Report text available as:

  • TXT
  • PDF   (PDF provides a complete and accurate display of this text.) Tip ?
105th Congress                                            Rept. 105-465
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part 2
_______________________________________________________________________


 
              RICKY RAY HEMOPHILIA RELIEF FUND ACT OF 1998

                                _______
                                

                  May 7, 1998.--Ordered to be printed

_______________________________________________________________________


    Mr. Archer, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1023]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Ways and Means, to whom was referred the 
bill (H.R. 1023) to provide for compassionate payments with 
regard to individuals with blood-clotting disorders, such as 
hemophilia, who contracted human immunodeficiency virus due to 
contaminated blood products, and for other purposes, having 
considered the same, report favorably thereon with amendments 
and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
 I. Introduction......................................................3
        A. Purpose and Scope.....................................     3
        B. Background and Need for Legislation...................     3
        C. Legislative History...................................     3
II. Explanation of Provisions.........................................3
III.Vote of The Committee.............................................6

IV. Budget Effects of The Bill........................................6
        A. Committee Estimate of Budgetary Effects...............     6
        B. Statement Regarding New Budget Authority And Tax 
            Expenditures.........................................     6
        C. Cost Estimate Prepared by The Congressional Budget 
            Office...............................................     7
 V. Other Matters Required To Be Discussed Under The Rules of The Hou10
        A. Committee Oversight Findings And Recommendations......    10
        B. Summary of Findings And Recommendations of The 
            Government Reform And Oversight Committee............    10
        C. Constitutional Authority Statement....................    10

  The amendments are as follows:
  Strike paragraph (1) of section 103(h) and insert the 
following:

          (1) shall be treated for purposes of the Internal 
        Revenue Code of 1986 as damages described in section 
        104(a)(2) of such Code;

  Strike title II and insert the following:

 TITLE II--TREATMENT OF CERTAIN PAYMENTS IN HEMOPHILIA-CLOTTING-FACTOR 
                       SUIT UNDER THE SSI PROGRAM

SEC. 201. TREATMENT OF CERTAIN PAYMENTS IN HEMOPHILIA-CLOTTING-FACTOR 
                    SUIT UNDER THE SSI PROGRAMS.

  (a) Private Payments.--
          (1) In general.--Notwithstanding any other provision 
        of law, the payments described in paragraph (2) shall 
        not be considered income or resources in determining 
        eligibility for, or the amount of--
                  (A) medical assistance under title XIX of the 
                Social Security Act, or
                  (B) supplemental security income benefits 
                under title XVI of the Social Security Act .
          (2) Private payments described.--The payments 
        described in this subsection are--
                  (A) payments made from any fund established 
                pursuant to a class settlement in the case of 
                Susan Walker v. Bayer Corporation, et al., 96-
                C-5024 (N.D. Ill.); and
                  (B) payments made pursuant to a release of 
                all claims in a case--
                          (i) that is entered into in lieu of 
                        the class settlement referred to in 
                        subparagraph (A); and
                          (ii) that is signed by all affected 
                        parties in such case on or before the 
                        later of--
                                  (I) December 31, 1997, or
                                  (II) the date that is 270 
                                days after the date on which 
                                such release is first sent to 
                                the persons (or the legal 
                                representative of such persons) 
                                to whom the payment is to be 
                                made.
  (b) Government Payments.--
          (1) In general.--Notwithstanding any other provision 
        of law, the payments described in paragraph (2) shall 
        not be considered income or resources in determining 
        eligibility for, or the amount of supplemental security 
        income benefits under title XVI of the Social Security 
        Act.
          (2) Government payments described.--The payments 
        described in this subsection are payments made from the 
        fund established pursuant to section 101 of this Act.

                            I. INTRODUCTION

                          A. Purpose and Scope

    H.R. 1023, the ``Ricky Ray Hemophilia Relief Fund Act of 
1998,'' provides ``compassionate payments'' to individuals with 
blood-clotting disorders, such as hemophilia, who contracted 
human immunodeficiency virus (HIV) from tainted blood products. 
Authorization of the $750 million Federal fund, which would 
make payments of $100,000 to eligible individuals who 
contracted HIV from the tainted blood products, is under the 
jurisdiction of the Committee on the Judiciary. Information 
about H.R. 1023 and its background can be found in the 
Judiciary Committee's report (105th Congress, 2nd Session, 
Rept. 105-465, Part 1). The Committee on Ways and Means has 
jurisdiction over how payments to eligible individuals are 
treated for purposes of determining the eligibility and benefit 
levels of recipients under the Supplemental Security Income 
(SSI) program, and over the tax treatment of these payments.

