text:
H. Rept. 105-149 - BALANCED BUDGET ACT OF 1997105th Congress (1997-1998)
Reports for H.R.2015
105th Congress                                                   Report
1st Session                                                    105-149
BALANCED BUDGET ACT OF 1997
COMMITTEE ON THE BUDGET
to accompany
H.R. 2015
A BILL TO PROVIDE FOR RECONCILIATION PURSUANT TO SUBSECTIONS (b)(1) AND
(c) OF SECTION 105 OF THE CONCURRENT RESOLUTION ON THE BUDGET FOR
ADDITIONAL AND MINORITY VIEWS
JOHN R. KASICH, Ohio, Chairman
DAVID L. HOBSON, Ohio,               JOHN M. SPRATT, Jr., South
Speaker's Designee                     Carolina,
CHRISTOPHER SHAYS, Connecticut         Ranking Minority Member
WALLY HERGER, California             JIM McDERMOTT, Washington,
JIM BUNNING, Kentucky                  Leadership Designee
LAMAR S. SMITH, Texas                ALAN B. MOLLOHAN, West Virginia
DAN MILLER, Florida                  JERRY F. COSTELLO, Illinois
BOB FRANKS, New Jersey               PATSY T. MINK, Hawaii
NICK SMITH, Michigan                 EARL POMEROY, North Dakota
BOB INGLIS, South Carolina           LYNN C. WOOLSEY, California
SUSAN MOLINARI, New York             LUCILLE ROYBAL-ALLARD, California
JIM NUSSLE, Iowa                     LYNN N. RIVERS, Michigan
PETER HOEKSTRA, Michigan             LLOYD DOGGETT, Texas
JOHN SHADEGG, Arizona                BENNIE G. THOMPSON, Mississippi
GEORGE P. RADANOVICH, California     BENJAMIN L. CARDIN, Maryland
CHARLES F. BASS, New Hampshire       DAVID MINGE, Minnesota
MARK W. NEUMANN, Wisconsin           SCOTTY BAESLER, Kentucky
MIKE PARKER, Mississippi             KEN BENTSEN, Texas
BOB EHRLICH, Maryland                JIM DAVIS, Florida
GIL GUTKNECHT, Minnesota             BRAD SHERMAN, California
VAN HILLEARY, Tennessee              ROBERT A. WEYGAND, Rhode Island
KAY GRANGER, Texas                   EVA M. CLAYTON, North Carolina
JOHN E. SUNUNU, New Hampshire
JOSEPH PITTS, Pennsylvania
Richard E. May, Staff Director
Thomas S. Kahn, Minority Staff Director and Chief Counsel
Legislative Language
Title I--Committee on Agriculture................................     2
Title II--Committee on Banking and Financial Services............     5
Title III--Committee on Commerce--NonMedicare....................     6
Title IV--Committee on Commerce--Medicare........................    72
Title V--Committee on Education and the Workforce................   228
Title VI--Committee on Government Reform and Oversight...........   263
Title VII--Committee on Transportation and Infrastructure........   271
Title VIII--Committee on Veterans' Affairs.......................   272
Title IX--Committee on Ways and Means--NonMedicare...............   278
Title X--Committee on Ways and Means--Medicare...................   303
Report Language
Introduction.....................................................   495
Title I--Committee on Agriculture................................   505
Title II--Committee on Banking and Financial Services............   524
Title III--Committee on Commerce--NonMedicare....................   529
Title IV--Committee on Commerce--Medicare........................   645
Title VI--Committee on Government Reform and Oversight...........  1091
Title VII--Committee on Transportation and Infrastructure........  1125
Title VIII--Committee on Veterans' Affairs.......................  1135
Title IX--Committee on Ways and Means--NonMedicare...............  1197
Title X--Committee on Ways and Means--Medicare...................  1382
Miscellaneous House Report Requirements..........................  1619
Additional and Minority Views....................................  1625
PROVIDING FOR RECONCILIATION PURSUANT TO SUBSECTIONS (B)(1) AND (C) OF
SECTION 105 OF THE CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR
Mr. Kasich, from the Committee on the Budget, submitted the following
[Including cost estimate of the Congressional Budget Office]
The Committee on the Budget, to whom reconciliation
recommendations were submitted pursuant to subsections (b)(1)
and (c) of section 105 of House Concurrent Resolution 84, the
concurrent resolution on the budget for fiscal year 1998,
having considered the same, reports favorably thereon without
amendment and recommends that the bill do pass.
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Balanced Budget Act of 1997''.
SEC. 2. TABLE OF CONTENTS.
Title I--Committee on Agriculture.
Title II--Committee on Banking and Financial Services.
Title III--Committee on Commerce--NonMedicare.
Title IV--Committee on Commerce--Medicare.
Title V--Committee on Education and the Workforce.
Title VI--Committee on Government Reform and Oversight.
Title VII--Committee on Transportation and Infrastructure.
Title VIII--Committee on Veterans' Affairs.
Title IX--Committee on Ways and Means--NonMedicare.
Title X--Committee on Ways and Means--Medicare.
TITLE I--COMMITTEE ON AGRICULTURE
SEC. 1001. EXEMPTION.
Section 6(o) of the Food Stamp Act of 1977 (7 U.S.C. 2015(o))
is amended--
(1) in paragraph (2)(D), by striking ``or (5)'' and
inserting ``(5), or (6)'';
(2) by redesignating paragraphs (5) and (6) as
paragraphs (6) and (7), respectively; and
(3) by inserting after paragraph (4) the following
new paragraph:
``(5) 15-percent exemption.--
``(A) Definitions.--In this paragraph:
``(i) Caseload.--The term `caseload'
means the average monthly number of
individuals receiving food stamps
during the 12-month period ending the
preceding June 30.
``(ii) Covered individual.--The term
`covered individual' means a food stamp
recipient, or an individual denied
eligibility for food stamp benefits
solely due to paragraph (2), who--
``(I) is not eligible for an
exception under paragraph (3);
``(II) does not reside in an
area covered by a waiver
granted under paragraph (4);
``(III) is not complying with
subparagraph (A), (B), or (C)
of paragraph (2);
``(IV) is not in the first 3
months of eligibility under
paragraph (2); and
``(V) is not receiving
benefits under paragraph (6).
``(B) General rule.--Subject to subparagraphs
(C) through (F), a State agency may provide an
exemption from the requirements of paragraph
(2) for covered individuals.
``(C) Fiscal year 1998.--Subject to
subparagraph (E), for fiscal year 1998, a State
agency may provide a number of exemptions such
that the average monthly number of the
exemptions in effect during the fiscal year
does not exceed 15 percent of the number of
covered individuals in the State in fiscal year
1998, as estimated by the Secretary, based on
the survey conducted to carry out section 16(c)
for fiscal year 1996 and such other factors as
the Secretary considers appropriate due to the
timing and limitations of the survey.
``(D) Subsequent fiscal years.--Subject to
subparagraphs (E) and (F), for fiscal year 1999
and each subsequent fiscal year, a State agency
may provide a number of exemptions such that
the average monthly number of the exemptions in
effect during the fiscal year does not exceed
15 percent of the number of covered individuals
in the State, as estimated by the Secretary
under subparagraph (C), adjusted by the
Secretary to reflect changes in the State's
caseload and the Secretary's estimate of
changes in the proportion of food stamp
recipients covered by waivers granted under
paragraph (4).
``(E) Caseload adjustments.--The Secretary
shall adjust the number of individuals
estimated for a State under subparagraph (C) or
(D) during a fiscal year if the number of food
stamp recipients in the State varies by a
significant number from the caseload, as
determined by the Secretary.
``(F) Exemption adjustments.--During fiscal
year 1999 and each subsequent fiscalyear, the
Secretary shall increase or decrease the number of individuals who may
be granted an exemption by a State agency to the extent that the
average monthly number of exemptions in effect in the State for the
preceding fiscal year is greater or less than the average monthly
number of exemptions estimated for the State agency during such
preceding fiscal year.
``(G) Reporting requirement.--A State agency
shall submit such reports to the Secretary as
the Secretary determines are necessary to
ensure compliance with this paragraph.''.
SEC. 1002. ADDITIONAL FUNDING FOR EMPLOYMENT AND TRAINING.
(a) In General.--Section 16(h) of the Food Stamp Act of 1977
(7 U.S.C. 2025(h)) is amended--
(1) by striking paragraph (1) and inserting the
following new paragraph:
``(1) In general.--
``(A) Amounts.--To carry out employment and
training programs, the Secretary shall reserve
for allocation to State agencies, to remain
available until expended, from funds made
available for each fiscal year under section
18(a)(1) the amount of--
``(i) for fiscal year 1996,
$75,000,000;
``(ii) for fiscal year 1997,
``(iii) for fiscal year 1998,
$221,000,000;
``(iv) for fiscal year 1999,
``(v) for fiscal year 2000,
``(vi) for fiscal year 2001,
$228,000,000; and
``(vii) for fiscal year 2002,
$210,000,000.
``(B) Limitations.--The Secretary shall
ensure that--
``(i) the funds provided in this
subparagraph shall not be used for food
stamp recipients who receive benefits
under a State program funded under part
A of title IV of the Social Security
Act (42 U.S.C. 601 et seq.); and
``(ii) not less than 75 percent of
the funds provided in this subparagraph
shall be used by a State agency for the
employment and training of food stamp
recipients not excepted by section
6(o)(3).
``(C) Allocation.--
``(i) Allocation formula.--The
Secretary shall allocate the amounts
reserved under subparagraph (A) among
the State agencies using a reasonable
formula, as determined and adjusted by
the Secretary each fiscal year, to
reflect changes in each State's
caseload (as defined in section
6(o)(5)(A)) that reflects the
proportion of food stamp recipients who
reside in each State--
``(I) who are not eligible
for an exception under section
6(o)(3); and
``(II) who do not reside in
an area subject to the waiver
granted by the Secretary under
section 6(o)(4), if the State
agency does not provide
services in the area to food
stamp recipients not excepted
by section 6(o)(3).
``(ii) Reporting requirement.--A
State agency shall submit such reports
to the Secretary as the Secretary
determines are necessary to ensure
compliance with this paragraph.''; and
``(D) Reallocation.--
``(i) Notification.--A State agency
shall promptly notify the Secretary if
the State agency determines that it
will not expend all of the funds
allocated to it under subparagraph (B).
``(ii) Reallocation.--On notification
under clause (i), the Secretary shall
reallocate the funds that the State
agency will not expend as the Secretary
considers appropriate and equitable.
``(E) Minimum allocation.--Notwithstanding
subparagraphs (A) through (C), the Secretary
shall ensure that each State agency operating
an employment and training program shall
receive not less than $50,000 for each fiscal
``(F) Maintenance of effort.--To receive the
additional funding under subparagraph (A), as
provided by the amendment made by section 1002
of the Balanced Budget Act of 1997, a State
agency shall maintain the expenditures of the
State agency for employment and training
programs and workfare programs for any fiscal
year under paragraph (2), and administrative
expenses under section 20(g)(1), at a level
that is not less than the level of the
expenditures by the State agency to carry out
the programs for fiscal year 1996.'';
(2) by redesignating paragraphs (2) through (5) as
paragraphs (3) through (6), respectively;
``(2) Report to congress on additional funding.--
Beginning one year after the date of the enactment of
this paragraph, the Secretary shall submit an annual
report to the Committee on Agriculture of the House of
Representatives and the Committee on Agriculture,
Nutrition, and Forestry of the Senate regarding whether
the additional funding provided under paragraph (1)(A)
has been utilized by State agencies to increase the
number of work slots in their employment and training
programs and workfare for recipients subject to section
6(o) in the most efficient and effective manner.''; and
(4) in paragraph (3) (as so redesignated), by
striking ``paragraph (3)'' and inserting ``paragraph
(4)''.
(b) Conforming Amendments.--(1) Subsection
(b)(1)(B)(iv)(III)(hh) of section 17 of the Food Stamp Act of
1977 (7 U.S.C. 2026) is amended by striking ``(h)(2), or (h)(3)
of section 16'' and inserting ``(h)(3), or (h)(4) of section
16''.
(2) Subsection (d)(1)(B)(ii) of section 22 of such Act (7
U.S.C. 2031) is amended by striking ``(h)(2), and (h)(3) of
section 16'' and inserting ``(h)(3), and (h)(4) of section
SEC. 1003. AUTHORIZING USE OF NONGOVERNMENTAL PERSONNEL IN MAKING
DETERMINATIONS OF ELIGIBILITY FOR BENEFITS UNDER
THE FOOD STAMP PROGRAM.
(a) In General.--Notwithstanding any other provision of law,
no provision of law shall be construed as preventing any State
(as defined in section 3(m) of the Food Stamp Act of 1977 (7
U.S.C. 2012(m))) from allowing eligibility determinations
described in subsection (b) to be made by an entity that is not
a State or local government, or by an individual who is not an
employee of a State or local government, which meets such
qualifications as the State determines. For purposes of any
Federal law, such determinations shall be considered to be made
by the State and by a State agency.
(b) Eligibility Determinations.--An eligibility determination
described in this subsection is a determination of eligibility
of individuals or households to receive benefits under the food
stamp program as defined in section 3(h) of the Food Stamp Act
of 1977 (7 U.S.C. 2012(h)).
(c) Construction.--Nothing in this section shall be construed
as affecting--
(1) the conditions for eligibility for benefits
(including any conditions relating to income or
resources);
(2) the rights to challenge determinations regarding
eligibility or rights to benefits; and
(3) determinations regarding quality control or error
rates.
TITLE II--COMMITTEE ON BANKING AND FINANCIAL SERVICES
SEC. 2001. TABLE OF CONTENTS.
The table of contents for this title is as follows:
Sec. 2002. Extension of foreclosure avoidance and borrower assistance
provisions for FHA single family housing mortgage insurance
Sec. 2003. Adjustment of maximum monthly rents for certain dwelling
units in new construction and substantial or moderate
rehabilitation projects assisted under section 8 rental
assistance program.
Sec. 2004. Adjustment of maximum monthly rents for non-turnover dwelling
units assisted under section 8 rental assistance program.
PROVISIONS FOR FHA SINGLE FAMILY HOUSING MORTGAGE
INSURANCE PROGRAM.
Section 407 of The Balanced Budget Downpayment Act, I (12
U.S.C. 1710 note) is amended--
(1) in subsection (c)--
(A) by striking ``only''; and
(B) by inserting ``, on, or after'' after
``before''; and
(2) by striking subsection (e).
UNITS IN NEW CONSTRUCTION AND SUBSTANTIAL OR
MODERATE REHABILITATION PROJECTS ASSISTED UNDER
SECTION 8 RENTAL ASSISTANCE PROGRAM.
The third sentence of section 8(c)(2)(A) of the United States
Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)) is amended by
inserting before the period at the end the following: ``, and
during fiscal year 1999 and thereafter''.
SEC. 2004. ADJUSTMENT OF MAXIMUM MONTHLY RENTS FOR NON-TURNOVER
DWELLING UNITS ASSISTED UNDER SECTION 8 RENTAL
The last sentence of section 8(c)(2)(A) of the United States
Housing Act of 1937 is amended by inserting before the period
at the end the following: ``, and during fiscal year 1999 and
thereafter''.
TITLE III--COMMITTEE ON COMMERCE-NONMEDICARE
Subtitle A--Nuclear Regulatory Commission Annual Charges
SEC. 3001. NUCLEAR REGULATORY COMMISSION ANNUAL CHARGES.
Section 6101(a)(3) of the Omnibus Budget Reconciliation Act
of 1990 (42 U.S.C. 2214(a)(3)) is amended by striking
``September 30, 1998'' and inserting ``September 30, 2002''.
Subtitle B--Lease of Excess Strategic Petroleum Reserve Capacity
SEC. 3101. LEASE OF EXCESS STRATEGIC PETROLEUM RESERVE CAPACITY.
(a) Amendment.--Part B of title I of the Energy Policy and
Conservation Act (42 U.S.C. 6231 et seq.) is amended by adding
at the end the following:
``USE OF UNDERUTILIZED FACILITIES
``Sec. 168. (a) Authority.--Notwithstanding any other
provision of this title, the Secretary, by lease or otherwise,
for any term and under such other conditions as the Secretary
considers necessary or appropriate, may store in underutilized
Strategic Petroleum Reserve facilities petroleum product owned
by a foreign government or its representative. Petroleum
products storedunder this section are not part of the Strategic
Petroleum Reserve and may be exported without license from the United
``(b) Protection of Facilities.--All agreements entered into
pursuant to subsection (a) shall contain provisions providing
for fees to fully compensate the United States for all costs of
storage and removals of petroleum products, including the cost
of replacement facilities necessitated as a result of any
``(c) Access to Stored Oil.--The Secretary shall ensure that
agreements to store petroleum products for foreign governments
or their representatives do not affect the ability of the
United States to withdraw, distribute, or sell petroleum from
the Strategic Petroleum Reserve in response to an energy
emergency or to the obligations of the United States under the
Agreement on an International Energy Program.
``(d) Availability of Funds.--Funds collected through the
leasing of Strategic Petroleum Reserve facilities authorized by
subsection (a) after September 30, 2002, shall be used by the
Secretary of Energy without further appropriation for the
purchase of oil for, and operation and maintenance costs of,
the Strategic Petroleum Reserve.''.
(b) Table of Contents Amendment.--The table of contents of
part B of title I of the Energy Policy and Conservation Act is
amended by adding at the end the following:
``Sec. 168. Use of underutilized facilities.''.
Subtitle C--Sale of DOE Assets
SEC. 3201. SALE OF DOE SURPLUS URANIUM ASSETS.
(a) In General.--The Secretary of Energy shall, during the
period fiscal year 1999 through fiscal year 2002, sell 3.2
million pounds per year of natural and low-enriched uranium
that the President has determined is not necessary for national
security needs. Such sales shall be--
(1) made for delivery after January 1, 1999;
(2) subject to a determination, for the period fiscal
year 1999 through fiscal year 2002, by the Secretary
under section 3112(d)(2)(B) of the USEC Privatization
Act (42 U.S.C. 2297h-10(d)(2)(B)); and
(3) made at a price not less than the fair market
value of the uranium and in a manner that maximizes
proceeds to the Treasury.
The Secretary shall receive the proceeds from such sale in the
period fiscal year 1999 through fiscal year 2002 and shall
deposit such proceeds in the General Fund of the Treasury.
(b) Costs.--The costs of making the sales required by
subsection (a) shall be covered by the unobligated balances of
appropriations of the Department of Energy.
Subtitle D--Communications
SEC. 3301. SPECTRUM AUCTIONS.
(a) Extension and Expansion of Auction Authority.--
(1) Amendments.--Section 309(j) of the Communications
Act of 1934 (47 U.S.C. 309(j)) is amended--
(A) by striking paragraphs (1) and (2) and
inserting in lieu thereof the following:
``(1) General authority.--If, consistent with the
obligations described in paragraph (6)(E), mutually
exclusive applications are accepted for any initial
license or construction permit which will involve an
exclusive use of the electromagnetic spectrum, then the
Commission shall grant such license or permit to a
qualified applicant through a system of competitive
bidding that meets the requirements of this subsection.
``(2) Exemptions.--The competitive bidding authority
granted by this subsection shall not apply to licenses
or construction permits issued by the Commission--
``(A) that, as the result of the Commission
carrying out the obligations described in
paragraph (6)(E), are not mutually exclusive;
``(B) for public safety radio services,
including private internal radio services used
by non-Government entities, that--
``(i) protect the safety of life,
health, or property; and
``(ii) are not made commercially
available to the public;
``(C) for initial licenses or construction
permits assigned by the Commission to existing
terrestrial broadcast licensees for new
terrestrial digital television services; or
``(D) for public telecommunications services,
as defined in section 397(14) of the
Communications Act of 1934 (47 U.S.C. 397(14)),
when the license application is for channels
reserved for noncommercial use.'';
(B) in paragraph (3)--
(i) by inserting after the second
sentence the following new sentence:
``The Commission shall, directly or by
contract, provide for the design and
conduct (for purposes of testing) of
competitive bidding using a contingent
combinatorial bidding system that
permits prospective bidders to bid on
combinations or groups of licensesin a
single bid and to enter multiple alternative bids within a single
bidding round.'';
(ii) by striking ``and'' at the end
of subparagraph (C);
(iii) by striking the period at the
end of subparagraph (D) and inserting
``; and''; and
(iv) by adding at the end the
following new subparagraph:
``(E) ensuring that, in the scheduling of any
competitive bidding under this subsection, an
adequate period is allowed--
``(i) before issuance of bidding
rules, to permit notice and comment on
proposed auction procedures; and
``(ii) after issuance of bidding
rules, to ensure that interested
parties have a sufficient time to
develop business plans, assess market
conditions, and evaluate the
availability of equipment for the
relevant services.'';
(C) in paragraph (8)--
(i) by striking subparagraph (B); and
(ii) by redesignating subparagraph
(C) as subparagraph (B);
(D) in paragraph (11), by striking ``1998''
and inserting ``2002''; and
(E) in paragraph (13)(F), by striking
``September 30, 1998'' and inserting ``the date
of enactment of the Balanced Budget Act of
1997''.
(2) Conforming amendment.--Subsection (i) of section
309 of the Communications Act of 1934 (47 U.S.C.
309(i)) is repealed.
(3) Effective date.--The amendment made by paragraph
(1)(A) shall not apply with respect to any license or
permit for which the Federal Communications Commission
has accepted mutually exclusive applications on or
before the date of enactment of this Act.
(b) Commission Obligation To Make Additional Spectrum
Available by Auction.--
(1) In general.--The Federal Communications
Commission shall complete all actions necessary to
permit the assignment, by September 30, 2002, by
competitive bidding pursuant to section 309(j) of the
Communications Act of 1934 (47 U.S.C. 309(j)) of
licenses for the use of bands of frequencies that--
(A) individually span not less than 25
megahertz, unless a combination of smaller
bands can, notwithstanding the provisions of
paragraph (7) of such section, reasonably be
expected to produce greater receipts;
(B) in the aggregate span not less than 100
megahertz;
(C) are located below 3 gigahertz;
(D) have not, as of the date of enactment of
this Act--
(i) been designated by Commission
regulation for assignment pursuant to
such section;
(ii) been identified by the Secretary
of Commerce pursuant to section 113 of
the National Telecommunications and
Information Administration Organization
Act;
(iii) been allocated for Federal
Government use pursuant to section 305
of the Communications Act of 1934 (47
U.S.C. 305);
(iv) been designated in section 3303
of this Act; or
(v) been allocated for unlicensed use
pursuant to part 15 of the Commission's
regulations (47 C.F.R. Part 15), if the
competitive bidding for licenses would
interfere with operation of end-user
products permitted under such
regulations; and
(E) notwithstanding section 115(b)(1)(B) of
the National Telecommunications and Information
Administration Organization Act (47 U.S.C.
925(b)(1)(B)) or any proposal pursuant to such
section, include frequencies at 1,710-1,755
megahertz.
