that it shall be in effect in all political subdivisions of the State, and if adminstered by them, be mandatory upon them;

"(2) provide for over-all financial participation by the State in a total amount at least equal to 50 per centum of that portion of the total amount expended under the State plan during any quarter in furnishing hospital and medical care to persons unable to pay subscription charges, for which payment to the State is not made under section 714;

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'(3) designate a single State agency (which may be the State agency designated to adminster part C of the Hospital Survey and Construction Act in such State) as the sole agency for the administration of the State plan; "(4) provide for the designation of a State hospital and medical care council of eleven members consisting of the head of the State agency administering the State plan, who shall serve as chairman ex officio, and ten appointed members (who at the time of appointment are members of Hospital and Medical Care Authorities created under paragraph (11)), four of whom shall be persons who are outstanding in fields pertaining to hospital and medical care, at least two of whom shall be doctors of medicine and two of whom shall be hospital administrators, two members shall be persons experienced in the administration of voluntary prepayment plans for hospital and medical care, and four members shall be appointed to represent the consumers of hospital and medical care and shall be persons familiar with the need for hospital and medical care in rural or urban areas;

"(5) contain satisfactory evidence that the State agency designated in accordance with paragraph (3) hereof will have authority to carry out such plan in conformity with this part;

"(6) give adequate assurance that Federal funds will be used to supplement total payments being made by the State and its political subdivisions for the purposes described in the State plan and not as a substitute for such payments;

"(7) provide such methods of administration of the State plan, including methods relating to the establishment and maintenance of personnel standards on a merit basis (except that the Surgeon General shall exercise no authority with respect to the selection, tenure of office, or compensation of any individual employed in accordance with such methods), as the Surgeon General may by regulation prescribe;

"(8) provide that the State agency will make such reports in such form and containing such information as the Surgeon General may from time to time reasonably require, and give the Surgeon General, upon demand, access to the records upon which such information is based;

"(9) provide safeguards which restrict the use or disclosure of information concerning recipients to purposes directly connected with the administration of hospital and medical care under the State plan;

"(10) provide that determination of eligibility shall be made, insofar as possible, in advance of the need for hospital and medical care; that the individual shall not be identified as a person accepting assistance at the time of receiving care; and that the individual shall not be provided a separate grade or classification of care because of his accepting assistance;

"(11) provide for the creation of a Hospital and Medical Care Authority within each of the regions into which the State has been or will be divided

under the Hospital Survey and Construction Act, or by other means, composed of persons residing within the region which shall include representatives of nongovernment organizations or groups, and of State and local agencies, concerned with the utilization of hospitals, including representatives of medical associations, hospital associations, voluntary prepayment plans for hospital and medical care, and including representatives of the consumers of hospital and medical care selected from persons familiar with the need for such care in urban or rural areas, to cooperate with and assist the State agency in carrying out such State plan, subject to the provisions of paragraph (3) above;

"(12) provide that such regional Hospital and Medical Care Authority shall encourage coordination of all health facilities and services in the region, both voluntary and government, and recommend means for their effective utilization in making hospital and medical care available to all persons in the regions;

"(13) provide for the issuance from time to time by the appropriate agency or agencies designated by the State of service cards of participating nonprofit prepayment plans for hospital and medical care to all persons who are certified as unable to pay all or part of the subscription charges of prepayment plans for such care, whether or not in immediate need of such care, which will entitle such persons to needed hospital and medical care;

"(14) provide for furnishing such types of hospital and medical care to persons holding such service cards as may be required by regulations prescribed by the Surgeon General under section 712;

"(15) provide for satisfactory contracts or arrangements so that following the admission of each such qualified person to a hospital such nonprofit prepayment plan will accept liability for payment for all essential services in the same manner as in the case of its regular subscribers, and that hospital and medical care under such contracts or arrangements will be paid for by such prepayment plan on a basis mutually agreeable to participating doctors and hospitals and the State agency or regional authority concerned;

"(16) provide for payment by the State agency of the full amount of payments for hospital and medical care by such nonprofit prepayment plans plus such reasonable administrative expenses as may be mutually agreed upon; "(17) provide methods of determining eligibility of persons to receive service cards, in accordance with regulations prescribed by the Surgeon General under section 712, and methods for obtaining partial reimbursement from such persons according to their financial ability to pay subscription charges;

"(18) provide for a survey of existing diagnostic facilities and a plan for meeting the need for any additional necessary diagnostic services and making such services available to all persons in the State;