                 B. Background and Need for Legislation

    Under current law, payments to victims of hemophilia who 
received tainted blood products would be treated as income by 
most welfare programs, including the Supplemental Security 
Income program. Thus, without Committee action, individuals 
eligible for both Federal payments under H.R. 1023 as well as 
payments from a class action lawsuit brought against the 
pharmaceutical companies that supplied the tainted blood would 
be treated as income or resources by the SSI program. As a 
result, most individuals receiving payments would either lose 
or experience a sharp reduction in their SSI benefit payments. 
Action by the Committee on Ways and Means on H.R. 1023 is 
necessary to prevent this loss of benefits.
    In addition, the authors of the legislation intended that 
these payments are to be treated as tax exempt. Action by the 
Committee on Ways and Means is necessary to ensure this.

                         C. Legislative History

Committee bill

    On April 22, 1998, the Committee ordered favorably reported 
H.R. 1023, as amended, by voice vote.

II. EXPLANATION OF PROVISIONS WITHIN THE JURISDICTION OF THE COMMITTEE 
                           ON WAYS AND MEANS

  A. Tax Treatment of Certain Payments Made to Individuals With Blood-
                  Clotting Disorders (Section 103(h))

Present law

    Under present law, gross income does not include any 
damages received (whether by suit or agreement and whether as 
lump sums or as periodic payments) on account of a personal 
physical injury or physical sickness.\1\ If an action has its 
origin in a physical injury or physical sickness, then all 
damages (other than punitive damages) that flow therefrom are 
treated as payments received on account of physical injury or 
physical sickness whether or not the recipient of the damages 
is the injured party. The term ``damages received (whether by 
suit or agreement)'' is defined under Treasury regulations to 
mean an amount received (other than workmen's compensation) 
through prosecution of a legal suit or action based upon tort 
or tort type rights, or through a settlement agreement entered 
into in lieu of such prosecution.\2\
---------------------------------------------------------------------------
    \1\ Internal Revenue Code section 104(a)(2).
    \2\ Treas. Reg. section 1.104-1(c).
---------------------------------------------------------------------------

Explanation of provision

    The bill is amended to provide that payments to certain 
individuals with blood-clotting disorders, who contracted HIV 
due to contaminated blood products, pursuant to the provisions 
of the bill are treated for purposes of the Internal Revenue 
Code as damages received on account of personal physical injury 
or physical sickness described in section 104(a)(2). Thus, 
payments made to such individuals are excluded from gross 
income.

Reasons for change

    The Committee has agreed to clarify the tax treatment of 
certain ``compassionate'' payments made to individuals with 
blood-clotting disorders who contracted the human 
immunodeficiency virus (``HIV'') because the Committee believes 
that, in the absence of such clarification, such payments 
generally are not excluded from gross income under the present-
law exclusion for damage payments. Whether such amounts might 
be excluded from income under some other provision of the 
Internal Revenue Code or regulations is unclear. The Committee 
finds the payments proposed under the bill to be sufficiently 
unusual and sympathetic to justify clarifying that such 
payments are not included in gross income. However, the 
Committee emphasizes that it is taking action because of the 
extraordinary nature of the problem that is addressed by the 
bill.

Effective date

    The provision is effective on the date of enactment.

  B. Treatment of Certain Payments in Hemophilia-Clotting-Factor Suit 
                  Under the SSI Program (Section 201)