(2) Criteria for reassignment.--In making available
bands of frequencies for competitive bidding pursuant
to paragraph (1), the Commission shall--
(A) seek to promote the most efficient use of
the spectrum;
(B) take into account the cost to incumbent
licensees of relocating existing uses to other
bands of frequencies or other means of
communication; and
(C) comply with the requirements of
international agreements concerning spectrum
allocations.
(3) Notification to ntia.--The Commission shall
notify the Secretary of Commerce if--
(A) the Commission is not able to provide for
the effective relocation of incumbent licensees
to bands of frequencies that are available to
the Commission for assignment; and
(B) the Commission has identified bands of
frequencies that are--
(i) suitable for the relocation of
such licensees; and
(ii) allocated for Federal Government
use, but that could be reallocated
pursuant to part B of the National
Telecommunications and Information
Administration Organization Act (as
amended by this Act).
(4) Protection of Space Research Uses.--The licenses
assigned pursuant to paragraph (1) shall require
licensees to avoid interference with communications in
space research and earth exploration-satellite services
authorized under notes 750A and US90 to section 2.106
of the regulations of the Federal Communications
Commission (47 C.F.R. 2.106) as in effect on the date
of enactment of this Act.
(c) Identification and Reallocation of Frequencies.--The
National Telecommunications and Information Administration
Organization Act (47 U.S.C. 901 et seq.) is amended--
(1) in section 113, by adding at the end the
following new subsection:
``(f) Additional Reallocation Report.--If the Secretary
receives a notice from the Commission pursuant to section
3301(b)(3) of the Balanced Budget Act of 1997, the Secretary
shall prepare and submit to the President, the Commission, and
the Congress a report recommending for reallocation for use
other than by Federal Government stations under section 305 of
the 1934 Act (47 U.S.C. 305), bands of frequencies that are
suitable for the uses identified in the Commission's notice.
The Commission shall, not later than one year after receipt of
such report, prepare, submit to the President and the Congress,
and implement, a plan for the immediate allocation and
assignment of such frequencies under the 1934 Act to incumbent
licencees described in section 3301(b)(3) of the Balanced
Budget Act of 1997.''; and
(2) in section 114(a)(1), by striking ``(a) or
(d)(1)'' and inserting ``(a), (d)(1), or (f)''.
(d) Identification and Reallocation of Auctionable
Frequencies.--The National Telecommunications and Information
Administration Organization Act (47 U.S.C. 901 et seq.) is
amended--
(1) in section 113(b)--
(A) by striking the heading of paragraph (1)
and inserting ``Initial reallocation report'';
(B) by inserting ``in the first report
required by subsection (a)'' after ``recommend
for reallocation'' in paragraph (1);
(C) by inserting ``or (3)'' after ``paragraph
(1)'' each place it appears in paragraph (2);
(D) by inserting after paragraph (2) the
``(3) Second reallocation report.--In accordance with
the provisions of this section, the Secretary shall
recommend for reallocation in the second report
required by subsection (a), for use other than by
Federal Government stations under section 305 of the
1934 Act (47 U.S.C. 305), a band or bands of
frequencies that--
``(A) in the aggregate span not less than 20
``(B) individually span not less than 20
bands can reasonably be expected to produce
greater receipts;
``(C) are located below 3 gigahertz; and
``(D) meet the criteria specified in
paragraphs (1) through (5) of subsection
(a).''; and
(2) in section 115--
(A) in subsection (b), by striking ``the
report required by section 113(a)'' and
inserting ``the initial reallocation report
required by section 113(a)''; and
(B) by adding at the end the following new
subsection:
``(c) Allocation and Assignment of Frequencies Identified in
the Second Reallocation Report.--With respect to the
frequencies made available for reallocation pursuant to section
113(b)(3), the Commission shall, not later than one year after
receipt of the second reallocation report required by such
section, prepare, submit to the President and the Congress, and
implement, a plan for the immediate allocation and assignment
under the 1934 Act of all such frequencies in accordance with
section 309(j) of such Act.''.
(e) Minimum Recovery for Public Required.--
(1) Methodology to secure minimum amounts required.--
In establishing, pursuant to section 309(j)(3) of the
Communications Act of 1934 (47 U.S.C. 309(j)(3)), a
competitive bidding methodology with respect to the
frequencies required to be assigned by competitive
bidding under subsection (b) of this section and
section 115(c) of the National Telecommunications and
Information Administration Organization Act (47 U.S.C.
925(c)), the Commission shall establish procedures that
are designed to secure winning bids totaling not less
than two-thirds of $7,500,000,000.
(2) Authority.--In establishing such methodology, the
Commission is authorized--
(A) to partition the total required to be
obtained under paragraph (1) among separate
competitive bidding proceedings, or among
separate bands, regions, or markets;
(B) to void any such separated competitive
bidding proceeding that fails to obtain the
partitioned subtotal that pertains to that
proceeding; and
(C) to prescribe minimum bids or other
bidding requirements to obtain such total or
subtotal.
(3) Licenses withheld.--Notwithstanding any other
requirement of this section, or the amendments made by
this section, the Commission shall refrain from
conducting any competitive biddingpursuant to the
methodology established pursuant to this subsection unless the
Commission determines that such methodology will secure winning bids
totaling not less than two-thirds of $7,500,000,000.
(4) Authority to rebid at a later time to secure
statutory objectives.--Nothing in paragraph (2) or (3)
shall preclude or limit the Commission from assigning
the frequencies described in paragraph (1) by
competitive bidding at such later date (than the date
required by this section) as the Commission determines,
in its discretion, will better attain the objectives of
recovering for the public a fair portion of the value
of the public spectrum resource and avoiding unjust
enrichment.
SEC. 3302. AUCTION OF RECAPTURED BROADCAST TELEVISION SPECTRUM.
Section 309(j) of the Communications Act of 1934 (47 U.S.C.
309(j)) is amended by adding at the end the following new
paragraph:
``(14) Auction of recaptured broadcast television
spectrum.--
``(A) Limitations on terms of terrestrial
television broadcast licenses.--A television
license that authorizes analog television
services may not be renewed to authorize such
service for a period that extends beyond
December 31, 2006. The Commission shall grant
by regulation an extension of such date to
licensees in a market if the Commission
determines that more than 5 percent of
households in such market continue to rely
exclusively on over-the-air terrestrial analog
television signals.
``(B) Spectrum reversion and resale.--
``(i) The Commission shall ensure
that, when the authority to broadcast
analog television services under a
license expires pursuant to
subparagraph (A), each licensee shall
return spectrum according to the
Commission's direction and the
Commission shall reclaim such spectrum.
``(ii) Licensees for new services
occupying spectrum reclaimed pursuant
to clause (i) shall be selected in
accordance with this subsection. The
Commission shall start such selection
process by July 1, 2001, with payment
pursuant to rules established by the
Commission under this subsection.
``(C) Minimum recovery for public required.--
``(i) Methodology to secure minimum
amounts required.--In establishing,
pursuant to section 309(j)(3) of the
Communications Act of 1934 (47 U.S.C.
309(j)(3)), a competitive bidding
methodology with respect to the
frequencies required to be assigned by
competitive bidding under subparagraph
(B) of this paragraph, the Commission
shall establish procedures that are
designed to secure winning bids
totaling not less than two-thirds of
$4,000,000,000.
``(ii) Authority.--In establishing
such methodology, the Commission is
authorized--
``(I) to partition the total
required to be obtained under
clause (i) among separate
competitive bidding
proceedings, or among separate
bands, regions, or markets;
``(II) to void any such
separated competitive bidding
proceeding that fails to obtain
the partitioned subtotal that
pertains to that proceeding;
``(III) to prescribe minimum
bids or other bidding
requirements to obtain such
aggregate total.
``(iii) Licenses withheld.--
Notwithstanding any other requirement
of this paragraph, the Commission shall
refrain from conducting any competitive
bidding pursuant to the methodology
established pursuant to this
subparagraph unless the Commission
determines that such methodology will
secure winning bids totaling not less
``(iv) Authority to rebid at a later
time to secure statutory objectives.--
Nothing in clause (ii) or (iii) shall
preclude or limit the Commission from
assigning the frequencies described in
clause (i) by competitive bidding at
such later date (than the date required
by this paragraph) as the Commission
determines, in its discretion, will
better attain the objectives of
recovering for the public a fair
portion of the value of the public
spectrum resource and avoiding unjust
``(D) Certain limitations on qualified
bidders prohibited.--In prescribing any
regulations relating to the qualification of
bidders for spectrum reclaimed pursuant to
subparagraph (B)(i), the Commission shall not--
``(i) preclude any party from being a
qualified bidder for spectrum that is
allocated for any use that includes
digital television service on the basis
of--
``(I) the Commission's
duopoly rule (47 C.F.R.
73.3555(b)); or
``(II) the Commission's
newspaper cross-ownership rule
(47 C.F.R. 73.3555(d)); or
``(ii) apply either such rule to
preclude such a party that is a
successful bidder in a competitive
bidding for such spectrum from using
such spectrum for digital television
``(E) Definitions.--As used in this
``(i) The term `digital television
service' means television service
provided usingdigital technology to
enhance audio quality and video resolution, as further defined in the
Memorandum Opinion, Report, and Order of the Commission entitled
`Advanced Television Systems and Their Impact Upon the Existing
Television Service', MM Docket No. 87-268 and any subsequent Commission
proceedings dealing with digital television.
``(ii) The term `analog television
service' means service provided
pursuant to the transmission standards
prescribed by the Commission in section
73.682(a) of its regulation (47 CFR
73.682(a)).''.
SEC. 3303. ALLOCATION AND ASSIGNMENT OF NEW PUBLIC SAFETY AND
COMMERCIAL LICENSES.
(a) In General.--The Federal Communications Commission shall,
not later than January 1, 1998, allocate on a national,
regional, or market basis, from radio spectrum between 746
megahertz and 806 megahertz--
(1) 24 megahertz of that spectrum for public safety
services according to the terms and conditions
established by the Commission, unless the Commission
determines that the needs for public safety services
can be met in particular areas with allocations of less
than 24 megahertz; and
(2) the remainder of that spectrum for commercial
purposes to be assigned by competitive bidding in
accordance with section 309(j).
(b) Assignment.--The Commission shall--
(1) assign the licenses for public safety created
pursuant to subsection (a) no later than March 31,
(2) commence competitive bidding for the commercial
licenses created pursuant to subsection (a) no later
than July 1, 2001.
(c) Licensing of Unused Frequencies for Public Safety Radio
Services.--
(1) Use of unused channels for public safety.--It
shall be the policy of the Commission, notwithstanding
any other provision of this Act or any other law, to
waive whatever licensee eligibility and other
requirements (including bidding requirements) are
applicable in order to permit the use of unassigned
frequencies for public safety purposes by a State or
local governmental agency upon a showing that--
(A) no other existing satisfactory public
safety channel is immediately available to
satisfy the requested use;
(B) the proposed use is technically feasible
without causing harmful interference to
existing stations in the frequency band
entitled to protection from such interference
under the rules of the Commission; and
(C) use of the channel for public safety
purposes is consistent with other existing
public safety channel allocations in the
geographic area of proposed use.
(2) Applicability.--Paragraph (1) shall apply to any
application that is pending before the Federal
Communications Commission, or that is not finally
determined under either section 402 or 405 of the
Communications Act of 1934 (47 U.S.C. 402, 405) on May
15, 1997, or that is filed after such date.
(d) Conditions on Licenses.--With respect to public safety
and commercial licenses granted pursuant to this subsection,
the Commission shall--
(1) establish interference limits at the boundaries
of the spectrum block and service area;
(2) establish any additional technical restrictions
necessary to protect full-service analog television
service and digital television service during a
transition to digital television service; and
(3) permit public safety and commercial licensees--
(A) to aggregate multiple licenses to create
larger spectrum blocks and service areas; and
(B) to disaggregate or partition licenses to
create smaller spectrum blocks or service
bidding under this section, the Commission shall
establish procedures that are designed to secure
winning bids totaling not less than two-thirds of
requirement of this section, the Commission shall
refrain from conducting any competitive bidding
pursuant to the methodology established pursuant to
this subsection unless the Commission determines that
such methodology will secure winning bids totaling not
less than two-thirds of $1,900,000,000.
(f) Protection of Qualifying Low-Power Stations.--Prior to
making any allocation or assignment under this section the
Commission shall assure that each qualifying low-power
television station is assigned a frequency below 746 megahertz
to permit the continued operation of such station.
(g) Definitions.--For purposes of this section:
(1) Commission.--The term ``Commission'' means the
Federal Communications Commission.
(2) Digital television service.--The term ``digital
television service'' means television service provided
using digital technology to enhance audio quality and
video resolution, as further defined in the Memorandum
Opinion, Report, and Order of the Commission entitled
`Advanced Television Systems and Their Impact Upon the
Existing Television Service', MM Docket No. 87-268 and
any subsequent Commission proceedings dealing with
digital television.
(3) Analog television service.--The term ``analog
television service'' means services provided pursuant
to the transmission standards prescribed by the
Commission in section 73.682(a) of its regulation (47
CFR 73.682(a)).
(4) Public safety services.--The term ``public safety
services'' means services--
(A) the sole or principal purpose of which is
to protect the safety of life, health, or
(B) that are provided--
(i) by State or local government
entities; or
(ii) by nongovernmental, private
organizations that are authorized by a
governmental entity whose primary
mission is the provision of such
services; and
(C) that are not made commercially available
to the public by the provider.
(5) Service area.--The term ``service area'' means
the geographic area over which a licensee may provide
service and is protected from interference.
(6) Spectrum block.--The term ``spectrum block''
means the range of frequencies over which the apparatus
licensed by the Commission is authorized to transmit
signals.
(7) Qualifying low-power television stations.--A
station is a qualifying low-power television station
if--
(A) during the 90 days preceding the date of
enactment of this Act--
(i) such station broadcast a minimum
of 18 hours per day;
(ii) such station broadcast an
average of at least 3 hours per week of
programming that was produced within
the community of license of such
station; and
(iii) such station was in compliance
with the requirements applicable to
low-power television stations; or
(B) the Commission determines that the public
interest, convenience, and necessity would be
served by treating the station as a qualifying
low-power television station for purposes of
this section.
SEC. 3304. INQUIRY REQUIRED.
The Federal Communications Commission shall, not later than
July 1, 1997, initiate the inquiry required by section
309(j)(12) of the Communications Act of 1934 (47 U.S.C.
309(j)(12)) for the purposes of collecting the information
required for its report under each of subparagraphs (A) through
(E) of such section, and shall keep the Congress fully and
currently informed with respect to the progress of such
inquiry.
Subtitle E--Medicaid
SEC. 3400. TABLE OF CONTENTS OF SUBTITLE; REFERENCES.
(a) Table of Contents of Subtitle.--The table of contents of
this subtitle is as follows:
Chapter 1--State Flexibility
SUBCHAPTER A--USE OF MANAGED CARE
Sec. 3401. State options to provide benefits through managed care
entities.
Sec. 3402. Elimination of 75:25 restriction on risk contracts.
Sec. 3403. Primary care case management services as State option without
need for waiver.
Sec. 3404. Change in threshold amount for contracts requiring
Secretary's prior approval.
Sec. 3405. Determination of hospital stay.
SUBCHAPTER B--PAYMENT METHODOLOGY
Sec. 3411. Flexibility in payment methods for hospital, nursing
facility, and ICF/MR services; flexibility for home health.
Sec. 3412. Payment for Federally qualified health center services.
Sec. 3413. Treatment of State taxes imposed on certain hospitals that
provide free care.
SUBCHAPTER C--ELIGIBILITY
Sec. 3421. State option of continuous eligibility for 12 months;
clarification of State option to cover children.
Sec. 3422. Payment of home-health-related medicare part B premium amount
for certain low-income individuals.
Sec. 3423. Penalty for fraudulent eligibility.
Sec. 3424. Treatment of certain settlement payments.
SUBCHAPTER D--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)
Sec. 3431. Establishment of PACE program as medicaid State option.
Sec. 3432. Coverage of PACE under the medicare program.
Sec. 3433. Effective date; transition.
Sec. 3434. Study and reports.
SUBCHAPTER E--BENEFITS
Sec. 3441. Elimination of requirement to pay for private insurance.
Sec. 3442. Permitting same copayments in health maintenance
organizations as in fee-for-service.
Sec. 3443. Physician qualification requirements.
Sec. 3444. Elimination of requirement of prior institutionalization with
respect to habilitation services furnished under a waiver for
home or community-based services.
Sec. 3445. Benefits for services of physician assistants.
Sec. 3446. Study and report on actuarial value of EPSDT benefit.
SUBCHAPTER F--ADMINISTRATION
Sec. 3451. Elimination of duplicative inspection of care requirements
for ICFS/MR and mental hospitals.
Sec. 3452. Alternative sanctions for noncompliant ICFS/MR.
Sec. 3453. Modification of MMIS requirements.
Sec. 3454. Facilitating imposition of State alternative remedies on
noncompliant nursing facilities.
Sec. 3455. Medically accepted indication.
Sec. 3456. Continuation of State-wide section 1115 medicaid waivers.
Sec. 3457. Authorizing administrative streamlining and privatizing
modifications under the medicaid program.
Sec. 3458. Extension of moratorium.
Chapter 2--Quality Assurance
Sec. 3461. Requirements to ensure quality of and access to care under
managed care plans.
Sec. 3462. Solvency standards for certain health maintenance
Sec. 3463. Application of prudent layperson standard for emergency
medical condition and prohibition of gag rule restrictions.
Sec. 3464. Additional fraud and abuse protections in managed care.
Sec. 3465. Grievances under managed care plans.
Sec. 3466. Standards relating to access to obstetrical and gynecological
services under managed care plans.
Chapter 3--Federal Payments
Sec. 3471. Reforming disproportionate share payments under State
medicaid programs.
Sec. 3472. Additional funding for State emergency health services
furnished to undocumented aliens.
(b) Amendments to Social Security Act.--Except as otherwise
specifically provided, whenever in this subtitle an amendment
is expressed in terms of an amendment to or repeal of a section
or other provision, the reference is considered to be made to
that section or other provision of the Social Security Act.
(a) In General.--Section 1915(a) (42 U.S.C. 1396n(a)) is
(1) by striking ``or'' at the end of paragraph (1),
(2) by striking the period at the end of paragraph
(2) and inserting ``; or'', and
(3) by adding at the end the following new paragraph:
``(3) requires individuals, other than special needs
children (as defined in subsection (i)), eligible for
medical assistance for items or services under the
State plan to enroll with an entity that provides or
arranges for services for enrollees under a contract
pursuant to section 1903(m), or with a primary care
case manager (as defined in section 1905(t)(2)) (or
restricts the number of provider agreements with those
entities under the State plan, consistent with quality
of care), if--
``(A) the State permits an individual to
choose the manager or managed care entity from
among the managed care organizations and
primary care case providers who meet the
requirements of this title;
``(B)(i) individuals are permitted to choose
between at least 2 of those entities, or 2 of
the managers, or an entity and a manager, each
of which has sufficient capacity to provide
services to enrollees; or
``(ii) with respect to a rural area--
``(I) individuals who are required to
enroll with a single entity are
afforded the option to obtain covered
services by an alternative provider;
``(II) an individual who is offered
no alternative to a single entity or
manager is given a choice between at
least two providers within the entity
or through the manager;
``(C) no individual who is an Indian (as
defined in section 4 of the Indian Health Care
Improvement Act of 1976) is required to enroll
in any entity that is not one of the following
(and only if such entity is participating under
the plan): the Indian Health Service, an Indian
health program operated by an Indian tribe or
tribal organization pursuant to a contract,
grant, cooperative agreement, or compact with
the Indian Health Service pursuant to the
Indian Self-Determination Act (25 U.S.C. 450 et
seq.), or an urban Indian health program
operated by an urban Indian organization
pursuant to a grant or contract with the Indian
Health Service pursuant to title V of the
Indian Health Care Improvement Act (25 U.S.C.
1601 et seq.);
``(D) the State restricts those individuals
from changing their enrollment without cause
for periods no longer than six months (and
permits enrollees to change enrollment for
cause at any time);
``(E) the restrictions do not apply to
providers of family planning services (as
defined in section 1905(a)(4)(C)) and are not
conditions for payment of medicare cost sharing
pursuant to section 1905(p)(3); and
``(F) prior to establishing an enrollment
requirement under this paragraph, the State
agency provides for public notice and comment
pursuant to requirements established by the
Secretary.''.
(b) Special Needs Children Defined.--Section 1915 (42 U.S.C.
1396n) is amended by adding at the end the following:
``(i) For purposes of subsection (a)(3), the term `special
needs child' means an individual under 19 years of age who--
``(1) is eligible for supplemental security income
under title XVI,
``(2) is described in section 501(a)(1)(D),
``(3) is described in section 1902(e)(3), or
``(4) is in foster care or otherwise in an out-of-
home placement.''.
(c) Conforming Amendment to Risk-Based Arrangements.--Section
1903(m)(2) (42 U.S.C. 1396b(m)(2)) is amended--
(1) in paragraph (A)(vi)--
(A) by striking ``(I) except as provided
under subparagraph (F),''; and
(B) by striking all that follows ``to
terminate such enrollment'' and inserting ``in
accordance with the provisions of subparagraph
(F);''; and
(2) in subparagraph (F)--
(A) by striking ``In the case of--'' and all
that follows through ``a State plan'' and
inserting ``A State plan'', and
(B) by striking ``(A)(vi)(I)'' and inserting
``(A)(vi)''.
(d) Effective Date.--The amendments made by this section take
effect on the date of the enactment of this Act.
(a) 75 Percent Limit on Medicare and Medicaid Enrollment.--
(1) In general.--Section 1903(m)(2)(A) (42 U.S.C.
1396b(m)(2)(A)) is amended by striking clause (ii).
(2) Conforming amendments.--Section 1903(m)(2) (42
U.S.C. 1396b(m)(2)) is amended--
(A) by striking subparagraphs (C), (D), and
(E); and
(B) in subparagraph (G), by striking
``clauses (i) and (ii)'' and inserting ``clause
(i)''.
(b) Effective Date.--The amendments made by subsection (a)
take effect on the date of the enactment of this Act.
SEC. 3403. PRIMARY CARE CASE MANAGEMENT SERVICES AS STATE OPTION
WITHOUT NEED FOR WAIVER.
(a) Optional Coverage as Part of Medical Assistance.--Section
1905(a) (42 U.S.C. 1396d(a)) is amended--
(1) by striking ``and'' at the end of paragraph (24);
(2) by redesignating paragraph (25) as paragraph (26)
and by striking the period at the end of such paragraph
and inserting a comma; and
(3) by inserting after paragraph (24) the following
``(25) primary care case management services (as
defined in subsection (t)); and''.