"(19) provide for a survey of existing facilities, services, and financing for the care of mental, tuberculous, and chronic-disease and other patients hospitalized for long periods of time, and a plan for meeting the need for any additional facilities, services, and financing, in order to provide proper care for such patients;

"(20) provide for a survey of areas in the State which are unable to attract practicing physicians, and recommend methods for encouraging physicians to practice medicine in such needy areas;

"(21) provide that if any person drawing unemployment compensation is enrolled in a participating voluntary prepayment plan for hospital and medical care, pro rata subscription charges in such plan for such person and his dependents shall be paid, out of funds available for hospital and medical care, for the period of time during which any such person is in receipt of unemployment compensation, such payment of subscription charges to be by way of direct payment to the plan either for the period of unemployment or, if subscription charges have been paid in advance, by way of extension of the period of protection of the plan for the period of unemployment, as may be prescribed by State law;

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(22) provide for pay-roll deduction of subscription charges in voluntary prepayment plans for hospital and medical care for each employee (and his dependents) of the State or political subdivision thereof who requests such deduction;

"(23) provide for a survey of existing enrollment in participating voluntary prepayment plans and development of a plan for stimulating and encouraging enrollment in such plans by all persons able to pay subscrip

tion charges, with emphasis on employer participation and enrollment of persons in rural areas; and

(24) provide that the State agency will from time to time review the State plan and submit to the Surgeon General any modifications thereof which it considers necessary.

"(b) The Surgeon General shall approve any State plan and any modification thereof which fulfills the conditions specified in subsection (a). If any such plan or modification thereof shall have been disapproved by the Surgeon General for failure to comply with subsection (a), the Federal Hospital and Medical Care Council shall, upon request of the State agency, afford it an opportunity for hearing. If such Council determines that the plan or modification complies with the provisions of such subsection, the Surgeon General shall thereupon approve such plan or modification.

"PAYMENT TO STATES

"SEC. 714. (a) From the sums appropriated therefor, the Secretary of the Treasury shall pay to each State which has an approved plan under this part, for each quarter, beginning with the first quarter commencing after the date of enactment of this Act, (1) an amount, which shall be used exclusively as hospital and medical care to persons unable to pay subscription charges, and including administrative expenses of the voluntary prepayment plan making such payments as required by section 713 (a) (15), equal to the Federal percentage (as defined in section 721) of the total sums expended during such quarter as hospital and medical care to persons unable to pay subscription charges, including such administrative expenses, under the State plan with respect to each such person; and (2) an amount equal to one-half of the total of the sums expended during such quarter as found necessary by the Surgeon General for the proper and efficient administration of the State plan, including expenditures required by section 713 (a) (18), (19), (20), (21), and (23), which amount shall be used for paying the costs of administering the State plan or for hospital and medical care to persons unable to pay subscription charges, or both, and for no other purpose.

"(b) The method of computing and paying such amounts shall be as follows:

"(1) The Surgeon General shall, prior to the beginning of each quarter, estimate the amount to be paid to the State for such quarter under the provisions of subsection (a), such estimate to be based on (A) a report filed by the State containing its estimate of the total sum to be expended in such quarter in accordance with the provisions of such subsection, and stating the amount appropriated or made available by the State and its political subdivisons for such expenditures in such quarter, and if such amount is less than the State's proportionate share of the total sum of such estimated expenditures, the source or sources from which the difference is expected to be derived, (B) records showing the number of persons in the State unable to pay subscription charges, and (C) such other investigation as the Surgeon General may find necessary.

"(2) The Surgeon General shall then certify to the Secretary of the Treasury the amount so estimated by the Surgeon General, (A) reduced or increased, as the case may be, by any sum by which he finds that his estimate for any prior quarter was greater or less than the amount which should have been paid to the State under subsection (a) for such quarter, and (B) reduced by a sum equivalent to the pro rata share to which the United States is equitably entitled, as determined by the Surgeon General, of the net amount recovered during any prior quarter by the State or any political subdivision thereof with respect to hospital and medical care furnished under the State plan; except that such increases or reductions shall not be made to the extent that such sums have been applied to make the amount certified for any prior quarter greater or less than the amount estimated by the Surgeon General for such prior quarter: Provided, That any part of the amount recovered from the estate of a deceased recipient which is not in excess of the amount expended by the State or any political subdivision thereof for the funeral expenses of the deceased shall not be considered as a basis for reduction under clause (B) of this paragraph.

"(3) The Secretary of the Treasury shall thereupon, through the Fiscal Service of the Treasury Department and prior to audit or settlement by the General Accounting Office, pay to the State, at the time or times fixed by the Surgeon General, the amount so certified.