Present law

    Under the SSI program, income is anything a person receives 
that can be used to obtain food, clothing, or shelter, unless 
it is specifically exempted by Federal law. In recent years, 
many compensatory payments have been excluded from being 
counted as income and/or resources under the SSI program. 
Sometimes an individual is given food, clothing, or shelter 
directly; more often an individual is given a cash payment that 
can be used to purchase food, clothing, or shelter. The SSI 
program does not count all income. There are more than 50 
income exclusions under the SSI program, all of which provide a 
financial advantage to persons who receive certain types of 
income. Most income exclusions for SSI are written into the 
Social Security Act, but some are also written into statutes 
governing other programs. These other statutory exclusions 
stipulate that the payment in question is not to be counted as 
income or resources in determining an individual's SSI 
eligibility or benefit status. The following is a list of 
compensatory-type payments in which the authorizing statute 
specified that the SSI program was not to consider the payment 
as income (or a resource) in determining a person's SSI 
eligibility or benefit status:
          Restitution payments made to Japanese internees and 
        relocated Aleutians (P.L. 100-383, enacted August 10, 
        1988);
          Payments from the Agent Orange settlement (P.L. 101-
        239, enacted December 19, 1989);
          Payments received from a state-administered fund 
        established to aid victims of crime (P.L. 101-508, 
        enacted November 5, 1990);
          Payments received as state or local government 
        relocation assistance (P.L. 101-508, enacted November 
        5, 1990--made permanent in P.L. 103-66, enacted August 
        10, 1993);
          Payments received under the Radiation Exposure 
        Compensation Act (P.L. 101-508, enacted November 5, 
        1990);
          Hostile fire pay to members of the uniformed services 
        (P.L. 103-66, enacted August 10, 1993); and
          Payments to victims of Nazi persecution (P.L. 103-
        286, enacted August 1, 1994).
    Under a recent settlement, four manufacturers of blood 
plasma products will pay $100,000 to each of 6,200 hemophilia 
patients who are infected with the human immunodeficiency virus 
(HIV). Payments made under the settlement to these individuals 
would in most instances cause them to exceed the income and/or 
resource limits for SSI and Medicaid eligibility. Pursuant to 
section 4735 of P.L. 105-33, the settlement payments are not 
considered income and/or resources in determining eligibility 
for, or the amount of benefits under, the Medicaid program. 
However, section 4735 of P.L. 105-33 does not provide a similar 
exemption for the SSI program. Thus, the settlement payments 
currently are counted as income and/or resources under the SSI 
program. In addition, payments from the fund authorized by 
section 101 of H.R. 1023 also would be counted as income and/or 
resources under the SSI program, should payment be made from 
this fund without the creation of the exception provided for in 
this legislation.

Explanation of provision

    The Committee provision stipulates that neither settlement 
payments in the hemophilia-clotting-factor suit nor payments 
from the Federal Ricky Ray Hemophilia Relief Fund are to be 
considered income or resources in determining eligibility for, 
or the amount of benefits under, the SSI program.

Reason for change

    The Committee provision is designed to ensure that 
individuals and their families who have suffered greatly 
through contraction of the human immunodeficiency virus (HIV) 
from tainted blood products remain eligible for continued 
Federal support, including new assistance designed to help 
them. For example, a number of the individuals in the 
settlement class are currently on SSI and Medicaid. However, 
because these programs are means-tested, accepting the private 
settlement money ($100,000 per plaintiff) and the public 
``compassionate payments'' (also $100,000 per person) may 
disqualify the recipients from these programs. This despite the 
fact that the average person with hemophilia spends about 
$100,000 per year on clotting factor, and those with HIV spend 
approximately $10,000 to $50,000 in additional medical expenses 
for AIDS-related treatment.
    Congress acted in the 1997 Balanced Budget legislation to 
exempt settlement payments from affecting Medicaid eligibility. 
Given the high amount of health care and other expenses 
individuals afflicted with HIV face each year and the intent of 
the settlement, making a similar exception for SSI has equal 
merit. Without the changes provided for in the Committee 
amendment, many individuals might no longer qualify for Federal 
SSI benefits due to their receipt of payments from the 
hemophilia-clotting-factor suit. An exception is also made to 
aid from the new Federal Ricky Ray Hemophilia Relief Fund, so 
that payments from it as well would be exempted from 
consideration for purposes of determining SSI eligibility and 
benefits.

Effective date

    Upon enactment.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 2(l)(2)(B) of rule XI of the 
Rules of the House of Representatives, the following statements 
are made concerning the vote of the Committee in its 
consideration of the bill, H.R. 1023:

                       MOTION TO REPORT THE BILL

    On April 22, 1998, the Committee ordered favorably reported 
H.R. 1023, as amended, by voice vote, with a quorum present.

                     IV. BUDGET EFFECTS OF THE BILL

               A. Committee Estimate of Budgetary Effects

    In compliance with clause 7(a) of rule XIII of the Rules of 
the House of Representatives, the following statement is made:
    The Committee agrees with the estimate prepared by the 
Congressional Budget office (CBO) which is included below.