(b) Primary Care Case Management Services Defined.--Section
1905 (42 U.S.C. 1396d) is amended by adding at the end the
``(t)(1) The term `primary care case management services'
means case-management related services (including coordination
and monitoring of health care services) provided by a primary
care case manager under a primary care case management
``(2)(A) The term `primary care case manager' means, with
respect to a primary care case management contract, a provider
described in subparagraph (B).
``(B) A provider described in this subparagraph is a provider
that provides primary care case management services under
contract and is--
``(i) a physician, a physician group practice, or an
entity employing or having other arrangements with
physicians; or
``(ii) at State option--
``(I) a nurse practitioner (as described in
section 1905(a)(21));
``(II) a certified nurse-midwife (as defined
in section 1861(gg)); or
``(III) a physician assistant (as defined in
section 1861(aa)(5)).
``(3) The term `primary care case management contract' means
a contract with a State agency under which a primary care case
manager undertakes to locate, coordinate and monitor covered
primary care (and such other covered services as may be
specified under the contract) to all individuals enrolled with
the primary care case manager, and which provides for--
``(A) reasonable and adequate hours of operation,
including 24-hour availability of information,
referral, and treatment with respect to medical
emergencies;
``(B) restriction of enrollment to individuals
residing sufficiently near a service delivery site of
the entity to be able to reach that site within a
reasonable time using available and affordable modes of
transportation;
``(C) employment of, or contracts or other
arrangements with, sufficient numbers of physicians and
other appropriate health care professionals to ensure
that services under the contract can be furnished to
enrollees promptly and without compromise to quality of
care;
``(D) a prohibition on discrimination on the basis of
health status or requirements for health services in
enrollment, disenrollment, or reenrollment of
individuals eligible for medical assistance under this
title; and
``(E) a right for an enrollee to terminate enrollment
without cause during the first month of each enrollment
period, which period shall not exceed six months in
duration, and to terminate enrollment at any time for
cause.
``(4) For purposes of this subsection, the term `primary
care' includes all health care services customarily provided in
accordance with State licensure and certification laws and
regulations, and all laboratory services customarily provided
by or through, a general practitioner, family medicine
physician, internal medicine physician, obstetrician/
gynecologist, or pediatrician.''.
(c) Conforming Amendments.--Section 1902 (42 U.S.C. 1396a) is
(1) in subsection (a)(10)(C)(iv), by striking
``(24)'' and inserting ``(25)'', and
(2) in subsection (j), by striking ``(25)'' and
inserting ``(26)''.
(d) Effective Date.--The amendments made by this section
apply to primary care case management services furnished on or
after October 1, 1997.
(a) In General.--Section 1903(m)(2)(A)(iii) (42 U.S.C.
1396b(m)(2)(A)(iii)) is amended by striking ``$100,000'' and
inserting ``$1,000,000 for 1998 and, for a subsequent year, the
amount established under this clause for the previous year
increased by the percentage increase in the consumer price
index for all urban consumers over the previous year''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to contracts entered into or renewed on or after
the date of the enactment of this Act.
(a) In General.--Title XIX, as amended by section 3431(a), is
(1) by redesignating section 1933 as section 1934,
(2) by inserting after section 1932 the following new
``determination of hospital stay
``Sec. 1933. (a) In General.--A Medicaid health plan shall
cover the length of an inpatient hospital stay under this title
as determined by the attending physician (or other attending
health care provider to the extent permitted under State law)
in consultation with the patient to be medically appropriate.
``(b) Construction.--Nothing in this title shall be
construed--
``(1) as requiring the provision of inpatient
coverage if the attending physician (or other attending
health care provider to the extent permitted under
State law) and patient determine that a shorter period
of hospital stay is medically appropriate, or
``(2) as affecting the application of deductibles and
coinsurance.''.
shall apply to discharges occurring on or after 6 months after
FACILITY, AND ICF/MR SERVICES; FLEXIBILITY FOR HOME
(a) Repeal of Boren Requirements.--Section 1902(a)(13) (42
U.S.C. 1396a(a)) is amended--
(1) by amending subparagraphs (A) and (B) to read as
``(A) for a public process for determination
of rates of payment under the plan for hospital
services, nursing facility services, and
services of intermediate care facilities for
the mentally retarded under which--
``(i) proposed rates are published,
and providers, beneficiaries and their
representatives, and other concerned
State residents are given a reasonable
opportunity for review and comment on
the proposed rates;
``(ii) final rates are published,
together with justifications, and
``(iii) in the case of hospitals,
take into account (in a manner
consistent with section 1923) the
situation of hospitals which serve a
disproportionate number of low income
patients with special needs;
``(B) that the State shall provide assurances
satisfactory to the Secretary that the average
level of payments under the plan for nursing
facility services (as determined on an
aggregate per resident-day basis) and the level
of payments under the plan for inpatient
hospital services (as determined on an
aggregate hospital payment basis) furnished
during the 18-month period beginning October 1,
1997, is not less than the average level of
payments that would be made under the plan
during such 18-month period for such respective
services (determined on such basis) based on
rates or payment basis in effect as of May 1,
1997;''; and
(2) by striking subparagraph (C).
(b) Repeal of Requirements Relating to Home Health
Services.--Such section is further amended--
(1) by adding ``and'' at the end of subparagraph (D),
(2) by striking ``and'' at the end of subparagraph
(E), and
(3) by striking subparagraph (F).
(c) Effective Date.--The amendments made by this section
shall apply to payment for items and services furnished on or
after the date of the enactment of this Act.
SEC. 3412. PAYMENT FOR CENTER AND CLINIC SERVICES.
(a) Phase-Out of Payment Based on Reasonable Costs.--Section
1902(a)(13)(E) (42 U.S.C. 1396a(a)(13)(E)) is amended by
inserting ``(or 95 percent for services furnished during fiscal
year 2000, 90 percent for service furnished during fiscal year
2001, and 85 percent for services furnished during fiscal year
2002)'' after ``100 percent''.
(b) Transitional Supplemental Payment for Services Furnished
Under Certain Managed Care Contracts.--
(1) In general.--Section 1902(a)(13)(E) is further
(A) by inserting ``(i)'' after ``(E)'', and
(B) by inserting before the semicolon at the
end the following: ``and (ii) in carrying out
clause (i) in the case of services furnished by
a federally qualified health center or a rural
health clinic pursuant to a contract between
the center and a health maintenance
organization under section 1903(m), for payment
by the State of a supplemental payment equal to
the amount (if any) by which the amount
determined under clause (i) exceeds the amount
of the payments provided under such contract''.
(2) Conforming amendment to managed care contract
requirement.--Clause (ix) of section 1903(m)(2)(A) (42
U.S.C. 1396b(m)(2)(A)) is amended to read as follows:
``(ix) such contract provides, in the case of an
entity that has entered into a contract for the
provision of services with a federally qualified health
center or a rural health clinic, that the entity shall
provide payment that is not less than the level and
amount of payment which theentity would make for the
services if the services were furnished by a provider which is not a
federally qualified health center or a rural health clinic;''.
(3) Effective date.--The amendments made by this
section shall apply to services furnished on or after
(c) End of Transitional Payment Rules.--Effective for
services furnished on or after October 1, 2002--
(1) subparagraph (E) of section 1902(a)(13) (42
U.S.C. 1396a(a)(13)) is repealed, and
(2) clause (ix) of section 1903(m)(2)(A) (42 U.S.C.
1396b(m)(2)(A)) is repealed.
(d) Flexibility in Coverage of Non-Freestanding Look-
Alikes.--
(1) In general.--Section 1905(l)(2)(B)(iii) (42
U.S.C. 1396d(l)(2)(B)(iii)) is amended by inserting
``and is not other than an entity that is owned,
controlled, or operated by another provider'' after
``such a grant''.
(2) Effective date.--The amendments made by paragraph
(1) shall apply to service furnished on and after the
date of the enactment of this Act.
(e) GAO Report.--By not later than February 1, 2001, the
Comptroller General shall submit to Congress a report on the
impact of the amendments made by this section on access to
health care for medicaid beneficiaries and the uninsured served
at health centers and rural health clinics and the ability of
health centers and rural health clinics to become integrated in
a managed care system.
(a) Exception From Tax Does Not Disqualify as Broad-Based
Tax.--Section 1903(w)(3) (42 U.S.C. 1396b(w)(3)) is amended--
(1) in subparagraph (B), by striking ``and (E)'' and
inserting ``(E), and (F)'', and
(2) by adding at the end the following:
``(F) In no case shall a tax not qualify as a broad-based
health care related tax under this paragraph because it does
not apply to a hospital that is exempt from taxation under
section 501(c)(3) of the Internal Revenue Code of 1986 and that
does not accept payment under the State plan under this title
or under title XVIII.''.
(b) Reduction in Federal Financial Participation in Case of
Imposition of Tax.--Section 1903(b) (42 U.S.C. 1396b(b)) is
``(4) Notwithstanding the preceding provisions of this
section, the amount determined under subsection (a)(1) for any
State shall be decreased in a quarter by the amount of any
health care related taxes (described in section 1902(w)(3)(A))
that are imposed on a hospital described in subsection
(w)(3)(F) in that quarter.''.
(c) Effective Date.--The amendments made by subsection (a)
shall apply to taxes imposed before, on, or after the date of
the enactment of this Act and the amendment made by subsection
(b) shall apply to taxes imposed on or after such date.
(a) Continuous Eligibility Option.--Section 1902(e) (42
U.S.C. 1396a(e)) is amended by adding at the end the following
``(12) At the option of the State, the plan may provide that
an individual who is under an age specified by the State (not
to exceed 19 years of age) and who is determined to be eligible
for benefits under a State plan approved under this title under
subsection (a)(10)(A) shall remain eligible for those benefits
until the earlier of--
``(A) the end of a period (not to exceed 12 months)
following the determination; or
``(B) the time that the individual exceeds that
age.''.
(b) Clarification of State Option To Cover All Children Under
19 Years of Age.--Section 1902(l)(1)(D) (42 U.S.C.
1396a(l)(1)(D)) is amended by inserting ``(or, at the option of
a State, after any earlier date)'' after ``children born after
September 30, 1983''.
shall apply to medical assistance for items and services
furnished on or after October 1, 1997.
SEC. 3422. PAYMENT OF HOME-HEALTH-RELATED MEDICARE PART B PREMIUM
AMOUNT FOR CERTAIN LOW-INCOME INDIVIDUALS.
(a) Eligibility.--Section 1902(a)(10)(E) (42 U.S.C.
1396a(a)(10)(E)) is amended--
(1) by striking ``and'' at the end of clause (ii),
(2) by inserting after clause (iii) the following:
``(iv) subject to section 1905(p)(4), for
making medical assistance available for the
portion of medicare cost sharing described in
section 1905(p)(3)(A)(ii), that is attributable
to the application under section 1839(a)(5) of
section 1833(d)(2) for individuals who would be
described in clause (iii) but for the fact that
their income exceeds 120 percent, but is less
than 175 percent, of the official poverty line
(referred to in section 1905(p)(2)) for a
family of the size involved;''.
(b) 100 Percent Federal Payment.--The third sentence of
section 1905(b) (42 U.S.C. 1396d(b)) is amended by inserting
``and with respect to amounts expended for medical assistance
described in section 1902(a)(10)(E)(iv) for individuals
described in such section'' before the period at the end.
Section 1128B(a) (42 U.S.C. 1320a-7b(a)), as amended by
section 217 of the Health Insurance Portability and
Accountability Act of 1996, is amended--
(1) by amending paragraph (6) to read as follows:
``(6) for a fee knowingly and willfully counsels or
assists an individual to dispose of assets (including
by any transfer in trust) in order for the individual
to become eligible for medical assistance under a State
plan under title XIX, if disposing of the assets
results in the imposition of a period of ineligibility
for such assistance under section 1917(c),''; and
(2) in clause (ii) of the matter following such
paragraph, by striking ``failure, or conversion by any
other person'' and inserting ``failure, conversion, or
provision of counsel or assistance by any other
person''.
Notwithstanding any other provision of law, the payments made
from any fund established pursuant to the settlement in the
case of In re Factor VIII or IX Concentrate Blood Products
Litigation, MDL-986, no. 93-C7452 (N.D. Ill.) shall not be
considered income or resources in determining eligibility for,
or the amount of benefits under, a State plan of medical
assistance approved under title XIX of the Social Security Act.
(a) In General.--Title XIX is amended--
(1) in section 1905(a) (42 U.S.C. 1396d(a)), as
amended by section 3403(a)--
(A) by striking ``and'' at the end of
paragraph (25);
(B) by redesignating paragraph (26) as
paragraph (27); and
(C) by inserting after paragraph (25) the
``(26) services furnished under a PACE program under
section 1932 to PACE program eligible individuals
enrolled under the program under such section; and'';
(2) by redesignating section 1932 as section 1933;
``program of all-inclusive care for the elderly (pace)
``Sec. 1932. (a) Option.--
``(1) In general.--A State may elect to provide
medical assistance under this section with respect to
PACE program services to PACE program eligible
individuals who are eligible for medical assistance
under the State plan and who are enrolled in a PACE
program under a PACE program agreement. Such
individuals need not be eligible for benefits under
part A, or enrolled under part B, of title XVIII to be
eligible to enroll under this section. In the case of
an individual enrolled with a PACE program pursuant to
such an election--
``(A) the individual shall receive benefits
under the plan solely through such program, and
``(B) the PACE provider shall receive payment
in accordance with the PACE program agreement
for provision of such benefits.
A State may limit through its PACE program agreement
the number of individuals who may be enrolled in a PACE
program under the State plan.
``(2) PACE program defined.--For purposes of this
section and section 1894, the term `PACE program' means
a program of all-inclusive care for the elderly that
meets the following requirements:
``(A) Operation.--The entity operating the
program is a PACE provider (as defined in
paragraph (3)).
``(B) Comprehensive benefits.--The program
provides comprehensive health care services to
PACE program eligible individuals in accordance
with the PACE program agreement and regulations
under this section.
``(C) Transition.--In the case of an
individual who is enrolled under the program
under this section and whose enrollment ceases
for any reason (including the individual no
longer qualifies as a PACE program eligible
individual, the termination of a PACE program
agreement, or otherwise), the program provides
assistance to the individual in obtaining
necessary transitional care through appropriate
referrals and making the individual's medical
records available to new providers.
``(3) PACE provider defined.--
``(A) In general.--For purposes of this
section, the term `PACE provider' means an
entity that--
``(i) subject to subparagraph (B), is
(or is a distinct part of) a public
entity or a private, nonprofit entity
organized for charitable purposes under
section 501(c)(3) of the Internal
Revenue Code of 1986, and
``(ii) has entered into a PACE
program agreement with respect to its
operation of a PACE program.
``(B) Treatment of private, for-profit
providers.--Clause (i) of subparagraph (A)
shall not apply--
``(i) to entities subject to a
demonstration project waiver under
subsection (h); and
``(ii) after the date the report
under section 4014(b) of the Balanced
Budget Act of 1997 is submitted, unless
the Secretary determines that any of
the findings described in subparagraph
(A), (B), (C) or (D) of paragraph (2)
of such section are true.
``(4) PACE program agreement defined.--For purposes
of this section, the term `PACE program agreement'
means, with respect to a PACE provider, an agreement,
consistent with this section, section 1894 (if
applicable), and regulations promulgated to carry out
such sections, between the PACE provider, the
Secretary, and a State administering agency for the
operation of a PACE program by the provider under such
``(5) PACE program eligible individual defined.--For
purposes of this section, the term `PACE program
eligible individual' means, with respect to a PACE
program, an individual who--
``(A) is 55 years of age or older;
``(B) subject to subsection (c)(4), is
determined under subsection (c) to require the
level of care required under the State medicaid
plan for coverage of nursing facility services;
``(C) resides in the service area of the PACE
program; and
``(D) meets such other eligibility conditions
as may be imposed under the PACE program
agreement for the program under subsection
(e)(2)(A)(ii).
``(6) PACE protocol.--For purposes of this section,
the term `PACE protocol' means the Protocol for the
Program of All-inclusive Care for the Elderly (PACE),
as published by On Lok, Inc., as of April 14, 1995.
``(7) PACE demonstration waiver program defined.--For
purposes of this section, the term `PACE demonstration
waiver program' means a demonstration program under
either of the following sections (as in effect before
the date of their repeal):
``(A) Section 603(c) of the Social Security
Amendments of 1983 (Public Law 98-21), as
extended by section 9220 of the Consolidated
Omnibus Budget Reconciliation Act of 1985
(Public Law 99-272).
``(B) Section 9412(b) of the Omnibus Budget
Reconciliation Act of 1986 (Public Law 99-509).
``(8) State administering agency defined.--For
purposes of this section, the term `State administering
agency' means, with respect to the operation of a PACE
program in a State, the agency of that State (which may
be the single agency responsible for administration of
the State plan under this title in the State)
responsible for administering PACE program agreements
under this section and section 1894 in the State.
``(9) Trial period defined.--
section, the term `trial period' means, with
respect to a PACE program operated by a PACE
provider under a PACE program agreement, the
first 3 contract years under such agreement
with respect to such program.
``(B) Treatment of entities previously
operating pace demonstration waiver programs.--
Each contract year (including a year occurring
before the effective date of this section)
during which an entity has operated a PACE
demonstration waiver program shall be counted
under subparagraph (A) as a contract year
during which the entity operated a PACE program
as a PACE provider under a PACE program
``(10) Regulations.--For purposes of this section,
the term `regulations' refers to interim final or final
regulations promulgated under subsection (f) to carry
out this section and section 1894.
``(b) Scope of Benefits; Beneficiary Safeguards.--
``(1) In general.--Under a PACE program agreement, a
PACE provider shall--
``(A) provide to PACE program eligible
individuals, regardless of source of payment
and directly or under contracts with other
entities, at a minimum--
``(i) all items and services covered
under title XVIII (for individuals
enrolled under section 1894) and all
items and services covered under this
title, but without any limitation or
condition as to amount, duration, or
scope and without application of
deductibles, copayments, coinsurance,
or othercost-sharing that would
otherwise apply under such title or this title, respectively; and
``(ii) all additional items and
services specified in regulations,
based upon those required under the
PACE protocol;
``(B) provide such enrollees access to
necessary covered items and services 24 hours
per day, every day of the year;
``(C) provide services to such enrollees
through a comprehensive, multidisciplinary
health and social services delivery system
which integrates acute and long-term care
services pursuant to regulations; and
``(D) specify the covered items and services
that will not be provided directly by the
entity, and to arrange for delivery of those
items and services through contracts meeting
the requirements of regulations.
``(2) Quality assurance; patient safeguards.--The
PACE program agreement shall require the PACE provider
to have in effect at a minimum--
``(A) a written plan of quality assurance and
improvement, and procedures implementing such
plan, in accordance with regulations, and
``(B) written safeguards of the rights of
enrolled participants (including a patient bill
of rights and procedures for grievances and
appeals) in accordance with regulations and
with other requirements of this title and
Federal and State law designed for the
protection of patients.
``(c) Eligibility Determinations.--
``(1) In general.--The determination of whether an
individual is a PACE program eligible individual--
``(A) shall be made under and in accordance
with the PACE program agreement, and
``(B) who is entitled to medical assistance
under this title, shall be made (or who is not
so entitled, may be made) by the State
administering agency.
``(2) Condition.--An individual is not a PACE program
eligible individual (with respect to payment under this
section) unless the individual's health status has been
determined, in accordance with regulations, to be
comparable to the health status of individuals who have
participated in the PACE demonstration waiver programs.
Such determination shall be based upon information on
health status and related indicators (such as medical
diagnoses and measures of activities of daily living,
instrumental activities of daily living, and cognitive
impairment) that are part of a uniform minimum data set
collected by PACE providers on potential eligible
``(3) Annual eligibility recertifications.--
``(A) In general.--Subject to subparagraph
(B), the determination described in subsection
(a)(5)(B) for an individual shall be
reevaluated at least once a year.
``(B) Exception.--The requirement of annual
reevaluation under subparagraph (A) may be
waived during a period in accordance with
regulations in those cases where the State
administering agency determines that there is
no reasonable expectation of improvement or
significant change in an individual's condition
during the period because of the advanced age,
severity of the advanced age, severity of
chronic condition, or degree of impairment of
functional capacity of the individual involved.
``(4) Continuation of eligibility.--An individual who
is a PACE program eligible individual may be deemed to
continue to be such an individual notwithstanding a
determination that the individual no longer meets the
requirement of subsection (a)(5)(B) if, in accordance
with regulations, in the absence of continued coverage
under a PACE program the individual reasonably would be
expected to meet such requirement within the succeeding
6-month period.
``(5) Enrollment; disenrollment.--The enrollment and
disenrollment of PACE program eligible individuals in a
PACE program shall be pursuant to regulations and the
PACE program agreement and shall permit enrollees to
voluntarily disenroll without cause at any time.
``(d) Payments to PACE Providers on a Capitated Basis.--
``(1) In general.--In the case of a PACE provider
with a PACE program agreement under this section,
except as provided in this subsection or by
regulations, the State shall make prospective monthly
payments of a capitation amount for each PACE program
eligible individual enrolled under the agreement under
``(2) Capitation amount.--The capitation amount to be
applied under this subsection for a provider for a
contract year shall be an amount specified in the PACE
program agreement for the year. Such amount shall be an
amount, specified under the PACE agreement, which is
less than the amount that would otherwise have been
made under the State plan if the individuals were not
so enrolled and shall be adjusted to take into account
the comparative frailty of PACE enrollees and such
other factors as the Secretary determines to be
appropriate. The payment under this section shall be in
addition to any payment made under section 1894 for
individuals who are enrolled in a PACE program under
such section.
``(e) PACE Program Agreement.--
``(1) Requirement.--
``(A) In general.--The Secretary, in close
cooperation with the State administering
agency, shall establish procedures for entering
into, extending, and terminating PACE program
agreements for the operation of PACE programs
by entities that meet the requirements for a
PACE provider under this section, section 1894,
and regulations.
``(B) Numerical limitation.--
``(i) In general.--The Secretary
shall not permit the number of PACE
providers with which agreements are in
effect under this section or under
section 9412(b) of the Omnibus Budget
Reconciliation Act of 1986 to exceed--
``(I) 40 as of the date of
the enactment of this section,
``(II) as of each succeeding
anniversary of such date, the
numerical limitation under this
subparagraph for the preceding
year plus 20.
Subclause (II) shall apply without
regard to the actual number of
agreements in effect as of a previous
anniversary date.
``(ii) Treatment of certain private,
for-profit providers.--The numerical
limitation in clause (i) shall not
apply to a PACE provider that--
``(I) is operating under a
demonstration project waiver
under subsection (h), or
``(II) was operating under
such a waiver and subsequently
qualifies for PACE provider
status pursuant to subsection
(a)(3)(B)(ii).
``(2) Service area and eligibility.--
``(A) In general.--A PACE program agreement
for a PACE program--
``(i) shall designate the service
area of the program;
``(ii) may provide additional
requirements for individuals to qualify
as PACE program eligible individuals
with respect to the program;
``(iii) shall be effective for a
contract year, but may be extended for
additional contract years in the
absence of a notice by a party to
terminate and is subject to termination
by the Secretary and the State
administering agency at any time for
cause (as provided under the
agreement);
``(iv) shall require a PACE provider
to meet all applicable State and local
laws and requirements; and
``(v) shall have such additional
terms and conditions as the parties may
agree to, consistent with this section
``(B) Service area overlap.--In designating a
service area under a PACE program agreement
under subparagraph (A)(i), the Secretary (in
consultation with the State administering
agency) may exclude from designation an area
that is already covered under another PACE
program agreement, in order to avoid
unnecessary duplication of services and avoid
impairing the financial and service viability
of an existing program.
``(3) Data collection.--
``(A) In general.--Under a PACE program
agreement, the PACE provider shall--
``(i) collect data,
``(ii) maintain, and afford the
Secretary and the State administering
agency access to, the records relating
to the program, including pertinent
financial, medical, and personnel
records, and
``(iii) make to the Secretary and the
State administering agency reports that
the Secretary finds (in consultation
with State administering agencies)
necessary to monitor the operation,
cost, and effectiveness of the PACE
program under this title and title
``(B) Requirements during trial period.--
During the first three years of operation of a
PACE program (either under this section or
under a PACE demonstration waiver program), the
PACE provider shall provide such additional
data as the Secretary specifies in regulations
in order to perform the oversight required
under paragraph (4)(A).
``(4) Oversight.--
``(A) Annual, close oversight during trial
period.--During the trial period (as defined in
subsection (a)(9)) with respect to a PACE
program operated by a PACE provider, the
Secretary (in cooperation with the State
administering agency) shall conduct a
comprehensive annual review of the operation of
the PACE program by the provider in order to
assure compliance with the requirements of this
section and regulations. Such a review shall
include--
``(i) an on-site visit to the program
site;
``(ii) comprehensive assessment of a
provider's fiscal soundness;
``(iii) comprehensive assessment of
the provider's capacity to provide all
PACE services to all enrolled
participants;
``(iv) detailed analysis of the
entity's substantial compliance with
all significant requirements of this
section and regulations; and
``(v) any other elements the
Secretary or State agency considers
necessary or appropriate.
``(B) Continuing oversight.--After the trial
period, the Secretary (in cooperation with the
State administering agency) shall continue to
conduct such review of the operation of PACE
providers and PACE programs as may be
appropriate, taking into account the
performance level of a provider and compliance
of a provider with all significant requirements
of this section and regulations.
``(C) Disclosure.--The results of reviews
under this paragraph shall be reported promptly
to the PACE provider, along with any
recommendations for changes to the provider's
program, and shall be made available to the
public upon request.
``(5) Termination of pace provider agreements.--
``(A) In general.--Under regulations--
``(i) the Secretary or a State
administering agency may terminate a
PACE program agreement for cause, and
``(ii) a PACE provider may terminate
such an agreement after appropriate
notice to the Secretary, the State
agency, and enrollees.
``(B) Causes for termination.--In accordance
with regulations establishing procedures for
termination of PACE program agreements, the
Secretary or a State administering agency may
terminate a PACE program agreement with a PACE
provider for, among other reasons, the fact
that--
``(i) the Secretary or State
administering agency determines that--
``(I) there are significant
deficiencies in the quality of
care provided to enrolled
participants; or
``(II) the provider has
failed to comply substantially
with conditions for a program
or provider under this section
or section 1894; and
``(ii) the entity has failed to
develop and successfully initiate,
within 30 days of the date of the
receipt of written notice of such a
determination, and continue
implementation of a plan to correct the
deficiencies.
``(C) Termination and transition
procedures.--An entity whose PACE provider
agreement is terminated under this paragraph
shall implement the transition procedures
required under subsection (a)(2)(C).
``(6) Secretary's oversight; enforcement authority.--
``(A) In general.--Under regulations, if the
Secretary determines (after consultation with
the State administering agency) that a PACE
provider is failing substantially to comply
with the requirements of this section and
regulations, the Secretary (and the State
administering agency) may take any or all of
the following actions:
``(i) Condition the continuation of
the PACE program agreement upon timely
execution of a corrective action plan.
``(ii) Withhold some or all further
payments under the PACE program
agreement under this section or section
1894 with respect to PACE program
services furnished by such provider
until the deficiencies have been
``(iii) Terminate such agreement.
``(B) Application of intermediate
sanctions.--Under regulations, the Secretary
may provide for the application against a PACE
provider of remedies described in section
1857(f)(2) (or, for periods before January 1,
1999, section 1876(i)(6)(B)) or 1903(m)(6)(B)
in the case of violations by the provider of
the type described in section 1857(f)(1) (or
1876(i)(6)(A) for such periods) or
1903(m)(6)(A), respectively (in relation to
agreements, enrollees, and requirements under
section 1894 or this section, respectively).
``(7) Procedures for termination or imposition of
sanctions.--Under regulations, the provisions of
section 1857(g) (or for periods before January 1, 1999,
section 1876(i)(9)) shall apply to termination and
sanctions respecting a PACE program agreement and PACE
provider under this subsection in the same manner as
they apply to a termination and sanctions with respect
to a contract and a MedicarePlus organization under
part C (or for such periods an eligible organization
under section 1876).
``(8) Timely consideration of applications for pace
program provider status.--In considering an application
for PACE provider program status, the application shall
be deemed approved unless the Secretary, within 90 days
after the date of the submission of the application to
the Secretary, either denies such request in writing or
informs the applicant in writing with respect to any
additional information that is needed in order to make
a final determination with respect to the application.
After the date the Secretary receives such additional
information, the application shall be deemed approved
unless the Secretary, within 90 days of such date,
denies such request.
``(f) Regulations.--
``(1) In general.--The Secretary shall issue interim
final or final regulations to carry out this section
and section 1894.
``(2) Use of pace protocol.--
``(A) In general.--In issuing such
regulations, the Secretary shall, to the extent
consistent with the provisions of this section,
incorporate the requirements applied to PACE
demonstration waiver programs under the PACE
protocol.
``(B) Flexibility.--The Secretary (in close
consultation with State administering agencies)
may modify or waive such provisions of the PACE
protocol in order to provide for reasonable
flexibility in adapting the PACE service
delivery model to the needs of particular
organizations (such as those in rural areas or
those that may determine it appropriate to use
non-staff physicians accordingly to State
licensing law requirements) under this section
and section 1932 where such flexibility is not
inconsistent with and would not impair the
essential elements, objectives, and
requirements of the this section, including--
``(i) the focus on frail elderly
qualifying individuals who require the
level of care provided in a nursing
facility;
``(ii) the delivery of comprehensive,
integrated acute and long-term care
services;
``(iii) the interdisciplinary team
approach to care management and service
delivery;
``(iv) capitated, integrated
financing that allows the provider to
pool payments received from public and
private programs and individuals; and
``(v) the assumption by the provider
over time of full financial risk.
``(3) Application of certain additional beneficiary
and program protections.--
regulations and subject to subparagraph (B),
the Secretary may apply with respect to PACE
programs, providers, and agreements such
requirements of part C of title XVIII (or, for
periods before January 1, 1999, section 1876)
and section 1903(m) relating to protection of
beneficiaries and program integrity as would
apply to MedicarePlus organizations under such
part C (or for such periods eligible
organizations under risk-sharing contracts
under section 1876) and to health maintenance
organizations under prepaid capitation
agreements under section 1903(m).
``(B) Considerations.--In issuing such
regulations, the Secretary shall--
``(i) take into account the
differences between populations served
and benefits provided under this
section and under part C of title XVIII
(or, for periods before January 1,
1999, section 1876) and section
1903(m);
``(ii) not include any requirement
that conflicts with carrying out PACE
programs under this section; and
``(iii) not include any requirement
restricting the proportion of enrollees
who are eligible for benefits under
this title or title XVIII.
``(g) Waivers of Requirements.--With respect to carrying out
a PACE program under this section, the following requirements
of this title (and regulations relating to such requirements)
shall not apply:
``(1) Section 1902(a)(1), relating to any requirement
that PACE programs or PACE program services be provided
in all areas of a State.
``(2) Section 1902(a)(10), insofar as such section
relates to comparability of services among different
population groups.
``(3) Sections 1902(a)(23) and 1915(b)(4), relating
to freedom of choice of providers under a PACE program.
``(4) Section 1903(m)(2)(A), insofar as it restricts
a PACE provider from receiving prepaid capitation
``(h) Demonstration Project for For-Profit Entities.--
``(1) In general.--In order to demonstrate the
operation of a PACE program by a private, for-profit
entity, the Secretary (in close consultation with State
administering agencies) shall grant waivers from the
requirement under subsection (a)(3) that a PACE
provider may not be a for-profit, private entity.
``(2) Similar terms and conditions.--
``(A) In general.--Except as provided under
subparagraph (B), and paragraph (1), the terms
and conditions for operation of a PACE program
by a provider under this subsection shall be
the same as those for PACE providers that are
nonprofit, private organizations.
``(B) Numerical limitation.--The number of
programs for which waivers are granted under
this subsection shall not exceed 10. Programs
with waivers granted under this subsection
shall not be counted against the numerical
limitation specified in subsection (e)(1)(B).
``(i) Post-Eligibility Treatment of Income.--A State may
provide for post-eligibility treatment of income for
individuals enrolled in PACE programs under this section in the
same manner as a State treats post-eligibility income for
individuals receiving services under a waiver under section
1915(c).
``(j) Miscellaneous Provisions.--
``(1) Construction.--Nothing in this section or
section 1894 shall be construed as preventing a PACE
provider from entering into contracts with other
governmental or nongovernmental payers for the care of
PACE program eligible individuals who are not eligible
for benefits under part A, or enrolled under part B, of
title XVIII or eligible for medical assistance under
this title.''.
(b) Conforming Amendments.--
(1) Section 1902 (42 U.S.C. 1396a), as amended by
section 3403(c), is amended--
(A) in subsection (a)(10)(C)(iv), by striking
(B) in subsection (j), by striking ``(26)''
and inserting ``(27)''.
(2) Section 1924(a)(5) (42 U.S.C. 1396r-5(a)(5)) is
(A) in the heading, by striking ``from
organizations receiving certain waivers'' and
inserting ``under pace programs'', and
(B) by striking ``from any organization'' and
all that follows and inserting ``under a PACE
demonstration waiver program (as defined in
subsection (a)(7) of section 1932) or under a
PACE program under section 1894.''.
(3) Section 1903(f)(4)(C) (42 U.S.C. 1396b(f)(4)(C))
is amended by inserting ``or who is a PACE program
eligible individual enrolled in a PACE program under
section 1932,'' after ``section 1902(a)(10)(A),''.
Title XVIII (42 U.S.C. 1395 et seq.) is amended by inserting
after section 1894 the following new section:
``payments to, and coverage of benefits under, programs of all-
inclusive care for the elderly (pace)
``Sec. 1894. (a) Receipt of Benefits Through Enrollment in
PACE Program; Definitions for PACE Program Related Terms.--
``(1) Benefits through enrollment in a pace
program.--In accordance with this section, in the case
of an individual who is entitled to benefits under part
A or enrolled under part B and who is a PACE program
eligible individual with respect to a PACE program
offered by a PACE provider under a PACE program
agreement--
``(A) the individual may enroll in the
program under this section; and
``(B) so long as the individual is so
enrolled and in accordance with regulations--
``(i) the individual shall receive
benefits under this title solely
through such program, and
``(ii) the PACE provider is entitled
to payment under and in accordance with
this section and such agreement for
provision of such benefits.
``(2) Application of definitions.--The definitions of
terms under section 1932(a) shall apply under this
section in the same manner as they apply under section
``(b) Application of Medicaid Terms and Conditions.--Except
as provided in this section, the terms and conditions for the
operation and participation of PACE program eligible
individuals in PACE programs offered by PACE providers under
PACE program agreements under section 1932 shall apply for
purposes of this section.
``(c) Payment.--
``(1) Adjustment in payment amounts.--In the case of
individuals enrolled in a PACE program under this
section, the amount of payment under this section shall
not be the amount calculated under section 1932(d)(2),
but shall be an amount, specified under the PACE
agreement, based upon payment rates established for
purposes of payment under section 1854 (or, for periods
before January 1, 1999, for purposes of risk-sharing
contracts under section 1876) and shall be adjusted to
take into account the comparative frailty of PACE
enrollees and such other factors as the Secretary
determines to be appropriate. Such amount under such an
agreement shall be computed in a manner so that the
total payment level for all PACE program eligible
individuals enrolled under a program is less than the
projected payment under this title for a comparable
population not enrolled under a PACE program.
``(2) Form.--The Secretary shall make prospective
monthly payments of a capitation amount for each PACE
program eligible individual enrolled under this section
in the same manner and from the same sources as
payments are made to a MedicarePlus organization under
section 1854 (or, for periods beginning before January
1, 1999, to an eligible organization under a risk-
sharing contract under section 1876). Such payments
shall be subject to adjustment in the manner described
in section 1854(a)(2) or section 1876(a)(1)(E), as the
case may be.
``(d) Waivers of Requirements.--With respect to carrying out
are waived and shall not apply:
``(1) Section 1812, insofar as it limits coverage of
institutional services.
``(2) Sections 1813, 1814, 1833, and 1886, insofar as
such sections relate to rules for payment for benefits.
``(3) Sections 1814(a)(2)(B), 1814(a)(2)(C), and
1835(a)(2)(A), insofar as they limit coverage of
extended care services or home health services.
``(4) Section 1861(i), insofar as it imposes a 3-day
prior hospitalization requirement for coverage of
extended care services.
``(5) Sections 1862(a)(1) and 1862(a)(9), insofar as
they may prevent payment for PACE program services to
individuals enrolled under PACE programs.''.
(a) Timely Issuance of Regulations; Effective Date.--The
Secretary of Health and Human Services shall promulgate
regulations to carry out this subchapter in a timely manner.
Such regulations shall be designed so that entities may
establish and operate PACE programs under sections 1894 and
1932 for periods beginning not later than 1 year after the date
of the enactment of this Act.
(b) Expansion and Transition for PACE Demonstration Project
Waivers.--
(1) Expansion in current number and extension of
demonstration projects.--Section 9412(b) of the Omnibus
Budget Reconciliation Act of 1986, as amended by
section 4118(g) of the Omnibus Budget Reconciliation
Act of 1987, is amended--
(A) in paragraph (1), by inserting before the
period at the end the following: ``, except
that the Secretary shall grant waivers of such
requirements to up to the applicable numerical
limitation specified in section 1932(e)(1)(B)
of the Social Security Act''; and
(i) in subparagraph (A), by striking
``, including permitting the
organization to assume progressively
(over the initial 3-year period of the
waiver) the full financial risk''; and
(ii) in subparagraph (C), by adding
at the end the following: ``In granting
further extensions, an organization
shall not be required to provide for
reporting of information which is only
required because of the demonstration
nature of the project.''.
(2) Elimination of replication requirement.--
Subparagraph (B) of paragraph (2) of such section shall
not apply to waivers granted under such section after
(3) Timely consideration of applications.--In
considering an application for waivers under such
section before the effective date of repeals under
subsection (c), subject to the numerical limitation
under the amendment made by paragraph (1), the
application shall be deemed approved unless the
Secretary of Health and Human Services, within 90 days
after the date of its submission to the Secretary,
either denies such request in writing or informs the
applicant in writing with respect to any additional
information which is needed in order to make a final
determination with respect to the application. After
the date the Secretary receives such additional
(c) Priority and Special Consideration in Application.--
During the 3-year period beginning on the date of the enactment
of this Act:
(1) Provider status.--The Secretary of Health and
Human Services shall give priority, in processing
applications of entities to qualify as PACE programs
under section 1894 or 1932 of the Social Security Act--
(A) first, to entities that are operating a
PACE demonstration waiver program (as defined
in section 1932(a)(7) of such Act), and
(B) then entities that have applied to
operate such a program as of May 1, 1997.
(2) New waivers.--The Secretary shall give priority,
in the awarding of additional waivers under section
9412(b) of the Omnibus Budget Reconciliation Act of
1986--
(A) to any entities that have applied for
such waivers under such section as of May 1,
(B) to any entity that, as of May 1, 1997,
has formally contracted with a State to provide
services for which payment is made on a
capitated basis with an understanding that the
entity was seeking to become a PACE provider.
(3) Special consideration.--The Secretary shall give
special consideration, in the processing of
applications described in paragraph (1) and the
awarding of waivers described in paragraph (2), to an
entity which as of May 1, 1997 through formal
activities (such as entering into contracts for
feasibility studies) has indicated a specific intent to
become a PACE provider.
(d) Repeal of Current PACE Demonstration Project Waiver
Authority.--
(1) In general.--Subject to paragraphs (2) and (3),
the following provisions of law are repealed:
(A) Section 603(c) of the Social Security
Amendments of 1983 (Public Law 98-21).
(B) Section 9220 of the Consolidated Omnibus
Budget Reconciliation Act of 1985 (Public Law
99-272).
(C) Section 9412(b) of the Omnibus Budget
(2) Delay in application.--
(A) In general.--Subject to subparagraph (B),
the repeals made by paragraph (1) shall not
apply to waivers granted before the initial
effective date of regulations described in
subsection (a).
(B) Application to approved waivers.--Such
repeals shall apply to waivers granted before
such date only after allowing such
organizations a transition period (of up to 24
months) in order to permit sufficient time for
an orderly transition from demonstration
project authority to general authority provided
under the amendments made by this subchapter.
(3) State option.--A State may elect to maintain the
PACE program which (as of the date of the enactment of
this Act) were operating under the authority described
in paragraph (1) without electing to use the authority
under section 1932 of the Public Health Service Act.
(a) Study.--
(1) In general.--The Secretary of Health and Human
Services (in close consultation with State
administering agencies, as defined in section
1932(a)(8) of the Social Security Act) shall conduct a
study of the quality and cost of providing PACE program
services under the medicare and medicaid programs under
the amendments made by this subchapter.
(2) Study of private, for-profit providers.--Such
study shall specifically compare the costs, quality,
and access to services by entities that are private,
for-profit entities operating under demonstration
projects waivers granted under section 1932(h) of the
Social Security Act with the costs, quality, and access
to services of other PACE providers.
(b) Report.--
(1) In general.--Not later than 4 years after the
date of the enactment of this Act, the Secretary shall
provide for a report to Congress on the impact of such
amendments on quality and cost of services. The
Secretary shall include in such report such
recommendations for changes in the operation of such
amendments as the Secretary deems appropriate.
(2) Treatment of private, for-profit providers.--The
report shall include specific findings on whether any
of the following findings is true:
(A) The number of covered lives enrolled with
entities operating under demonstration project
waivers under section 1932(h) of the Social
Security Act is fewer than 800 (or such lesser
number as the Secretarymay find statistically
sufficient to make determinations respecting findings described in the
succeeding subparagraphs).
(B) The population enrolled with such
entities is less frail than the population
enrolled with other PACE providers.
(C) Access to or quality of care for
individuals enrolled with such entities is
lower than such access or quality for
individuals enrolled with other PACE providers.
(D) The application of such section has
resulted in an increase in expenditures under
the medicare or medicaid programs above the
expenditures that would have been made if such
section did not apply.
(c) Information Included in Annual Recommendations.--The
Medicare Payment Advisory Commission shall include in its
annual report under section 1805(b)(1)(B) of the Social
Security Act recommendations on the methodology and level of
payments made to PACE providers under section 1894(d) of such
Act and on the treatment of private, for-profit entities as
PACE providers.
(a) Repeal of State Plan Provision.--Section 1902(a)(25) (42
U.S.C. 1396a(a)(25)) is amended--
(1) by striking subparagraph (G); and
(2) by redesignating subparagraphs (H) and (I) as
subparagraphs (G) and (H), respectively.
(b) Making Provision Optional.--Section 1906 (42 U.S.C.
1396e) is amended--
(1) in subsection (a)--
(A) by striking ``For purposes of section
1902(a)(25)(G) and subject to subsection (d),
each'' and inserting ``Each'',
(B) in paragraph (1), by striking ``shall''
and inserting ``may'', and
(C) in paragraph (2), by striking ``shall''
and inserting ``may''; and
(2) by striking subsection (d).
shall take effect on the date of the enactment of this Act.
(a) In General.--Section 1916(a)(2)(D) (42 U.S.C.
1396o(a)(2)(D)) is amended by inserting ``(at the option of the
State)'' after ``section 1905(a)(4)(C), or''.
shall apply to cost sharing with respect to deductions, cost
sharing and similar charges imposed for items and services
furnished on or after the date of the enactment of this Act.
(a) In General.--Section 1903(i) (42 U.S.C. 1396b(i)) is
amended by striking paragraph (12)
shall apply to services furnished on or after the date of the
enactment of this Act.
SEC. 3444. ELIMINATION OF REQUIREMENT OF PRIOR INSTITUTIONALIZATION
WITH RESPECT TO HABILITATION SERVICES FURNISHED
UNDER A WAIVER FOR HOME OR COMMUNITY-BASED
(a) In General.--Section 1915(c)(5) (42 U.S.C. 1396n(c)(5))
is amended, in the matter preceding subparagraph (A), by
striking ``, with respect to individuals who receive such
services after discharge from a nursing facility or
intermediate care facility for the mentally retarded''.
apply to services furnished on or after October 1, 1997.
(a) In General.--Section 1905(a) (42 U.S.C. 1396d(a)), as
amended by sections 3403(a) and 3431(a), is amended--
(1) by redesignating paragraphs (22) through (27) as
paragraphs (23) through (28), and
``(22) services furnished by a physician assistant
(as defined in section 1861(aa)(5)) which the assistant
is legally authorized to perform under State law and
with the supervision of a physician;''.
(b) Conforming Amendments.--Section 1902 (42 U.S.C. 1396a),
as amended by sections 3403(c) and 3431(b)(1), is amended--
(a) Study.--The Secretary of Health and Human Services shall
provide for a study on the actuarial value of the provision of
early and periodic screening, diagnostic, and treatment
services (as defined in section 1905(r) of the Social Security
Act (42 U.S.C. 1396d(r))) under the medicaid program under
title XIX of such Act. Such study shall include an examination
of the portion of such value that is attributable to paragraph
(5) of such section and to the second sentence of such section.
(b) Report.--By not later than 18 months after the date of
the enactment of this Act, the Secretary shall submit a report
to Congress on the results of the study under subsection (a).
(a) Mental Hospitals.--Section 1902(a)(26) (42 U.S.C.
1396a(a)(26)) is amended--
(1) by striking ``provide--
``(A) with respect to each patient'' and
inserting ``provide, with respect to each
patient''; and
(2) by striking subparagraphs (B) and (C).
(b) ICFS/MR.--Section 1902(a)(31) (42 U.S.C. 1396a(a)(31)) is
(c) Effective Date.--The amendments made by this section take
(a) In General.--Section 1902(i)(1)(B) (42 U.S.C.