    B. Statement Regarding New Budget Authority and Tax Expenditures

    In compliance with clause 2(l)(3)(B) of rule XI of the 
Rules of the House of Representatives, the Committee states 
that the Committee bill results in no new budget authority and 
has no effect on federal revenues.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 2(l)(3)(C) of rule XI of the 
Rules of the House of Representatives requiring a cost estimate 
prepared by the Congressional Budget Office (CBO), the 
following report prepared by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                       Washington, DC, May 4, 1998.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1023, the Ricky 
Ray Hemophilia Relief Fund Act of 1998.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Anne 
Cappabianca.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               congressional budget office cost estimate

H.R. 1023--Ricky Ray Hemophilia Relief Fund Act of 1998

    Summary: H.R. 1023 would authorize $750 million to make 
compensatory payments to hemophiliacs who contracted HIV from 
an antihemophilic factor, and to certain of their family 
members. By accepting payments, individuals would agree that 
any claim they have against the federal government would be 
fully satisfied. The bill also would exclude from eligibility 
determinations for Medicaid and Supplemental Security Income 
(SSI) benefits settlement payments from private lawsuits by 
hemophiliacs who contracted HIV.
    Assuming the authorized amounts would be appropriated, CBO 
estimates that H.R. 1023 would result in additional 
discretionary spending of $767 million over the 1998-2003 
period. The bill would also increase direct spending by $18 
million and therefore be subject to pay-as-you-go procedures. 
H.R. 1023 does not contain any intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act 
of 1995.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 1023 is shown in the following table. 
For the purposes of this estimate, CBO assumes an enactment 
date of July 1, 1998.

----------------------------------------------------------------------------------------------------------------
                                                                   By fiscal years, in millions of dollars      
                                                           -----------------------------------------------------
                                                              1998     1999     2000     2001     2002     2003 
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION                                       
                                                                                                                
Authorization Level.......................................      752        3        3        3        3        2
Estimated Outlays.........................................        2      116      228      228      116       77
                                                                                                                
                                                 DIRECT SPENDING                                                
                                                                                                                
Estimated Budget Authority................................        1        5        4        3        3        2
Estimated Outlays.........................................        1        5        4        3        3        2
----------------------------------------------------------------------------------------------------------------

    The costs of this legislation fall within budget functions 
550 (Health) and 600 (Income Security).

Basis of estimate

            Title I
    H.R. 1023 would authorize $750 million to be placed in a 
trust fund, from which compensatory payments would be made to 
qualified claimants. Eligible claimants include individuals 
with blood-clotting disorders who contracted HIV from a 
contaminated antihemophilic factor between July 1, 1982, and 
December 1, 1987. Spouses of these patients also qualify as 
claimants, provided they demonstrate that they contracted HIV 
from their infected spouse. Finally, any children of these 
couples who contracted HIV perinatally could petition for 
payments. Claimants must be able to submit medical 
documentation of their HIV status, a hemophilia diagnosis, and 
the date of the antihemophilic factor treatment.
    The Secretary of Health and Human Services would administer 
the trust fund, which would pay $100,000 to each approved 
claimant. Claims would be paid in the order received until the 
fund is depleted. However, the Secretary could make payments 
for only five years after enactment of the bill. For the 
purposes of this estimate, CBO assumes that payments would 
equal the amount authorized.
    If a claimant died before filing a petition, his survivors 
could submit a petition in his name. If the claimant died 
before the claim was settled, payment would be made to his 
spouse, children, or parents, in that order. In accepting these 
payments, petitioners would agree that any claims they have 
against the government or its agents are fully satisfied.
    The bill provides that all claims must be filed within 
three years of its enactment. Therefore, CBO assumes that the 
majority of payments from the fund would occur during the first 
four years of the program's operation. We also assume that 
payments would not start until fiscal year 1999, when outlays 
would total $113 million.
    H.R. 1023 specifies that, for tax purposes, payments from 
the fund would be considered damages received on account of 
personal injuries or sickness. However, this provision would 
not affect federal revenues since, under current law, there 
would be no compensatory payments that could be taxed. The bill 
also stipulates that, in determining eligibility for Medicaid 
or other entitlement benefits under section 3803(c)(2)(C) of 
title 31 of the United States Code, payments to claimants could 
not be counted as income or resources.
    Under the proposal, individuals accepting payments from the 
fund agree not to pursue any further claim against the federal 
government. These claims might have taken the form of 
individual lawsuits against the federal government, or of a 
class-action lawsuit. CBO cannot estimate the amount of the 
government's liability, if any, under current law. However, it 
is possible that this provision of the bill could yield some 
savings to the federal government.
    Finally, the bill would require that administrative costs 
not be paid from the fund's appropriation. Based on the 
administrative costs of other, similar federal trust funds, CBO 
estimates that the fund's administrative costs would be $2 
million in 1998, and $16 million over the 1998-2003 period.
            Title II
    Thousands of hemophiliacs who contracted HIV through 
contaminated blood products have filed lawsuits against the 
manufacturers of those blood products. H.R. 1023 would exempt 
any settlement payments arising from these lawsuits from 
consideration as income or resources in determining eligibility 
for Medicaid or SSI benefits. Most payments will be part of a 
class settlement in the Susan Walker v. Bayer Corporation, et 
al. case. (This settlementis also known as the In Re Factor VII 
or IX Concentrate Blood Products Litigation settlement.) Under this 
settlement, hemophiliacs or their survivors would receive a payment of 
$100,000 per case of HIV infection. These settlement payments have 
already been exempted from Medicaid eligibility determinations by the 
Balanced Budget Act of 1997.
    Under current law settlement payments are treated as income 
in SSI eligibility determinations. The size of the payments in 
the Susan Walker v. Bayer settlement and other lawsuits would 
almost certainly make individuals currently receiving SSI 
ineligible. H.R. 1023 thus preserves SSI eligibility for a 
group of people who would otherwise become ineligible.
    Approximately 3,250 hemophiliacs who have contracted HIV 
through tainted blood products are currently alive. Of this 
total, CBO estimates that 1,300 people are receiving SSI 
benefits. A small number of these individuals would not be 
affected by the bill because they will place their settlement 
payments in a special needs trust, which preserves their SSI 
eligibility. The estimated cost of preserving SSI eligibility 
for the remaining beneficiaries will be $1 million in 1998, $5 
million in 1999, and less in subsequent years.
    Pay-as-you-go-considerations: The provisions of Title II of 
this bill would affect direct spending and would therefore be 
subject to pay-as-you-go procedures. The pay-as-you-go effects 
of the bill are shown in the following table. For the purposes 
of enforcing pay-as-you-go procedures, only the effects in the 
current year, the budget year, and the succeeding four years 
are counted.