1396a(i)(1)(B)) is amended by striking ``provide'' and
inserting ``establish alternative remedies if the State
demonstrates to the Secretary's satisfaction that the
alternative remedies are effective in deterring noncompliance
and correcting deficiencies, and may provide''.
takes effect on the date of the enactment of this Act.
(a) In General.--Section 1903(r) (42 U.S.C. 1396b(r)) is
(1) by striking all that precedes paragraph (5) and
inserting the following:
``(r)(1) In order to receive payments under subsection (a)
for use of automated data systems in administration of the
State plan under this title, a State must have in operation
mechanized claims processing and information retrieval systems
that meet the requirements of this subsection and that the
Secretary has found--
``(A) is adequate to provide efficient, economical,
and effective administration of such State plan;
``(B) is compatible with the claims processing and
information retrieval systems used in the
administration of title XVIII, and for this purpose--
``(i) has a uniform identification
coding system for providers, other
payees, and beneficiaries under this
title or title XVIII;
``(ii) provides liaison between
States and carriers and intermediaries
with agreements under title XVIII to
facilitate timely exchange of
appropriate data; and
``(iii) provides for exchange of data
between the States and the Secretary
with respect to persons sanctioned
under this title or title XVIII;
``(C) is capable of providing accurate and timely
data;
``(D) is complying with the applicable provisions of
part C of title XI;
``(E) is designed to receive provider claims in
standard formats to the extent specified by the
Secretary; and
``(F) effective for claims filed on or after January
1, 1999, provides for electronic transmission of claims
data in the format specified by the Secretary and
consistent with the Medicaid Statistical Information
System (MSIS) (including detailed individual enrollee
encounter data and other information that the Secretary
may find necessary).''.
(2) in paragraph (5)--
(A) by striking subparagraph (B);
(B) by striking all that precedes clause (i)
and inserting the following:
``(2) In order to meet the requirements of this paragraph,
must meet the following requirements:'';
(C) in clause (iii), by striking ``under
paragraph (6)''; and
(D) by redesignating clauses (i) through
(iii) as paragraphs (A) through (C); and
(3) by striking paragraphs (6), (7), and (8).
(b) Conforming Amendments.--Section 1902(a)(25)(A)(ii) (42
U.S.C. 1396a(a)(25)(A)(ii)) is amended by striking all that
follows ``shall'' and inserting the following: ``be integrated
with, and be monitored as a part of the Secretary's review of,
the State's mechanized claims processing and information
retrieval system under section 1903(r);''.
(c) Effective Date.--Except as otherwise specifically
provided, the amendments made by this section shall take effect
on January 1, 1998.
(a) In General.--Section 1919(h)(3)(D) (42 U.S.C.
1396r(h)(3)(D)) is amended--
(1) by inserting ``and'' at the end of clause (i);
(2) by striking ``, and'' at the end of clause (ii)
and inserting a period; and
(3) by striking clause (iii).
Section 1927(g)(1)(B)(i) (42 U.S.C. 1396r-8(g)(1)(B)(i)) is
(1) by striking ``and'' at the end of subclause (II),
(2) by redesignating subclause (III) as subclause
(IV), and
(3) by inserting after subclause (II) the following:
``(III) the DRUGDEX
Information System; and''.
(a) In General.--Section 1115 (42 U.S.C. 1315) is amended by
adding at the end the following new subsection:
``(e)(1) The provisions of this subsection shall apply to the
extension of State-wide comprehensive demonstration project (in
this subsection referred to as `waiver project') for which a
waiver of compliance with requirements of title XIX is granted
under subsection (a).
``(2) Not earlier than 1 year before the date the waiver
under subsection (a) with respect to a waiver project would
otherwise expire, the chief executive officer of the State
which is operating the project may submit to the Secretary a
written request for an extension, of up to 3 years, of the
``(3) If the Secretary fails to respond to the request within
6 months after the date it is submitted, the request is deemed
to have been granted.
``(4) If such a request is granted, the deadline for
submittal of a final report under the waiver project is deemed
to have been extended until the date that is 1 year after the
date the waivers under subsection (a) with respect to the
project would otherwise have expired.
``(5) The Secretary shall release an evaluation of each such
project not later than 1 year after the date of receipt of the
final report.
``(6) Subject to paragraphs (4) and (7), the extension of a
waiver project under this subsection shall be on the same terms
and conditions (including applicable terms and conditions
relating to quality and access of services, budget neutrality,
data and reporting requirements, and special population
protections) that applied to the project before its extension
under this subsection.
``(7) If an original condition of approval of a waiver
project was that Federal expenditures under the project not
exceed the Federal expenditures that would otherwise have been
made, the Secretary shall take such steps as may be necessary
to assure that, in the extension of the project under this
subsection, such condition continues to be met. In applying the
previous sentence, the Secretary shall take into account the
Secretary's best estimate of rates of change in expenditures at
the time of the extension.''.
shall apply to demonstration projects initially approved
before, on, or after the date of the enactment of this Act.
Section 1902 (42 U.S.C. 1396a) is amended by adding at the
end the following:
``(aa)(1) Notwithstanding any other provision of law, no
provision of law shall be construed as preventing any State
from allowing determinations of eligibility to receive medical
assistance under this title to be made by an entity that is not
``(2) Nothing in this subsection shall be construed as
affecting--
``(A) the conditions for eligibility for benefits
resources); and
``(B) the rights to challenge determinations
regarding eligibility or rights to benefits; and
``(C) determinations regarding quality control or
error rates.''.
of 1989, as amended by section 13642 of the Omnibus Budget
Reconciliation Act of 1993, is amended by striking ``December
31, 1995'' and inserting ``December 31, 2002''.
(a) State Plan Requirement.--Section 1902(a) (42 U.S.C.
1396a(a)) is amended--
(1) in paragraph (62), by striking ``; and'' at the
end and inserting a semicolon;
(63) and inserting ``; and''; and
``(64) provide, with respect to all contracts
described in section 1903(m)(2)(A) with an organization
or provider, that--
``(A) the State agency develops and
implements a quality assessment and improvement
strategy, consistent with standards that the
Secretary shall establish, in consultation with
the States, and monitor and that do not preempt
the application of stricter State standards,
which includes--
``(i) standards for access to care so
that covered services are available
within reasonable timeframes and in a
manner that ensures continuity of care
and adequate primary care and, where
applicable, specialized services
capacity, including pediatric
specialized services for special needs
children (as defined in section
1915(i)); and
``(ii) procedures for monitoring and
evaluating the quality and
appropriateness of care and services to
beneficiaries that reflect the full
spectrum of populations enrolled under
the contract and that include--
``(I) requirements for
provision of quality assurance
data to the State using the
data and information set that
the Secretary shall specify
with respect to entities
contracting under section 1876
or alternative data
requirements approved by the
Secretary;
``(II) regular and periodic
examination of the scope and
content of the quality
improvement strategy; and
``(III) other aspects of care
and service directly related to
the improvement of quality of
care (including grievance
procedures and marketing and
information standards); and
``(B) that adequate provision is made,
consistent with standards that the Secretary
shall specify and monitor, with respect to
financial reporting under the contracts.''.
(b) Deemed Compliance.--Section 1903(m) (42 U.S.C. 1396b(m))
is amended by adding at the end the following:
``(7) Deemed compliance.--
``(A) Medicare organizations.--At the option of a
State, the requirements of the previous provisions of
this subsection shall not apply with respect to a
health maintenance organization if the organization is
an eligible organization with a contract in effect
under section 1876 or a MedicarePlus organization with
a contract in effect under C of title XVIII.
``(B) Private accreditation.--
``(i) In general.--At the option of a State,
such requirements shall not apply with respect
to a health maintenance organization if--
``(I) the organization is accredited
by an organization meeting the
requirements described in subparagraph
(C); and
``(II) the standards and process
under which the organization is
accredited meet such requirements as
are established under clause (ii),
without regard to whether or not the
time requirement of such clause is
satisfied.
``(ii) Standards and process.--Not later than
180 days after the date of the enactment of
this paragraph, the Secretary shall specify
requirements for the standards and process
under which a health maintenance organization
is accredited by an organization meeting the
requirements of subparagraph (C).
``(C) Accrediting organization.--An accrediting
organization meets the requirements of this
subparagraph if the organization--
``(i) is a private, nonprofit organization;
``(ii) exists for the primary purpose of
accrediting managed care organizations or
health care providers; and
``(iii) is independent of health care
providers or associations of health care
providers.''.
(c) Application to Managed Care Entities.--Section
1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A)) is amended--
(1) by striking ``and'' at the end of clause (x),
(2) by striking the period at the end of clause (xi)
and inserting ``; and'', and
(3) by adding at the end the following new clause:
``(xii) such contract provides for--
``(I) submitting to the State agency such
information as may be necessary to monitor the
care delivered to members,
``(II) maintenance of an internal quality
assurance program consistent with section
1902(a)(64)(A), and meeting standards that the
Secretary shall establish in regulations; and
``(III) providing effective procedures for
hearing and resolving grievances between the
entity and members enrolled with the
organization under this subsection.''.
(d) Application to Primary Care Case Management Contracts.--
Section 1905(t)(3), as added by section 3403(b), is amended--
(D),
(2) by striking the period at the end of subparagraph (E) and
inserting ``; and'', and
(3) by adding at the end the following new subparagraph:
``(F) if payment is made to the organization on a
prepaid capitated or other risk basis, compliance with
the requirements of section 1903(m)(2)(A)(xii) in the
same manner such requirements apply to a health
maintenance organization under section
1903(m)(2)(A).''.
(e) Effective Date.--The amendments made by this section
apply to agreements between a State agency and an organization
entered into or renewed on or after January 1, 1999.
(a) In General.--Section 1903(m)(1) (42 U.S.C. 1396b(m)(1))
(1) in subparagraph (A)(ii), by inserting ``, meets
the requirements of subparagraph (C)(i) (if
applicable),'' after ``provision is satisfactory to the
State'', and
``(C)(i) Subject to clause (ii), a provision meets the
requirements of this subparagraph for an organization if the
organization meets solvency standards established by the State
for private health maintenance organizations or is licensed or
certified by the State as a risk-bearing entity.
``(ii) Clause (i) shall not apply to an organization if--
``(I) the organization is not responsible for the
provision (directly or through arrangements with
providers of services) of inpatient hospital services
and physicians' services;
``(II) the organization is a public entity;
``(III) the solvency of the organization is
guaranteed by the State; or
``(IV) the organization is (or is controlled by) one
or more federally-qualified health centers and meets
solvency standards established by the State for such an
For purposes of subclause (IV), the term `control' means the
possession, whether direct or indirect, of the power to direct
or cause the direction of the management and policies of the
organization through membership, board representation, or an
ownership interest equal to or greater than 50.1 percent.''
(c) Transition.--In the case of a health maintenance
organization that as of the date of the enactment of this Act
has entered into a contract with a State for the provision of
medical assistance under title XIX under which the organization
assumes full financial risk and is receiving capitation
payments, the amendment made by subsection (a) shall not apply
to such organization until 3 years after the date of the
MEDICAL CONDITION AND PROHIBITION OF GAG RULE
RESTRICTIONS.
Section 1903(m) (42 U.S.C. 1396b(m)) is amended by adding at
the end the following:
``(8)(A)(i) Each contract with a health maintenance
organization under this subsection shall require the
organization--
``(I) to provide coverage for emergency services (as
defined in subparagraph (B)) without regard to prior
authorization or the emergency care provider's
contractual relationship with the organization, and
``(II) to comply with guidelines established under
section 1852(d)(2) (respecting coordination of post-
stabilization care) in the same manner as such
guidelines apply to MedicarePlus plans offered under
part C of title XVIII.
``(B) In subparagraph (A)(i)(I), the term `emergency
services' means, with respect to an individual enrolled with an
organization, covered inpatient and outpatient services that--
``(i) are furnished by a provider that is qualified
to furnish such services under this title, and
``(ii) are needed to evaluate or stabilize an
emergency medical condition (as defined in subparagraph
(C)).
``(C) In subparagraph (B)(ii), the term `emergency medical
condition' means a medical condition manifesting itself by
acute symptoms of sufficient severity such that a prudent
layperson, who possesses an average knowledge of health and
medicine, could reasonably expect the absence of immediate
medical attention to result in--
``(i) placing the health of the individual (or, with
respect to a pregnant woman, the health of the woman or
her unborn child) in serious jeopardy,
``(ii) serious impairment to bodily functions, or
``(iii) serious dysfunction of any bodily organ or
``(9)(A) Subject to subparagraphs (B) and (C), under a
contract under this subsection a health maintenance
organization (in relation to an individual enrolled under the
contract) shall not prohibit or otherwise restrict a covered
health care professional (as defined in subparagraph (D)) from
advising such an individual who is a patient of the
professional about the health status of the individual or
medical care or treatment for the individual's condition or
disease, regardless of whether benefits for such care or
treatment are provided under the plan, if the professional is
acting within the lawful scope of practice.
``(B) Subparagraph (A) shall not be construed as requiring a
health maintenance organization to provide, reimburse for, or
provide coverage of a counseling or referral service if the
``(i) objects to the provision of such service on
moral or religious grounds; and
``(ii) in the manner and through the written
instrumentalities such organization deems appropriate,
makes available information on its policies regarding
such service to prospective enrollees before or during
enrollment and to enrollees within 90 days after the
date that the organization or plan adopts a change in
policy regarding such a counseling or referral service.
``(C) Nothing in subparagraph (B) shall be construed to
affect disclosure requirements under State law or under the
Employee Retirement Income Security Act of 1974.
``(D) For purposes of this paragraph, the term `health care
professional' means a physician (as defined in section 1861(r))
or other health care professional if coverage for the
professional's services is provided under the contract under
this subsection for the services of the professional. Such term
includes a podiatrist, optometrist, chiropractor, psychologist,
dentist, physician assistant, physical or occupational
therapist and therapy assistant, speech-language pathologist,
audiologist, registered or licensed practical nurse (including
nurse practitioner, clinical nurse specialist, certified
registered nurse anesthetist, and certified nurse-midwife),
licensed certified social worker, registered respiratory
therapist, and certified respiratory therapy technician.''.
(a) Protection Against Marketing Abuses.--Section 1903(m) (42
U.S.C. 1396b(m)), as amended by section 3463, is amended--
(1) in paragraph (2)(A)(viii), by inserting ``and
compliance with the requirements of paragraphs (10) and
(11)'' after ``of this subsection'', and
``(10)(A)(i) A health maintenance organization with respect
to activities under this subsection may not distribute directly
or through any agent or independent contractor marketing
materials within any State--
``(I) without the prior approval of the State; and
``(II) that contain false or materially misleading
``(ii) In the process of reviewing and approving such
materials, the State shall provide for consultation with a
medical care advisory committee.
``(iii) The State may not enter into or renew a contract with
a health maintenance organization for the provision of services
to individuals enrolled under the State plan under this title
if the State determines that the entity distributed directly or
through any agent or independent contractor marketing materials
in violation of clause (i)(II).
``(B) A health maintenance organization shall distribute
marketing materials to the entire service area of such
``(C) A health maintenance organization, or any agency of
such organization, may not seek to influence an individual's
enrollment with the organization in conjunction with the sale
of any other insurance.
``(D) Each health maintenance organization shall comply with
such procedures and conditions as the Secretary prescribes in
order to ensure that, before an individual is enrolled with the
organization under this title, the individual is provided
accurate oral and written and sufficient information to make an
informed decision whether or not to enroll.
``(E) Each health maintenance organization shall not,
directly or indirectly, conduct door-to-door, telephonic, or
other `cold call' marketing of enrollment under this title.''.
(b) Prohibiting Affiliations With Individuals Debarred by
Federal Agencies.--Section 1903(m) (42 U.S.C. 1396b(m)), as
amended by section 3463 and subsection (a), is further amended
``(11)(A) A health maintenance organization may not
knowingly--
``(i) have a person described in subparagraph (C) as
a director, officer, partner, or person with beneficial
ownership of more than 5 percent of the organization
equity; or
``(ii) have an employment, consulting, or other
agreement with a person described in such subparagraph
for the provision of items and services that are
significant and material to the organization's
obligations under its contract with the State.
``(B) If a State finds that a health maintenance organization
is not in compliance with clause (i) or (ii) of subparagraph
(A), the State--
``(i) shall notify the Secretary of such
noncompliance;
``(ii) may continue an existing agreement with the
organization unless the Secretary (in consultation with
the Inspector General of the Department of Health and
Human Services) directs otherwise; and
``(iii) may not renew or otherwise extend the
duration of an existing agreement with the organization
unless the Secretary (in consultation with the
Inspector General of the Department of Health and Human
Services) provides to the State and to the Congress a
written statement describing compelling reasons that
exist for renewing or extending the agreement.
``(C) A person is described in this subparagraph if such
person--
``(i) is debarred, suspended, or otherwise excluded
from participating in procurement activities under the
Federal acquisition regulation or from participating in
nonprocurement activities under regulations issued
pursuant to Executive Order 12549; or
``(ii) is an affiliate (within the meaning of the
Federal acquisition regulation) of a person described
in clause (i).''.
(c) Application of State Conflict-of-Interest Safeguards.--
Section 1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A)), as amended by
(1) by striking ``and'' at the end of clause (xi),
(2) by striking the period at the end of clause (xii)
(3) by inserting after clause (xi) the following:
``(xiii) the State has in effect conflict-of-interest
safeguards with respect to officers and employees of
the State with responsibilities relating to contracts
with such organizations and to any default enrollment
process that are at least as effective as the Federal
safeguards provided under section 27 of the Office of
Federal Procurement Policy Act (41 U.S.C. 423), against
conflicts of interest that apply with respect to
Federal procurement officials with comparable
responsibilities with respect to such contracts.''.
(d) Limitation on Availability of FFP for Use of Enrollment
Brokers.--Section 1903(b) (42 U.S.C. 1396b(b)), as amended by
section 3413(b), is amended by adding at the end the following:
``(5) Amounts expended by a State for the use an enrollment
broker in marketing health maintenance organizations and other
managed care entities to eligible individuals under this title
shall be considered, for purposes of subsection (a)(7), to be
necessary for the proper and efficient administration of the
State plan but only if the following conditions are met with
respect to the broker:
``(A) The broker is independent of any such entity
and of any health care providers (whether or not any
such provider participates in the State plan under this
title) that provide coverage of services in the same
State in which the broker is conducting enrollment
``(B) No person who is an owner, employee,
consultant, or has a contract with the broker either
has any direct or indirect financial interest with such
an entity or health care provider or has been excluded
from participation in the program under this title or
title XVIII or debarred by any Federal agency, or
subject to a civil money penalty under this Act.''.
shall take effect on January 1, 1998.
Section 1903(m) (42 U.S.C. 1396b(m)) is amended--
(1) in paragraph (2)(A), as amended by sections
3461(c) and 3464(c),--
(A) by striking ``and'' at the end of clause
(xii),
(B) by striking the period at the end of
clause (xiii) and inserting ``; and'', and
(C) by inserting after clause (xiii) the
following new clause:
``(xiv) such contract provides for compliance of the
organization with the grievance and appeals
requirements described in paragraph (3).''; and
``(3)(A) An eligible organization must provide a meaningful
and expedited procedure, which includes notice and hearing
requirements, for resolving grievances between the organization
(including any entity or individual through which the
organization provides health care services) and members
enrolled with the organization under this subsection. Under the
procedure any member enrolled with the organization may at any
time file orally or in writing a complaint to resolve
grievances between the member and the organization before a
board of appeals established under subparagraph (C).
``(B)(i) The organization must provide, in a timely manner,
such an enrollee a notice of any denial of services in-network
or denial of payment for out-of-network care or notice of
termination or reduction of services.
``(ii) Such notice shall include the following:
``(I) A clear statement of the reason for the denial.
``(II) An explanation of the complaint process under
subparagraph (C) which is available to the enrollee
upon request.
``(III) An explanation of all other appeal rights
available to all enrollees.
``(IV) A description of how to obtain supporting
evidence for this hearing, including the patient's
medical records from the organization, as well as
supporting affidavits from the attending health care
``(C)(i) Each eligible organization shall establish a board
of appeals to hear and make determinations on complaints by
enrollees under this subsection concerning denials of coverage
or payment for services (whether in-network or out-of-network)
and the medical necessity and appropriateness of covered items
and services.
``(ii) A board of appeals of an eligible organization shall
consist of--
``(I) representatives of the organization, including
physicians, nonphysicians, administrators, and
enrollees;
``(II) consumers who are not enrollees; and
``(III) providers with expertise in the field of
medicine which necessitates treatment.
``(iii) A board of appeals shall hear and resolve complaints
within 30 days after the date the complaint is filed with the
``(D) Nothing in this paragraph may be construed to replace
or supersede any appeals mechanism otherwise provided for an
individual entitled to benefits under this title.''.
SEC. 3466. STANDARDS RELATING TO ACCESS TO OBSTETRICAL AND
GYNECOLOGICAL SERVICES UNDER MANAGED CARE PLANS.
(a) In General.--Section 1903(m)(2)(A) (42 U.S.C.
1396b(m)(2)(A)), as amended by sections 3461(c), 3464(c), and
3465(1), is amended--
(1) by striking ``and'' at the end of clause (xiii),
(2) by striking the period at the end of clause (xiv)
(3) by inserting after clause (xiv) the following:
``(xv) the organization complies with the
requirements of paragraph (12).''.
(b) Requirements.--Section 1903(m) (42 U.S.C. 1396b(m)), as
amended by sections 3463, 3464(a), and 3464(b), is amended by
adding at the end the following new paragraph:
``(12)(A) If a health maintenance organization, under a
contract under this subsection, requires or provides for an
enrollee to designate a participating primary care provider--
``(i) the organization shall permit a female enrollee
to designate an obstetrician-gynecologist who has
agreed to be designated as such, as the enrollee's
primary care provider; and
``(ii) if such an enrollee has not designated such a
provider as a primary care provider, the organization--
``(I) may not require prior authorization by
the enrollee's primary care provider or
otherwise for coverage of obstetric and
gynecologic care provided by a participating
obstetrician-gynecologist, or a participating
health care professional practicing in
collaboration with the obstetrician-
gynecologist and in accordance with State law,
to the extent such care is otherwise covered,
``(II) shall treat the ordering of other
gynecologic care by such a participating
physician as the prior authorization of the
primary care provider with respect to such care
under the contract.
``(B) Nothing in subparagraph (A)(ii)(II) shall waive any
requirements of coverage relating to medical necessity or
appropriateness with respect to coverage of gynecologic care so
ordered.''.
shall apply to contracts entered into, renewed, or extended on
or after January 1, 1998.
(a) Direct Payment by State.--Subsection (a)(1) of section
1923 (42 U.S.C. 1396r-4) is amended--
(A),
(2) by striking the period at the end of subparagraph
(B) and inserting ``, and'', and
(3) by adding at the end the following new
subparagraph:
``(C) provides that payment adjustments under
the plan under this section for services
furnished by a hospital on or after October 1,
1997, for individuals entitled to benefits
under the plan, and enrolled with an entity
described in section 1903(m), under a primary
care case management system (described in
section 1905(t)), or other managed care plan--
``(i) are made directly to the
hospital by the State, and
``(ii) are not used as part of, and
are disregarded in determining the
amount of, prepaid capitation paid
under the State plan with respect to
those services.''.
(b) Adjustment to State DSH Allocations.--
(1) In general.--Subsection (f) of such section is
(A) in paragraph (2)(A), by inserting ``and
paragraph (5)'' after ``subparagraph (B)'', and
``(5) Adjustments in dsh allotments.--
``(A) Allotment frozen for states with very
low dsh expenditures.--In the case of a State
for which its State 1995 DSH spending did not
exceed 1 percent of the total amount
expenditures made under the State plan under
this title for medical assistance during fiscal
year 1995 (as reported by the State no later
than January 1, 1997, on HCFA Form 64), the DSH
allotment for each of fiscal years 1998 through
2002 is equal to its State 1995 DSH spending.
``(B) Full reduction for high dsh states.--In
the case of a State which was classified under
this subsection as a high DSH State for fiscal
year 1997, the DSH allotment for each of fiscal
years 1998 through 2002 is equal to the State
1995 DSH spending reduced by the full reduction
percentage (described in subparagraph (D)) for
the fiscal year involved.
``(C) Half-reduction for other states.--In
the case of a State not described in
subparagraph (A) or (B), the DSH allotment for
each of fiscal years 1998 through 2002 is equal
to the State 1995 DSH spending reduced by \1/2\
of the full reduction percentage for the fiscal
year involved.
``(D) Full reduction percentage.--For
purposes of this paragraph, the `full reduction
percentage' for--
``(i) fiscal year 1998 is 2 percent,
``(ii) fiscal year 1999 is 5 percent,
``(iii) fiscal year 2000 is 20
``(iv) fiscal year 2001 is 30
percent, and
``(v) fiscal year 2002 is 40 percent.
``(E) Definitions.-- In this paragraph:
``(i) State.--The term `State' means
the 50 States and the District of
Columbia.
``(ii) State 1995 dsh spending.--The
term `State 1995 DSH spending' means,
with respect to a State, the total
amount of payment adjustments made
under subsection (c) under the State
plan during fiscal year 1995 as
reported by the State no later than
January 1, 1997, on HCFA Form 64.''.
(1) shall apply to fiscal years beginning with fiscal
year 1998.
(c) Transition Rule.--Effective October 1, 1997, section
1923(g)(2)(A) of the Social Security Act (42 U.S.C. 1396r-
4(g)(2)(A)) shall be applied to the State of California as
though--
(1) ``or that begins on or after October 1, 1997, and
before October 1, 1999'' were inserted in such section
after ``January 1, 1995''; and
(2) ``(or 175 percent in the case of a State fiscal
year that begins on or after October 1, 1997, and
before October 1, 1999)'' were inserted in such section
after ``200 percent''.
(a) Total Amount Available for Allotment.--There are
available for allotments under this section for each of the 5
fiscal years (beginning with fiscal year 1998) $20,000,000 for
payments to certain States under this section.
(b) State Allotment Amount.--
Services shall compute an allotment for each fiscal
year beginning with fiscal year 1998 and ending with
fiscal year 2002 for each of the 12 States with the
highest number of undocumented aliens. The amount of
such allotment for each such State for a fiscal year
shall bear the same ratio to the total amount available
for allotments under subsection (a) for the fiscal year
as the ratio of the number of undocumented aliens in
the State in the fiscal year bears to the total of such
numbers for all such States for such fiscal year. The
amount of allotment to a State provided under this
paragraph for a fiscal year that is not paid out under
subsection (c) shall be available for payment during
the subsequent fiscal year.
(2) Determination.--For purposes of paragraph (1),
the number of undocumented aliens in a State under this
section shall be determined based on estimates of the
resident illegal alien population residing in each
State prepared by the Statistics Division of the
Immigration and Naturalization Service as of October
1992 (or as of such later date if such date is at least
1 year before the beginning of the fiscal year
involved),
(c) Use of Funds.--From the allotments made under subsection
(b), the Secretary shall pay to each State amounts the State
demonstrates were paid by the State (or by a political
subdivision of the State) for emergency health services
(d) State Defined.--For purposes of this section, the term
``State'' includes the District of Columbia.
(e) State Entitlement.--This section constitutes budget
authority in advance of appropriations Acts and represents the
obligation of the Federal Government to provide for the payment
to States of amounts provided under subsection (c).
Subtitle F--Child Health Assistance Program (CHAP)
SEC. 3501. SHORT TITLE OF SUBTITLE; TABLE OF CONTENTS OF SUBTITLE.
(a) Short Title of Subtitle.--This subtitle may be cited as
the ``Child Health Assistance Program Act of 1997''.
(b) Table of Contents of Subtitle.--The table of contents of
Sec. 3501. Short title of subtitle; table of contents.
Sec. 3502. Establishment of Child Health Assistance Program (CHAP).
``TITLE XXI--CHILD HEALTH ASSISTANCE PROGRAM
``Sec. 2101. Purpose; State child health plans.
``Sec. 2102. Contents of State child health plan.
``Sec. 2103. Allotments.
``Sec. 2104. Payments to States.
``Sec. 2105. Process for submission, approval, and amendment of
State child health plans.
``Sec. 2106. Strategic objectives and performance goals; plan
administration.
``Sec. 2107. Annual reports; evaluations.
``Sec. 2108. Definitions.
Sec. 3503. Optional use of State child health assistance funds for
enhanced medicaid match for expanded medicaid eligibility.
Sec. 3504. Medicaid presumptive eligibility for low-income children.
The Social Security Act is amended by adding at the end the
following new title:
``(a) Purpose.--The purpose of this title is to provide funds
to States to enable them to implement plans to initiate and
expand the provision of child health care assistance to
uninsured, low-income children in an effective and efficient
manner that is coordinated with other sources of coverage for
children. Such assistance may be provided for obtaining
creditable health coverage through methods specified in the
plan, which may include any or all of the following:
``(1) Providing benefits under the State's medicaid
plan under title XIX.
``(2) Obtaining coverage under group health plans or
group or individual health insurance coverage.
``(3) Direct purchase of services from providers.
``(4) Other methods specified under the plan.
``(b) State Child Health Plan Required.--A State is not
eligible for payment under section 2104 unless the State has
submitted to the Secretary under section 2105 a plan that--
``(1) sets forth how the State intends to use the
funds provided under this title to provide child health
assistance to needy children consistent with the
provisions of this title, and
``(2) is approved under section 2105.
``(c) State Entitlement.--This title constitutes budget
to States of amounts provided under section 2104.
``(d) Effective Date.--No State is eligible for payments
under section 2104 for any calendar quarter beginning before
``(a) General Background and Description.--A State child
health plan shall include a description, consistent with the
requirements of this title, of--
``(1) the extent to which, and manner in which,
children in the State, including targeted low-income
children and other classes of children classified by
income and other relevant factors, currently have
creditable health coverage (as defined in section
2108(c)(2));
``(2) current State efforts to provide or obtain
creditable health coverage for uncovered children,
including the steps the State is taking to identify and
enroll all uncovered children who are eligible to
participate in public health insurance programs and
health insurance programs that involve public-private
partnerships;
``(3) how the plan is designed to be coordinated with
such efforts to increase coverage of children under
creditable health coverage; and
``(4) how the plan will comply with subsection
(c)(5).
``(b) General Description of Eligibility Standards and
Methodology.--
``(1) Eligibility standards.--
``(A) In general.--The plan shall include a
description of the standards used to determine
the eligibility of targeted low-income children
for child health assistance under the plan.
Such standards may include (to the extent
consistent with this title) those relating to
the geographic areas to be served by the plan,
age, income and resources (including any
standards relating to spenddowns and
disposition of resources), residency,
disability status, immigration status, access
to or coverage under other health coverage, and
duration of eligibility. Such standards may not
discriminate on the basis of diagnosis.
``(B) Limitations on eligibility standards.--
Such eligibility standards--
``(i) shall, within any defined group
of covered targeted low-income
children, not cover such children with
higher family income without covering
children with a lower family income,
``(ii) may not deny eligibility based
on a child having a preexisting medical
``(2) Methodology.--The plan shall include a
description of methods of establishing and continuing
eligibility and enrollment, including a methodology for
computing family income that is consistent with the
methodology used under section 1902(l)(3)(E).
``(3) Eligibility screening; coordination with other
health coverage programs.--The plan shall include a
description of procedures to be used to ensure--
``(A) through both intake and followup
screening, that only targeted low-income
children are furnished child health assistance
under the State child health plan;
``(B) that children found through the
screening to be eligible for medical assistance
under the State medicaid plan under title XIX
are enrolled for such assistance under such
plan;
``(C) that the insurance provided under the
State child health plan does not substitute for
coverage under group health plans; and
``(D) coordination with other public and
private programs providing creditable coverage
for low-income children.
``(4) Nonentitlement.--Nothing in this title shall be
construed as providing an individual with an
entitlement to child health assistance under a State
child health plan.
``(c) Description of Assistance.--
``(1) In general.--A State child health plan shall
include a description of the child health assistance
provided under the plan for targeted low-income
children. The child health assistance provided to a
targeted low-income child under the plan in the form
described in paragraph (2) of section 2101(a) shall
include benefits (in an amount, duration, and scope
specified under the plan) for at least the following
categories of services:
``(A) Inpatient and outpatient hospital
``(B) Physicians' surgical and medical
``(C) Laboratory and x-ray services.
``(D) Well-baby and well-child care,
including age-appropriate immunizations.
The previous sentence shall not apply to coverage under
a group health plan if the benefits under such coverage
for individuals under this title are no less than the
benefits for other individuals similarly covered under
the plan.
``(2) Items.--The description shall include the
``(A) Cost sharing.--Subject to paragraph
(3), the amount (if any) of premiums,
deductibles, coinsurance, and other cost
sharing imposed.
``(B) Delivery method.--The State's approach
to delivery of child health assistance,
including a general description of--
``(i) the use (or intended use) of
different delivery methods, which may
include the delivery methods used under
the medicaid plan under title XIX, fee-
for-service, managed care arrangements
(such as capitated health care plans,
case management, and case
coordination), direct provision of
health care services (such as through
community health centers and
disproportionate share hospitals),
vouchers, and other delivery methods;
``(ii) utilization control systems.
``(3) Limitations on cost sharing.--
``(A) No cost sharing on preventive
benefits.--The plan may not impose deductibles,
coinsurance, or similar cost sharing with
respect to benefits for preventive services.
``(B) Sliding scale.--To the extent
practicable, any premiums imposed under the
plan shall be imposed on a sliding scale
related to income and the plan may only vary
premiums, deductibles, coinsurance, and other
cost sharing based on the family income of
targeted low-income children only in a manner
that does not favor children from families with
higher income over children from families with
lower income.
``(4) Restriction on application of preexisting
condition exclusions.--
(B), the State child health plan shall not
permit the imposition of any preexisting
condition exclusion for covered benefits under
``(B) Group health plans and group health
insurance coverage.--If the State child health
plan provides for benefits through payment for,
or a contract with, a group health plan or
group health insurance coverage, the plan may
permit the imposition of a preexisting
condition exclusion but only insofar as it is
permitted under the applicable provisions of
part 7 of subtitle B of title I of the Employee
Retirement Income Security Act of 1974 and
title XXVII of the Public Health Service Act.
``(5) Special protection for children with chronic
health conditions and special health care needs.--In
the case of a child who has a chronic condition, life-
threatening condition, or combination of conditions
that warrants medical specialty care and who is
eligible for benefits under the plan with respect to
such care, the State child health plan shall assure
access to such care, including the use of a medical
specialist as a primary care provider.
``(6) Secondary payment.--Nothing in this section
shall be construed as preventing a State from denying
benefits to an individual to the extent such benefits
are available to the individual under another public or
private health care insurance program.
``(7) Treatment of cash payments.--Payments in the
form of cash or vouchers provided as child health or
other assistance under the State child health plan to
parents, guardians or other caretakers of a targeted
low-income child are not considered income for purpose
of eligibility for, or benefits provided under, any
means-tested Federal or Federally-assisted program.
``(d) Outreach and Coordination.--A State child health plan
shall include a description of the procedures to be used by the
State to accomplish the following:
``(1) Outreach.--Outreach to families of children
likely to be eligible for child health assistance under
the plan or under other public or private health
coverage programs to inform these families of the
availability of, and to assist them in enrolling their
children in, such a program.
``(2) Coordination with other health insurance
programs.--Coordination of the administration of the
State program under this subtitle with other public and
private health insurance programs.
``(a) Total Allotment.--The total allotment that is available
under this title for each fiscal year, beginning with fiscal
year 1998, is $2,880,000,000.
``(b) Allotments to 50 States and District of Columbia.--
``(1) In general.--Subject to paragraphs (4) and (5),
of the total allotment available under subsection (a)
for a fiscal year, reduced by the amount of allotments
made under subsection (c) for the fiscal year, the
Secretary shall allot to each State (other than a State
described in such subsection) with a State child health
plan approved under this title the same proportion as
the ratio of--
``(A) the product of (i) the number of
uncovered low-income children for the fiscal
year in the State (as determined under
paragraph (2)) and (ii) the State cost factor
for that State (established under paragraph
(3)); to
``(B) the sum of the products computed under
subparagraph (A).
``(2) Number of uncovered low-income children.--For
the purposes of paragraph (1)(A)(i), the number of
uncovered low-income children for a fiscal year in a
State is equal to the arithmetic average of the number
of low-income children (as defined in section
2108(c)(4)) with no health insurance coverage, as
reported and defined inthe 3 most recent March
supplements to the Current Population Survey of the Bureau of the
Census before the beginning of the fiscal year.
``(3) Adjustment for geographic variations in health
costs.--
``(A) In general.--For purposes of paragraph
(1)(A)(ii), the `State cost factor' for a State
for a fiscal year equal to the sum of--
``(i) 0.15, and
``(ii) 0.85 multiplied by the ratio
``(I) the annual average
wages per employee for the
State for such year (as
determined under subparagraph
(B)), to
``(II) the annual average
wages per employee for the 50
States and the District of
``(B) Annual average wages per employee.--For
purposes of subparagraph (A), the `annual
average wages per employee' for a State, or for
all the States, for a fiscal year is equal to
the average of the annual wages per employee
for the State or for the 50 States and the
District of Columbia for employees in the
health services industry (SIC code 8000), as
reported by the Bureau of Labor Statistics of
the Department of Labor for each of the most
recent 3 years before the beginning of the
fiscal year involved.
``(4) Floor for states.--Subject to paragraph (5), in
no case shall the amount of the allotment under this
subsection for one of the 50 States or the District of
Columbia for a year be less than $2,000,000. To the
extent that the application of the previous sentence
results in an increase in the allotment to a State
above the amount otherwise provided, the allotments for
the other States and the District of Columbia under
this subsection shall be decreased in a pro rata manner
(but not below $2,000,000) so that the total of such
allotments in a fiscal year does not exceed the amount
otherwise provided for allotment under paragraph (1)
for that fiscal year.
``(5) Offset for expenditures under medicaid
presumptive eligibility.--The amount of the allotment
otherwise provided to a State under this subsection for
a fiscal year shall be reduced by the amount of the
payments made to the State under section 1903(a) for
calendar quarters during such fiscal year that are
attributable to provision of medical assistance to a
child during a presumptive eligibility period under
section 1920A.
``(c) Allotments to Territories.--
``(1) In general.--Subject to paragraph (3), of the
total allotment under subsection (a) for a fiscal year,
the Secretary shall allot 0.5 percent among each of the
commonwealths and territories described in paragraph
(4) in the same proportion as the percentage specified
in paragraph (2) for such commonwealth or territory
bears to the sum of such percentages for all such
commonwealths or territories so described.
``(2) Percentage.--The percentage specified in this
paragraph for--
``(A) Puerto Rico is 91.6 percent,
``(B) Guam is 3.5 percent,
``(C) Virgin Islands is 2.6 percent,
``(D) American Samoa is 1.2 percent, and
``(E) the Northern Mariana Islands is 1.1
percent.
``(3) Floor.--In no case shall the amount of the
allotment to a commonwealth or territory under
paragraph (1) for a fiscal year be less than $100,000.
To the extent that the application of the previous
sentence results in an increase in the allotment to a
commonwealth or territory above the amount otherwise
provided, the allotments for the other commonwealths
and territories under this subsection for the fiscal
year shall be decreased (but not below $100,000) in a
pro rata manner so that the total of such allotments
does not exceed the total amount otherwise provided for
allotment under paragraph (1).
``(4) Commonwealths and territories.--A commonwealth
or territory described in this paragraph is any of the
following if it has a State child health plan approved
under this title:
``(A) Puerto Rico.
``(B) Guam.
``(C) the Virgin Islands.
``(D) American Samoa.
``(E) the Northern Mariana Islands.
``(d) Adjustment for States Using Enhanced Medicaid Match.--
In the case of a State that elects the increased medicaid
matching option under section 1905(t), the amount of the
State's allotment under this section shall be reduced by the
amount of additional payment made under section 1903 that is
attributable to the increase in the Federal medical assistance
percentage effected under such option.
``(e) 3-Year Availability of Amounts Allotted.--Amounts
allotted to a State pursuant to this section for a fiscal year
shall remain available for expenditure by the State through the
end of the second succeeding fiscal year.
``(a) In General.--Subject to the succeeding provisions of
this section, the Secretary shall pay to each State with a
program approved under this title, from its allotment under
section 2103 (as may be adjusted under section 2103(d)), an
amount for each quarter up to 80 percent of expenditures under
that program in the quarter for--
``(1) child health assistance for targeted low-income
children;
``(2) health services initiatives for improving the
health of children (including targeted low-income
children and other low-income children);
``(3) expenditures for outreach activities as
provided in section 2102(d)(1); and
``(4) other reasonable costs incurred by the State to
administer the plan.
``(b) Limitation on Certain Payments for Certain
Expenditures.--
``(1) In general.--Funds provided to a State under
this title shall only be used to carry out the purposes
of this title.
``(2) Limitation on expenditures not used for
assistance.--Payment shall not be made under subsection
(a) for expenditures for items described in paragraphs
(2), (3), or (4) of subsection to the extent the total
of such expenditures exceeds 15 percent of total
expenditures under the plan for the period involved
(including any in such total additional Federal medical
assistance payments under section 1903(a)(1) that are
attributable to an enhanced State medicaid match under
section 1905(t)).
``(3) Purchase of family coverage.--The Secretary
shall establish rules regarding the extent to which
payment may be made under subsection (a)(1) for the
purchase of family coverage under a group health plan
or health insurance coverage that includes coverage of
targeted low-income children. Under such rules such
payment may be permitted, notwithstanding that a
portion may be considered attributable to purchase of
coverage for other family members, if the State
demonstrates that purchase of such coverage is cost
effective relative to the amounts that the State would
have paid to obtain comparable coverage only of the
targeted low-income children involved. In making such
determination, there shall be taken into account the
costs of providing coverage for medical assistance for
children with similar actuarial characteristics under
section 1902(l).
``(4) Denial of payment for reduction of medicaid
eligibility standards.--No payment may be made under
subsection (a) with respect to child health assistance
provided under a State child health plan to a targeted
low-income child if the child would be eligible for
medical assistance under the State plan under title XIX
(as such plan was in effect as of June 1, 1997) but for
a change in the income or assets standards or
methodology under such plan effected after such date.
``(5) Disallowances for excluded providers.--
``(A) In general.--Payment shall not be made
to a State under subsection (a) for
expenditures for items and services furnished--
``(i) by a provider who was excluded
from participation under title V,
XVIII, or XX or under this title
pursuant to section 1128, 1128A, 1156,
or 1842(j)(2), or
``(ii) under the medical direction or
on the prescription of a physician who
was so excluded, if the provider of the
services knew or had reason to know of
the exclusion.
``(B) Exception for emergency services.--
Subparagraph (A) shall not apply to emergency
items or services, not including hospital
emergency room services.
``(6) Use of non-federal funds for state matching
requirement.--Amounts provided by the Federal
Government, or services assisted or subsidized to any
significant extent by the Federal Government, may not
be included in determining the amount of non-Federal
contributions required under subsection (a).
``(7) Treatment of third party liability.--No payment
shall be made to a State under this section for
expenditures for child health assistance provided for a
targeted low-income child under its plan to the extent
that a private insurer (as defined by the Secretary by
regulation and including a group health plan (as
defined in section 607(1) of the Employee Retirement
Income Security Act of 1974), a service benefit plan,
and a health maintenance organization) would have been
obligated to provide such assistance but for a
provision of its insurance contract which has the
effect of limiting or excluding such obligation because
the individual is eligible for or is provided child
health assistance under the plan.
``(8) Secondary payer provisions.--Except as
otherwise provided by law, no payment shall be made to
a State under this section for expenditures for child
health assistance provided for a targeted low-income
child under its plan to the extent that payment has
been made or can reasonably be expected to be made
promptly (as determined in accordance with regulations)
under any other federally operated or financed health
care insurance program, other than an insurance program
operated or financed by the Indian Health Service, as
identified by the Secretary. For purposes of this
paragraph, rules similar to the rules for overpayments
under section 1903(d)(2) shall apply.
``(9) Limitation on payment for abortions.--
to a State under this section for any amount
expended under the State plan to pay for any
abortion or to assist in the purchase, in whole
or in part, of health benefit coverage that
includes coverage of abortion.
``(B) Exception.--Subparagraph (A) shall not
apply to an abortion--
``(i) if the pregnancy is the result
of an act of rape or incest, or
``(ii) in the case where a woman
suffers from a physical disorder,
illness, or injury that would, as
certified by a physician, place the
woman in danger of death unless an
abortion is performed.
``(c) Advance Payment; Retrospective Adjustment.--The
Secretary may make payments under this section for each quarter
on the basis of advance estimates of expenditures submitted by
the State and other investigation the Secretary may find
necessary, and may reduce or increase thepayments as necessary
to adjust for any overpayment or underpayment for prior quarters.
``SEC. 2105. PROCESS FOR SUBMISSION, APPROVAL, AND AMENDMENT OF STATE
CHILD HEALTH PLANS.
``(a) Initial Plan.--
``(1) In general.--As a condition of receiving
funding under section 2104, a State shall submit to the
Secretary a State child health plan that meets the
applicable requirements of this title.
``(2) Approval.--Except as the Secretary may provide
under subsection (e), a State plan submitted under
paragraph (1)--
``(A) shall be approved for purposes of this
title, and
``(B) shall be effective beginning with a
calendar quarter that is specified in the plan,
but in no case earlier than the first calendar
quarter that begins at least 60 days after the
date the plan is submitted.