----------------------------------------------------------------------------------------------------------------
                                                      By fiscal years, in millions of dollars--                 
                                    ----------------------------------------------------------------------------
                                      1998   1999   2000   2001   2002   2003   2004   2005   2006   2007   2008
----------------------------------------------------------------------------------------------------------------
Change in outlays..................      1      5      4      3      3      2      2      2      1      1      1
Change in receipts.................                                                                             
(10)Not applicable                                                                                              
----------------------------------------------------------------------------------------------------------------

    Estimated impact on State, local, and tribal government: 
H.R. 1023 contains no intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act of 1995 (UMRA). By excluding 
payments from the Susan Walker v. Bayer Corporation, et al. and 
other settlements from being used to consider SSI eligibility, 
some SSI recipients would remain eligible for state benefits. 
However, CBO estimates that the cost of these benefits would be 
less than $500,000 annually and that states have sufficient 
authority to amend their financial or programmatic 
responsibilities to offset these costs.
    Estimated impact on the private sector: None.
    Comparison with other estimates: On March 20, 1998, CBO 
released an estimate for H.R. 1023 as ordered reported by the 
House Committee on Judiciary. CBO estimated that that version 
of H.R. 1023 would increase discretionary spending by $767 
million and direct spending by $17 million over the 1998-2003 
period. The Ways and Means version of the bill would have a 
slightly larger impact on direct spending because it exempts 
from SSI eligibility determinations all private settlement 
payments. The Judiciary version covered only payments stemming 
from the In Re Factor VIII or IX settlement.
    Estimate prepared by: Federal Costs: Anne Cappabianca 
(Title I), and Eric Rollins (Title II). Impact on State, Local, 
and Tribal Governments: Leo Lex. Impact on the Private Sector: 
Julia Matson.
    Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

 V. OTHER MATTERS REQUIRED TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. Committee Oversight Findings and Recommendations

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that it was the result of its oversight of the Supplemental 
Security Income program and the tax laws that it deemed the 
action taken to be appropriate.

B. Summary of Findings and Recommendations of the Government Reform and 
                          Oversight Committee

    In compliance with clause 2(l)(3)(D) of rule XI of the 
Rules of the House of Representatives, the Committee states 
that no oversight findings or recommendations have been 
submitted to the Committee on Government Reform and Oversight 
regarding the subject of the bill.

                 C. Constitutional Authority Statement

    With respect to clause 2(l)(4) of rule XI of the Rules of 
the House of Representatives, relating to Constitutional 
Authority, the Committee states that the Committee's action in 
reporting the bill is derived from Article I of the 
Constitution, Section 8 (``The Congress shall have power to lay 
and collect taxes, duties, imposts and excises, to pay the 
debts and to provide for * * * the general Welfare of the 
United States * * *''), and the 16th amendment to the 
Constitution.