``(b) Plan Amendments.--
``(1) In general.--A State may amend, in whole or in
part, its State child health plan at any time through
transmittal of a plan amendment.
under subsection (e), an amendment to a state plan
submitted under paragraph (1)--
``(B) shall be effective as provided in
``(3) Effective dates for amendments.--
``(A) In general.--Subject to the succeeding
provisions of this paragraph, an amendment to a
State plan shall take effect on one or more
effective dates specified in the amendment.
``(B) Amendments relating to eligibility or
benefits.--
``(i) Notice requirement.--Any plan
amendment that eliminates or restricts
eligibility or benefits under the plan
may not take effect unless the State
certifies that it has provided prior or
contemporaneous public notice of the
change, in a form and manner provided
under applicable State law.
``(ii) Timely transmittal.--Any plan
shall not be effective for longer than
a 60-day period unless the amendment
has been transmitted to the Secretary
before the end of such period.
``(C) Other amendments.--Any plan amendment
that is not described in subparagraph (C)
becomes effective in a State fiscal year may
not remain in effect after the end of such
fiscal year (or, if later, the end of the 90-
day period on which it becomes effective)
unless the amendment has been transmitted to
the Secretary.
``(c) Disapproval of Plans and Plan Amendments.--
``(1) Prompt review of plan submittals.--The
Secretary shall promptly review State plans and plan
amendments submitted under this section to determine if
they substantially comply with the requirements of this
title.
``(2) 90-day approval deadlines.--A State plan or
plan amendment is considered approved unless the
Secretary notifies the State in writing, within 90 days
after receipt of the plan or amendment, that the plan
or amendment is disapproved (and the reasons for
disapproval) or that specified additional information
is needed.
``(3) Correction.--In the case of a disapproval of a
plan or plan amendment, the Secretary shall provide a
State with a reasonable opportunity for correction
before taking financial sanctions against the State on
the basis of such disapproval.
``(d) Program Operation.--
``(1) In general.--The State shall conduct the
program in accordance with the plan (and any
amendments) approved under subsection (c) and with the
requirements of this title.
``(2) Violations.--The Secretary shall establish a
process for enforcing requirements under this title.
Such process shall provide for the withholding of funds
in the case of substantial noncompliance with such
requirements. In the case of an enforcement action
against a State under this paragraph, the Secretary
shall provide a State with a reasonable opportunity for
correction before taking financial sanctions against
the State on the basis of such an action.
``(e) Continued Approval.--An approved State child health
plan shall continue in effect unless and until the State amends
the plan under subsection (b) or the Secretary finds
substantial noncompliance of the plan with the requirements of
this title under subsection (d)(2).
``(a) Strategic Objectives and Performance Goals.--
``(1) Description.--A State child health plan shall
include a description of--
``(A) the strategic objectives,
``(B) the performance goals, and
``(C) the performance measures,
the State has established for providing child health
assistance to targeted low-income children under the
plan and otherwise for maximizing health coverage for
other low-income children and children generally in the
``(2) Strategic objectives.--Such plan shall identify
specific strategic objectives relating to increasing
the extent of creditable health coverage among targeted
low-income children and other low-income children.
``(3) Performance goals.--Such plan shall specify one
or more performance goals for each such strategic
objective so identified.
``(4) Performance measures.--Such plan shall describe
how performance under the plan will be--
``(A) measured through objective,
independently verifiable means, and
``(B) compared against performance goals, in
order to determine the State's performance
under this title.
``(b) Records, Reports, Audits, and Evaluation.--
``(1) Data collection, records, and reports.--A State
child health plan shall include an assurance that the
State will collect the data, maintain the records, and
furnish the reports to the Secretary, at the times and
in the standardized format the Secretary may require in
order to enable the Secretary to monitor State program
administration and compliance and to evaluate and
compare the effectiveness of State plans under this
``(2) State assessment and study.--A State child
health plan shall include a description of the State's
plan for the annual assessments and reports under
section 2107(a) and the evaluation required by section
2107(b).
``(3) Audits.--A State child health plan shall
include an assurance that the State will afford the
Secretary access to any records or information relating
to the plan for the purposes of review or audit.
``(c) Program Development Process.--A State child health plan
shall include a description of the process used to involve the
public in the design and implementation of the plan and the
method for ensuring ongoing public involvement.
``(d) Program Budget.--A State child health plan shall
include a description of the budget for the plan. The
description shall be updated periodically as necessary and
shall include details on the planned use of funds and the
sources of the non-Federal share of plan expenditures,
including any requirements for cost sharing by beneficiaries.
``(e) Application of Certain General Provisions.--The
following sections in part A of title XI shall apply to States
under this title in the same manner as they applied to a State
under title XIX:
``(1) Section 1101(a)(1) (relating to definition of
State).
``(2) Section 1116 (relating to administrative and
judicial review), but only insofar as consistent with
the provisions of part B.
``(3) Section 1124 (relating to disclosure of
ownership and related information).
information about certain convicted individuals).
``(5) Section 1128B(d) (relating to criminal
penalties for certain additional charges).
``(6) Section 1132 (relating to periods within which
claims must be filed).
``(a) Annual Report.--The State shall--
``(1) assess the operation of the State plan under
this title in each fiscal year, including the progress
made in reducing the number of uncovered low-income
children; and
``(2) report to the Secretary, by January 1 following
the end of the fiscal year, on the result of the
assessment.
``(b) State Evaluations.--
``(1) In general.--By March 31, 2000, each State that
has a State child health plan shall submit to the
Secretary an evaluation that includes each of the
``(A) An assessment of the effectiveness of
the State plan in increasing the number of
children with creditable health coverage.;
``(B) A description and analysis of the
effectiveness of elements of the State plan,
including--
``(i) the characteristics of the
children and families assisted under
the State plan including age of the
children, family income, and the
assisted child's access to or coverage
by other health insurance prior to the
State plan and after eligibility for
the State plan ends,
``(ii) the quality of health coverage
provided including the types of
benefits provided,
``(iii) the amount and level (payment
of part or all of the premium) of
assistance provided by the State,
``(iv) the service area of the State
plan,
``(v) the time limits for coverage of
a child under the State plan,
``(vi) the State's choice of health
insurance plans and other methods used
for providing child health assistance ,
``(vii) the sources of non-Federal
funding used in the State plan;
``(C) an assessment of the effectiveness of
other public and private programs in the State
in increasing the availability of affordable
quality individual and family health insurance
for children;
``(D) a review and assessment of State
activities to coordinate the plan under this
title with other public and private programs
providing health care and health care
financing, including Medicaid and maternal and
child health services;
``(E) an analysis of changes and trends in
the State that affect the provision of
accessible, affordable, quality health
insurance and health care to children;
``(F) a description of any plans the State
has for improving the availability of health
insurance and health care for children;
``(G) recommendations for improving the
program under this title; and
``(H) any other matters the State and the
Secretary consider appropriate.
``(2) Report of the secretary.--The Secretary shall
submit to the Congress and make available to the public
by December 31, 2000, a report based on the evaluations
submitted by States under paragraph (1), containing any
conclusions and recommendations the Secretary considers
``(a) Child Health Assistance.--For purposes of this title,
the term `child health assistance' means payment of part or all
of the cost of any of the following, or assistance in the
purchase, in whole or in part, of health benefit coverage that
includes any of the following, for targeted low-income children
(as defined in subsection (b)) as specified under the State
``(1) Inpatient hospital services.
``(2) Outpatient hospital services.
``(3) Physician services.
``(4) Surgical services.
``(5) Clinic services (including health center
services) and other ambulatory health care services.
``(6) Prescription drugs and biologicals and the
administration of such drugs and biologicals, only if
such drugs and biologicals are not furnished for the
purpose of causing, or assisting in causing, the death,
suicide, euthanasia, or mercy killing of a person.
``(7) Over-the-counter medications.
``(8) Laboratory and radiological services.
``(9) Prenatal care and prepregnancy family planning
services and supplies.
``(10) Inpatient mental health services, including
services furnished in a State-operated mental hospital
and including residential or other 24-hour
therapeutically planned structured services.
``(11) Outpatient mental health services, including
and including community-based services.
``(12) Durable medical equipment and other medically-
related or remedial devices (such as prosthetic
devices, implants, eyeglasses, hearing aids, dental
devices, and adaptive devices).
``(13) Disposable medical supplies.
``(14) Home and community-based health care services
and related supportive services (such as home health
nursing services, home health aide services, personal
care, assistance with activities of daily living, chore
services, day care services, respite care services,
training for family members, and minor modifications to
the home).
``(15) Nursing care services (such as nurse
practitioner services, nurse midwife services, advanced
practice nurse services, private duty nursing care,
pediatric nurse services, and respiratory care
services) in a home, school, or other setting.
``(16) Abortion only if necessary to save the life of
the mother or if the pregnancy is the result of an act
of rape or incest.
``(17) Dental services.
``(18) Inpatient substance abuse treatment services
and residential substance abuse treatment services.
``(19) Outpatient substance abuse treatment services.
``(20) Case management services.
``(21) Care coordination services.
``(22) Physical therapy, occupational therapy, and
services for individuals with speech, hearing, and
language disorders.
``(23) Hospice care.
``(24) Any other medical, diagnostic, screening,
preventive, restorative, remedial, therapeutic, or
rehabilitative services (whether in a facility, home,
school, or other setting) if recognized by State law
and only if the service is--
``(A) prescribed by or furnished by a
physician or other licensed or registered
practitioner within the scope of practice as
defined by State law,
``(B) performed under the general supervision
or at the direction of a physician, or
``(C) furnished by a health care facility
that is operated by a State or local government
or is licensed under State law and operating
within the scope of the license.
``(25) Premiums for private health care insurance
``(26) Medical transportation.
``(27) Enabling services (such as transportation,
translation, and outreach services) only if designed to
increase the accessibility of primary and preventive
health care services for eligible low-income
``(28) Any other health care services or items
specified by the Secretary and not excluded under this
``(b) Targeted Low-Income Child Defined.--For purposes of
this title--
``(1) In general.--The term `targeted low-income
child' means a child--
``(A) who has been determined eligible by the
State for child health assistance under the
State plan;
``(B) whose family income (as determined
under the State child health plan)--
``(i) exceeds the medicaid applicable
income level (as defined in paragraph
(2) and expressed as a percentage of
the poverty line), but
``(ii) but does not exceed an income
level that is 75 percentage points
higher (as so expressed) than the
medicaid applicable income level, or,
ifhigher, 133 percent of the poverty
line for a family of the size involved; and
``(C) who is not found to be eligible for
medical assistance under title XIX or covered
under a group health plan or under health
insurance coverage (as such terms are defined
in section 2791 of the Public Health Service
Act).
Such term does not include a child who is an inmate of
a public institution.
``(2) Medicaid applicable income level.--The term
`medicaid applicable income level' means, with respect
to a child, the effective income level (expressed as a
percent of the poverty line) that has been specified
under the State plan under title XIX (including under a
waiver authorized by the Secretary or under section
1902(r)(2)), as of June 1, 1997, for the child to be
eligible for medical assistance under section
1902(l)(2) for the age of such child. In applying the
previous sentence in the case of a child described in
section 1902(l)(2)(D), such level shall be applied
taking into account the expanded coverage effected
among such children under such section with the passage
``(c) Additional Definitions.--For purposes of this title:
``(1) Child.--The term `child' means an individual
under 19 years of age.
``(2) Creditable health coverage.--The term
`creditable health coverage' has the meaning given the
term `creditable coverage' under section 2701(c) of the
Public Health Service Act (42 U.S.C. 300gg(c)) and
includes coverage (including the direct provision of
services) provided to a targeted low-income child under
this title.
``(3) Group health plan; health insurance coverage;
etc.--The terms `group health plan', `group health
insurance coverage', and `health insurance coverage'
have the meanings given such terms in section 2191 of
the Public Health Service Act.
``(4) Low-income.--The term `low-income child' means
a child whose family income is below 200 percent of the
poverty line for a family of the size involved.
``(5) Poverty line defined.--The term `poverty line'
has the meaning given such term in section 673(2) of
the Community Services Block Grant Act (42 U.S.C.
9902(2)), including any revision required by such
``(6) Preexisting condition exclusion.--The term
`preexisting condition exclusion' has the meaning given
such term in section 2701(b)(1)(A) of the Public Health
Service Act (42 U.S.C. 300gg(b)(1)(A)).
``(7) State child health plan; plan.--Unless the
context otherwise requires, the terms `State child
health plan' and `plan' mean a State child health plan
approved under section 2105.
``(8) Uncovered child.--The term `uncovered child'
means a child that does not have creditable health
coverage.''.
(1) Definition of state.--Section 1101(a)(1) is
(A) by striking ``and XIX'' and inserting
``XIX, and XXI'', and
(B) by striking ``title XIX'' and inserting
``titles XIX and XXI''.
ENHANCED MEDICAID MATCH FOR EXPANDED MEDICAID
(a) Increased FMAP for Medical Assistance for Expanded
Coverage of Targeted Low-Income Children.--Section 1905 of the
Social Security Act (42 U.S.C. 1396d) is amended--
(1) in subsection (b), by adding at the end the
following new sentence: ``Notwithstanding the first
sentence of this subsection, in the case of a State
plan that meets the condition described in subsection
(t)(1), with respect to expenditures for medical
assistance for optional targeted low-income children
described in subsection (t)(2), the Federal medical
assistance percentage is equal to the enhanced medical
assistance percentage described in subsection
(t)(3).''; and
``(t)(1) The conditions described in this paragraph for a
State plan are as follows:
``(A) The plan is not applying income and resource
standards and methodologies for the purpose of
determining eligibility of individuals under section
1902(l) that are more restrictive than those applied as
of June 1, 1997, for the purpose of determining
eligibility of individuals under such section.
``(B) The plan provides for such reporting of
information about expenditures and payments
attributable to the operation of this subsection as the
Secretary deems necessary in order to carry out
sections 2103(d) and 2104(b)(2).
``(C) The amount of the increased payments under
section 1903(a) resulting from the application of this
subsection does not exceed the total amount of any
allotment not otherwise expended by the State under
section 2103 for the period involved.
``(2) For purposes of subsection (b), the term `optional
targeted low-income child' means a targeted low-income child
described in section 2108(b)(1) who would not qualify for
medical assistance under the State plan under this title based
on such plan as in effect on June 1, 1997 (taking into account
the process of individuals aging into eligibility under section
1902(l)(2)(D)).
``(3) The enhanced medical assistance percentage described in
this paragraph for a State is equal to the Federal medical
assistance percentage (as defined in the first sentence of
subsection (b)) for the State increased by a number of
percentage points equal to 30 percent of the number of
percentagepoints by which (A) such Federal medical assistance
percentage for the State, is less than (B) 100 percent.
``(4) Notwithstanding any other provision of this title, a
State plan under this title may impose a limit on the number of
optional targeted low-income children described in paragraph
(2).''.
(b) Effective Date.--The amendments made by this section
(a) In General.--Title XIX of the Social Security Act is
amended by inserting after section 1920 the following new
``presumptive eligibility for children
``Sec. 1920A. (a) A State plan approved under section 1902
may provide for making medical assistance with respect to
health care items and services covered under the State plan
available to a child during a presumptive eligibility period.
``(b) For purposes of this section:
``(1) The term `child' means an individual under 19
years of age.
``(2) The term `presumptive eligibility period'
means, with respect to a child, the period that--
``(A) begins with the date on which a
qualified entity determines, on the basis of
preliminary information, that the family income
of the child does not exceed the applicable
income level of eligibility under the State
plan, and
``(B) ends with (and includes) the earlier
``(i) the day on which a
determination is made with respect to
the eligibility of the child for
medical assistance under the State
plan, or
``(ii) in the case of a child on
whose behalf an application is not
filed by the last day of the month
following the month during which the
entity makes the determination referred
to in subparagraph (A), such last day.
``(3)(A) Subject to subparagraph (B), the term
`qualified entity' means any entity that--
``(i)(I) is eligible for payments under a
State plan approved under this title and
provides items and services described in
subsection (a) or (II) is authorized to
determine eligibility of a child to participate
in a Head Start program under the Head Start
Act (42 U.S.C. 9821 et seq.), eligibility of a
child to receive child care services for which
financial assistance is provided under the
Child Care and Development Block Grant Act of
1990 (42 U.S.C. 9858 et seq.), eligibility of
an infant or child to receive assistance under
the special supplemental nutrition program for
women, infants, and children (WIC) under
section 17 of the Child Nutrition Act of 1966
(42 U.S.C. 1786); and
``(ii) is determined by the State agency to
be capable of making determinations of the type
described in paragraph (1)(A).
``(B) The Secretary may issue regulations further
limiting those entities that may become qualified
entities in order to prevent fraud and abuse and for
other reasons.
``(C) Nothing in this section shall be construed as
preventing a State from limiting the classes of
entities that may become qualified entities, consistent
with any limitations imposed under subparagraph (B).
``(c)(1) The State agency shall provide qualified entities
with--
``(A) such forms as are necessary for an application
to be made on behalf of a child for medical assistance
under the State plan, and
``(B) information on how to assist parents,
guardians, and other persons in completing and filing
such forms.
``(2) A qualified entity that determines under subsection
(b)(1)(A) that a child is presumptively eligible for medical
assistance under a State plan shall--
``(A) notify the State agency of the determination
within 5 working days after the date on which
determination is made, and
``(B) inform the parent or custodian of the child at
the time the determination is made that an application
for medical assistance under the State plan is required
to be made by not later than the last day of the month
following the month during which the determination is
``(3) In the case of a child who is determined by a qualified
entity to be presumptively eligible for medical assistance
under a State plan, the parent, guardian, or other person shall
make application on behalf of the child for medical assistance
under such plan by not later than the last day of the month
following the month during which the determination is made,
which application may be the application used for the receipt
of medical assistance by individuals described in section
1902(l)(1).
``(d) Notwithstanding any other provision of this title,
medical assistance for items and services described in
subsection (a) that--
``(1) are furnished to a child--
``(A) during a presumptive eligibility
period,
``(B) by a entity that is eligible for
payments under the State plan; and
``(2) are included in the care and services covered
by a State plan;
shall be treated as medical assistance provided by such plan
for purposes of section 1903.''.
(b) Conforming Amendments.--(1) Section 1902(a)(47) of such
Act (42 U.S.C. 1396a(a)(47)) is amended by inserting before the
semicolon at the end the following: ``and provide for making
subsection (a) of section 1920A available to children during a
presumptive eligibility period in accordance with such
section''.
(2) Section 1903(u)(1)(D)(v) of such Act (42 U.S.C.
1396b(u)(1)(D)(v)) of such Act is amended by inserting before
the period at the end the following: ``or for items and
services described in subsection (a) of section 1920A provided
to a child during a presumptive eligibility period under such
TITLE IV--COMMITTEE ON COMMERCE--MEDICARE
SEC. 4000. AMENDMENTS TO SOCIAL SECURITY ACT AND REFERENCES TO OBRA;
TABLE OF CONTENTS OF TITLE.
(a) Amendments to Social Security Act.--Except as otherwise
specifically provided, whenever in this title an amendment is
expressed in terms of an amendment to or repeal of a section or
other provision, the reference shall be considered to be made
to that section or other provision of the Social Security Act.
(b) References to OBRA.--In this title, the terms ``OBRA-
1986'', ``OBRA-1987'', ``OBRA-1989'', ``OBRA-1990'', and
``OBRA-1993'' refer to the Omnibus Budget Reconciliation Act of
1986 (Public Law 99-509), the Omnibus Budget Reconciliation Act
of 1987 (Public Law 100-203), the Omnibus Budget Reconciliation
Act of 1989 (Public Law 101-239), the Omnibus Budget
Reconciliation Act of 1990 (Public Law 101-508), and the
Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66),
(c) Table of Contents of Title.--The table of contents of
this title is as follows:
Subtitle A--MedicarePlus Program
Chapter 1--MedicarePlus Program
SUBCHAPTER A--MEDICAREPLUS PROGRAM
Sec. 4001. Establishment of MedicarePlus program.
``Part C--MedicarePlus Program
``Sec. 1851. Eligibility, election, and enrollment.
``Sec. 1852. Benefits and beneficiary protections.
``Sec. 1853. Payments to MedicarePlus organizations.
``Sec. 1854. Premiums.
``Sec. 1855. Organizational and financial requirements for
MedicarePlus organizations; provider-sponsored
``Sec. 1856. Establishment of standards.
``Sec. 1857. Contracts with MedicarePlus organizations.
``Sec. 1859. Definitions; miscellaneous provisions.
Sec. 4002. Transitional rules for current medicare HMO program.
Sec. 4003. Conforming changes in medigap program.
SUBCHAPTER B--SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS ACCOUNTS
Sec. 4006. MedicarePlus MSA.
SUBCHAPTER C--GME, IME, AND DSH PAYMENTS FOR MANAGED CARE ENROLLEES
Sec. 4008. Graduate medical education and indirect medical education
payments for managed care enrollees.
Sec. 4009. Disproportionate share hospital payments for managed care
enrollees.
Chapter 2--Integrated Long-term Care Programs
SUBCHAPTER A--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)
Sec. 4011. Reference to coverage of PACE under the medicare program.
Sec. 4012. Reference to establishment of PACE program as medicaid State
option.
SUBCHAPTER B--SOCIAL HEALTH MAINTENANCE ORGANIZATIONS (SHMOS)
Sec. 4015. Social health maintenance organizations (SHMOs).
SUBCHAPTER C--OTHER PROGRAMS
Sec. 4018. Orderly transition of municipal health service demonstration
Sec. 4019. Extension of certain medicare community nursing organization
demonstration projects.
Chapter 3--Medicare Payment Advisory Commission
Sec. 4021. Medicare Payment Advisory Commission.
Chapter 4--Medigap Protections
Sec. 4031. Medigap protections.
Sec. 4032. Medicare prepaid competitive pricing demonstration project.
Subtitle B--Prevention Initiatives
Sec. 4101. Screening mammography.
Sec. 4102. Screening pap smear and pelvic exams.
Sec. 4103. Prostate cancer screening tests.
Sec. 4104. Coverage of colorectal screening.
Sec. 4105. Diabetes screening tests.
Sec. 4106. Standardization of medicare coverage of bone mass
Sec. 4107. Vaccines outreach expansion.
Sec. 4108. Study on preventive benefits.
Subtitle C--Rural Initiatives
Sec. 4206. Informatics, telemedicine, and education demonstration
Subtitle D--Anti-Fraud and Abuse Provisions
Sec. 4301. Permanent exclusion for those convicted of 3 health care
related crimes.
Sec. 4302. Authority to refuse to enter into medicare agreements with
individuals or entities convicted of felonies.
Sec. 4303. Inclusion of toll-free number to report medicare waste,
fraud, and abuse in explanation of benefits forms.
Sec. 4304. Liability of medicare carriers and fiscal intermediaries for
claims submitted by excluded providers.
Sec. 4305. Exclusion of entity controlled by family member of a
sanctioned individual.
Sec. 4306. Imposition of civil money penalties.
Sec. 4307. Disclosure of information and surety bonds.
Sec. 4308. Provision of certain identification numbers.
Sec. 4309. Advisory opinions regarding certain physician self-referral
Sec. 4310. Nondiscrimination in post-hospital referral to home health
Sec. 4311. Other fraud and abuse related provisions.
Subtitle E--Prospective Payment Systems
Chapter 2--Payment Under Part B
SUBCHAPTER A--PAYMENT FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES
Sec. 4411. Elimination of formula-driven overpayments (FDO) for certain
outpatient hospital services.
Sec. 4412. Extension of reductions in payments for costs of hospital
outpatient services.
Sec. 4413. Prospective payment system for hospital outpatient department
SUBCHAPTER B--REHABILITATION SERVICES
Sec. 4421. Rehabilitation agencies and services.
Sec. 4422. Comprehensive outpatient rehabilitation facilities (corf).
SUBCHAPTER C--AMBULANCE SERVICES
Sec. 4431. Payments for ambulance services.
Sec. 4432. Demonstration of coverage of ambulance services under
medicare through contracts with units of local government.
Chapter 3--Payment Under Parts A and B
Sec. 4441. Prospective payment for home health services.
Subtitle G--Provisions Relating to Part B Only
Chapter 1--Physicians' Services
Sec. 4601. Establishment of single conversion factor for 1998.
Sec. 4602. Establishing update to conversion factor to match spending
under sustainable growth rate.
Sec. 4603. Replacement of volume performance standard with sustainable
growth rate.
Sec. 4604. Payment rules for anesthesia services.
Sec. 4605. Implementation of resource-based physician practice expense.
Sec. 4606. Dissemination of information on high per admission relative
values for in-hospital physicians' services.
Sec. 4607. No X-ray required for chiropractic services.
Sec. 4608. Temporary coverage restoration for portable electrocardiogram
transportation.
Chapter 2--Other Payment Provisions
Sec. 4611. Payments for durable medical equipment.
Sec. 4612. Oxygen and oxygen equipment.
Sec. 4613. Reduction in updates to payment amounts for clinical
diagnostic laboratory tests.
Sec. 4614. Simplification in administration of laboratory services
Sec. 4615. Updates for ambulatory surgical services.
Sec. 4616. Reimbursement for drugs and biologicals.
Sec. 4617. Coverage of oral anti-nausea drugs under chemotherapeutic
regimen.
Sec. 4618. Rural health clinic services.
Sec. 4619. Increased medicare reimbursement for nurse practitioners and
clinical nurse specialists.
Sec. 4620. Increased medicare reimbursement for physician assistants.
Sec. 4621. Renal dialysis-related services.
Sec. 4622. Payment for cochlear implants as customized durable medical
Chapter 3--Part B Premium
Sec. 4631. Part B premium.
Subtitle H--Provisions Relating to Parts A and B
Chapter 1--Provisions Relating to Medicare Secondary Payer
Sec. 4701. Permanent extension and revision of certain secondary payer
Sec. 4702. Clarification of time and filing limitations.
Sec. 4703. Permitting recovery against third party administrators.
Chapter 2--Home Health Services
Sec. 4711. Recapturing savings resulting from temporary freeze on
payment increases for home health services.
Sec. 4712. Interim payments for home health services.
Sec. 4713. Clarification of part-time or intermittent nursing care.
Sec. 4714. Study of definition of homebound.
Sec. 4715. Payment based on location where home health service is
furnished.
Sec. 4716. Normative standards for home health claims denials,
Sec. 4717. No home health benefits based solely on drawing blood.
Sec. 4718. Making part B primary payor for certain home health services.
Chapter 3--Baby Boom Generation Medicare Commission
Sec. 4721. Bipartisan Commission on the Effect of the Baby Boom
Generation on the Medicare Program.
Chapter 4--Provisions Relating to Direct Graduate Medical Education
Sec. 4731. Limitation on payment based on number of residents and
implementation of rolling average FTE count.
Sec. 4732. Phased-in limitation on hospital overhead and supervisory
physician component of direct medical education costs.
Sec. 4733. Permitting payment to non-hospital providers.
Sec. 4734. Incentive payments under plans for voluntary reduction in
number of residents.
Sec. 4735. Demonstration project on use of consortia.
Sec. 4736. Recommendations on long-term payment policies regarding
financing teaching hospitals and graduate medical education.
Sec. 4737. Medicare special reimbursement rule for certain combined
residency programs.
Chapter 5--Other Provisions
Sec. 4741. Centers of excellence.
Sec. 4742. Medicare part B special enrollment period and waiver of part
B late enrollment penalty and medigap special open enrollment
period for certain military retirees and dependents.
Sec. 4743. Competitive bidding for certain items and services.
Subtitle I--Medical Liability Reform
Chapter 1--General Provisions
Sec. 4801. Federal reform of health care liability actions.
Sec. 4802. Definitions.
Sec. 4803. Effective date.
Chapter 2--Uniform Standards for Health Care Liability Actions
Sec. 4811. Statute of limitations.
Sec. 4812. Calculation and payment of damages.
Sec. 4813. Alternative dispute resolution.
(a) In General.--Title XVIII is amended by redesignating part
C as part D and by inserting after part B the following new
``eligibility, election, and enrollment
``Sec. 1851. (a) Choice of Medicare Benefits Through
MedicarePlus Plans.--
``(1) In general.--Subject to the provisions of this
section, each MedicarePlus eligible individual (as
defined in paragraph (3)) is entitled to elect to
receive benefits under this title--
``(A) through the medicare fee-for-service
program under parts A and B, or
``(B) through enrollment in a MedicarePlus
plan under this part.
``(2) Types of medicareplus plans that may be
available.--A MedicarePlus plan may be any of the
following types of plans of health insurance:
``(A) Coordinated care plans.--Coordinated
care plans which provide health care services,
including health maintenance organization plans
and preferred provider organization plans.
``(B) Plans offered by provider-sponsored
organization.--A MedicarePlus plan offered by a
provider-sponsored organization, as defined in
section 1855(e).
``(C) Combination of msa plan and
contributions to medicareplus msa.--An MSA
plan, as defined in section 1859(b)(2), and a
contribution into a MedicarePlus medical
savings account (MSA).
``(3) MedicarePlus eligible individual.--
``(A) In general.--In this title, subject to
subparagraph (B), the term `MedicarePlus
eligible individual' means an individual who is
entitled to benefits under part A and enrolled
under part B.
``(B) Special rule for end-stage renal
disease.--Such term shall not include an
individual medically determined to have end-
stage renal disease, except that an individual
who develops end-stage renal disease while
enrolled in a MedicarePlus plan may continue to
be enrolled in that plan.
``(b) Special Rules.--
``(1) Residence requirement.--
``(A) In general.--Except as the Secretary
may otherwise provide, an individual is
eligible to elect a MedicarePlus plan offered
by a MedicarePlus organization only if the
organization serves the geographic area in
which the individual resides.
``(B) Continuation of enrollment permitted.--
Pursuant to rules specified by the Secretary,
the Secretary shall provide that an individual
may continue enrollment in a plan,
notwithstanding that the individual no longer
resides in the service area of the plan, so
long as the plan provides benefits for
enrollees located in the area in which the
individual resides.
``(2) Special rule for certain individuals covered
under fehbp or eligible for veterans or military health
benefits, veterans .--
``(A) FEHBP.--An individual who is enrolled
in a health benefit plan under chapter 89 of
title 5, United States Code, is not eligible to
enroll in an MSA plan until such time as the
Director of the Office of Management and Budget
certifies to the Secretary that the Office of
Personnel Management has adopted policies which
will ensure that the enrollment of such
individuals in such plans will not result in
increased expenditures for the Federal
Government for health benefit plans under such
chapter.
``(B) VA and dod.--The Secretary may apply
rules similar to the rules described in
subparagraph (A) in the case of individuals who
are eligible for health care benefits under
chapter 55 of title 10, United States Code, or
under chapter 17 of title 38 of such Code.
``(3) Limitation on eligibility of qualified medicare
beneficiaries and other medicaid beneficiaries to
enroll in an MSA plan.--An individual who is a
qualified medicare beneficiary (as defined in section
1905(p)(1)), a qualified disabled and working
individual (described in section 1905(s)), an
individual described in section 1902(a)(10)(E)(iii), or
otherwise entitled to medicare cost-sharing under a
State plan under title XIX is not eligible to enroll in
an MSA plan.
``(4) Coverage under msa plans on a demonstration
basis.--
``(A) In general.--An individual is not
eligible to enroll in an MSA plan under this
part--
``(i) on or after January 1, 2003,
unless the enrollment is the
continuation of such an enrollment in
effect as of such date; or
``(ii) as of any date if the number
of such individuals so enrolled as of
such date has reached 500,000.
Under rules established by the Secretary, an
individual is not eligible to enroll (or
continue enrollment) in an MSA plan for a year
unless the individual provides assurances
satisfactory to the Secretary that the
individual will reside in the United States for
at least 183 days during the year.
``(B) Evaluation.--The Secretary shall
regularly evaluate the impact of permitting
enrollment in MSA plans under this part on
selection (including adverse selection), use of
preventive care, access to care, and the
financial status of the Trust Funds under this
``(C) Reports.--The Secretary shall submit to
Congress periodic reports on the numbers of
individuals enrolled in such plans and on the
evaluation being conducted under subparagraph
(B). The Secretary shall submit such a report,
by not later than March 1, 2002, on whether the
time limitation under subparagraph (A)(i)
should be extended or removed and whether to
change the numerical limitation under
subparagraph (A)(ii).
``(c) Process for Exercising Choice.--
``(1) In general.--The Secretary shall establish a
process through which elections described in subsection
(a) are made and changed, including the form and manner
in which such elections are made and changed. Such
elections shall be made or changed only during coverage
election periods specified under subsection (e) and
shall become effective as provided in subsection (f).
``(2) Coordination through medicareplus
organizations.--
``(A) Enrollment.--Such process shall permit
an individual who wishes to elect a
MedicarePlus plan offered by a MedicarePlus
organization to make such election through the
filing of an appropriate election form with the
``(B) Disenrollment.--Such process shall
permit an individual, who has elected a
organization and who wishes to terminate such
election, to terminate such election through
the filing of an appropriate election form with
``(3) Default.--
``(A) Initial election.--
``(i) In general.--Subject to clause
(ii), an individual who fails to make
an election during an initial election
period under subsection (e)(1) is
deemed to have chosen the medicare fee-
for-service program option.
``(ii) Seamless continuation of
coverage.--The Secretary may establish
procedures under which an individual
who is enrolled in a health plan (other
than MedicarePlus plan) offered by a
MedicarePlus organization at the time
of the initial election period and who
fails to elect to receive coverage
other than through the organization is
deemed to have elected the MedicarePlus
plan offered by the organization (or,
if the organization offers more than
one such plan, such plan or plans as
the Secretary identifies under such
procedures).
``(B) Continuing periods.--An individual who
has made (or is deemed to have made) an
election under this section is considered to
have continued to make such election until such
time as--
``(i) the individual changes the
election under this section, or
``(ii) a MedicarePlus plan is
discontinued, if the individual had
elected such plan at the time of the
discontinuation.
``(d) Providing Information To Promote Informed Choice.--
``(1) In general.--The Secretary shall provide for
activities under this subsection to broadly disseminate
information to medicare beneficiaries (and prospective
medicare beneficiaries) on the coverage options
provided under this section in order to promote an
active, informed selection among such options.
``(2) Provision of notice.--
``(A) Open season notification.--At least 30
days before the beginning of each annual,
coordinated election period (as defined in
subsection (e)(3)(B)), the Secretary shall mail
to each MedicarePlus eligible individual
residing in an area the following:
``(i) General information.--The
general information described in
``(ii) List of plans and comparison
of plan options.--A list identifying
the MedicarePlus plans that are (or
will be) available to residents of the
area and information described in
paragraph (4) concerning such plans.
Such information shall be presented in
a comparative form.
``(iii) MedicarePlus monthly
capitation rate.--The amount of the
monthly MedicarePlus capitation rate
for the area.
``(iv) Additional information.--Any
other information that the Secretary
determines will assist the individual
in making the election under this
The mailing of such information shall be
coordinated with the mailing of any annual
notice under section 1804.
``(B) Notification to newly medicareplus
eligible individuals.--To the extent
practicable, the Secretary shall, not later
than 2 months before the beginning of the
initial MedicarePlus enrollment period for an
individual described in subsection (e)(1), mail
to the individual the information described in
``(C) Form.--The information disseminated
under this paragraph shall be written and
formatted using language that is easily
understandable by medicare beneficiaries.
``(D) Periodic updating.--The information
described in subparagraph (A) shall be updated
on at least an annual basis to reflect changes
in the availability of MedicarePlus plans and
the benefits and monthly premiums (and net
monthly premiums) for such plans.
``(3) General information.--General information under
this paragraph, with respect to coverage under this
part during a year, shall include the following:
``(A) Benefits under fee-for-service program
option.--A general description of the benefits
covered (and not covered) under the medicare
fee-for-service program under parts A and B,
``(i) covered items and services,
``(ii) beneficiary cost sharing, such
as deductibles, coinsurance, and
copayment amounts, and
``(iii) any beneficiary liability for
balance billing.
``(B) Part b premium.--The part B premium
rates that will be charged for part B coverage.
``(C) Election procedures.--Information and
instructions on how to exercise election
options under this section.
``(D) Rights.--The general description of
procedural rights (including grievance and
appeals procedures) of beneficiaries under the
medicare fee-for-service program and the
MedicarePlus program and right to be protected
against discrimination based on health status-
related factors under section 1852(b).
``(E) Information on medigap and medicare
select.--A general description of the benefits,
enrollment rights, and other requirements
applicable to medicare supplemental policies
under section 1882 and provisions relating to
medicare select policies described in section
1882(t).
``(F) Potential for contract termination.--
The fact that a MedicarePlus organization may
terminate or refuse to renew its contract under
this part and the effect the termination or
nonrenewal of its contract may have on
individuals enrolled with the MedicarePlus plan
under this part.
``(4) Information comparing plan options.--
Information under this paragraph, with respect to a
MedicarePlus plan for a year, shall include the
``(A) Benefits.--The benefits covered (and
not covered) under the plan, including--
``(i) covered items and services
beyond those provided under the
medicare fee-for-service program,
``(ii) any beneficiary cost sharing,
``(iii) any maximum limitations on
out-of-pocket expenses,
``(iv) in the case of an MSA plan,
differences in cost sharing under such
a plan compared to under other
MedicarePlus plans,
``(v) the use of provider networks
and the restriction on payments for
services furnished other than by other
through the organization,
``(vi) the organization's coverage of
emergency and urgently needed care,
``(vii) the appeal and grievance
rights of enrollees,
``(viii) number of grievances and
appeals, and information on their
disposition in the aggregate,
``(ix) procedures used by the
organization to control utilization of
services and expenditures, and
``(x) any exclusions in the types of
providers participating in the plan's
``(B) Premiums.--The monthly premium (and net
monthly premium), if any, for the plan.
``(C) Service area.--The service area of the
plan.
``(D) Quality and performance.--To the extent
available, plan quality and performance
indicators for the benefits under the plan (and
how they compare to such indicators under the
medicare fee-for-service program under parts A
and B in the area involved), including--
``(i) disenrollment rates for
medicare enrollees electing to receive
benefits through the plan for the
previous 2 years (excluding
disenrollment due to death or moving
outside the plan's service area),
``(ii) information on medicare
enrollee satisfaction,
``(iii) information on health
outcomes, and
``(iv) the recent record regarding
compliance of the plan with
requirements of this part (as
determined by the Secretary).
``(E) Supplemental benefits options.--Whether
the organization offering the plan offers
optional supplemental benefits and the terms
and conditions (including premiums) for such
``(5) Maintaining a toll-free number and internet
site.--The Secretary shall maintain a toll-free number
for inquiries regarding MedicarePlus options and the
operation of this part in all areas in which
MedicarePlus plans are offered and an Internet site
through which individuals may electronically obtain
information on such options and MedicarePlus plans.
``(6) Use of nonfederal entities.--The Secretary may
enter into contracts with non-Federal entities to carry
out activities under this subsection.
``(7) Provision of information.--A MedicarePlus
organization shall provide the Secretary with such
information on the organization and each MedicarePlus
plan it offers as may be required for the preparation
of the information referred to in paragraph (2)(A).
``(e) Coverage Election Periods.--
``(1) Initial choice upon eligibility to make
election if medicareplus plans available to
individual.--If, at the time an individual first
becomes entitled to benefits under part A and enrolled
under part B, there is one or more MedicarePlus plans
offered in the area in which the individual resides,
the individual shall make the election under this
section during a period (of a duration and beginning at
a time specified by the Secretary) at such time. Such
period shall be specified in a manner so that, in the
case of an individual who elects a MedicarePlus plan
during the period, coverage under the plan becomes
effective as of the first date on which the individual
may receive such coverage.
``(2) Open enrollment and disenrollment
opportunities.--Subject to paragraph (5)--
``(A) Continuous open enrollment and
disenrollment through 2000.--At any time during
1998, 1999, and 2000, a MedicarePlus eligible
individual may change the election under
subsection (a)(1).
``(B) Continuous open enrollment and
disenrollment for first 6 months during 2001.--
(ii), at any time during the first 6
months of 2001, or, if the individual
first becomes a MedicarePlus eligible
individual during 2001, during the
first 6 months during 2001 in which the
individual is a MedicarePluseligible
individual may change the election under subsection (a)(1).
``(ii) Limitation of one change per
year.--An individual may exercise the
right under clause (i) only once during
2001. The limitation under this clause
shall not apply to changes in elections
effected during an annual, coordinated
election period under paragraph (3) or
during a special enrollment period
under paragraph (4).
``(C) Continuous open enrollment and
disenrollment for first 3 months in subsequent
years.--
months of a year after 2001, or, if the
individual first becomes a MedicarePlus
eligible individual during a year after
2001, during the first 3 months of such
year in which the individual is a
MedicarePlus eligible individual, a
MedicarePlus eligible individual may
change the election under subsection
(a)(1).
right under clause (i) only once a
year. The limitation under this clause
``(3) Annual, coordinated election period.--
``(A) In general.--Subject to paragraph (5),
each individual who is eligible to make an
election under this section may change such
election during an annual, coordinated election
``(B) Annual, coordinated election period.--
For purposes of this section, the term `annual,
coordinated election period' means, with
respect to a calendar year (beginning with
2001), the month of October before such year.
``(C) MedicarePlus health fairs.--In the
month of October of each year (beginning with
1998), the Secretary shall provide for a
nationally coordinated educational and
publicity campaign to inform MedicarePlus
eligible individuals about MedicarePlus plans
and the election process provided under this
``(4) Special election periods.--Effective as of
January 1, 2001, an individual may discontinue an
election of a MedicarePlus plan offered by a
MedicarePlus organization other than during an annual,
coordinated election period and make a new election
under this section if--
``(A) the organization's or plan's
certification under this part has been
terminated or the organization has terminated
or otherwise discontinued providing the plan;
``(B) the individual is no longer eligible to
elect the plan because of a change in the
individual's place of residence or other change
in circumstances (specified by the Secretary,
but not including termination of the
individual's enrollment on the basis described
in clause (i) or (ii) of subsection (g)(3)(B));
``(C) the individual demonstrates (in
accordance with guidelines established by the
Secretary) that--
``(i) the organization offering the
plan substantially violated a material
provision of the organization's
contract under this part in relation to
the individual (including the failure
to provide an enrollee on a timely
basis medically necessary care for
which benefits are available under the
plan or the failure to provide such
covered care in accordance with
applicable quality standards); or
``(ii) the organization (or an agent
or other entity acting on the
organization's behalf) materially
misrepresented the plan's provisions in
marketing the plan to the individual;
``(D) the individual meets such other
exceptional conditions as the Secretary may
provide.
``(5) Special rules for msa plans.--Notwithstanding
the preceding provisions of this subsection, an
individual--
``(A) may elect an MSA plan only during--
``(i) an initial open enrollment
period described in paragraph (1),
``(ii) an annual, coordinated
election period described in paragraph
(3)(B), or
``(iii) the months of October 1998
and October 1999; and
``(B) may not discontinue an election of an
MSA plan except during the periods described in
clause (ii) or (iii) of subparagraph (A) and
``(f) Effectiveness of Elections and Changes of Elections.--
``(1) During initial coverage election period.--An
election of coverage made during the initial coverage
election period under subsection (e)(1) shall take
effect upon the date the individual becomes entitled to
benefits under part A and enrolled under part B, except
as the Secretary may provide (consistent with section
1838) in order to prevent retroactive coverage.
``(2) During continuous open enrollment periods.--An
election or change of coverage made under subsection
(e)(2) shall take effect with the first day of the
first calendar month following the date on which the
election is made.
``(3) Annual, coordinated election period.--An
election or change of coverage made during an annual,
coordinated election period (as defined in subsection
(e)(3)(B)) in a year shall take effect as of the first
day of the following year.
``(4) Other periods.--An election or change of
coverage made during any other period under subsection
(e)(4) shall take effect in such manner as the
Secretary provides in a manner consistent (to the
extent practicable) with protecting continuity of
health benefit coverage.
``(g) Guaranteed Issue and Renewal.--
``(1) In general.--Except as provided in this
subsection, a MedicarePlus organization shall provide
that at any time during which elections are accepted
under this section with respect to a MedicarePlus plan
offered by the organization, the organization will
accept without restrictions individuals who are
eligible to make such election.
``(2) Priority.--If the Secretary determines that a
MedicarePlus organization, in relation to a
MedicarePlus plan it offers, has a capacity limit and
the number of MedicarePlus eligible individuals who
elect the plan under this section exceeds the capacity
limit, the organization may limit the election of
individuals of the plan under this section but only if
priority in election is provided--
``(A) first to such individuals as have
elected the plan at the time of the
determination, and
``(B) then to other such individuals in such
a manner that does not discriminate, on a basis
described in section 1852(b), among the
individuals (who seek to elect the plan).
The preceding sentence shall not apply if it would
result in the enrollment of enrollees substantially
nonrepresentative, as determined in accordance with
regulations of the Secretary, of the medicare
population in the service area of the plan.
``(3) Limitation on termination of election.--
(B), a MedicarePlus organization may not for
any reason terminate the election of any
individual under this section for a
MedicarePlus plan it offers.
``(B) Basis for termination of election.--A
MedicarePlus organization may terminate an
individual's election under this section with
respect to a MedicarePlus plan it offers if--
``(i) any net monthly premiums
required with respect to such plan are
not paid on a timely basis (consistent
with standards under section 1856 that
provide for a grace period for late
payment of net monthly premiums),
``(ii) the individual has engaged in
disruptive behavior (as specified in
such standards), or
``(iii) the plan is terminated with
respect to all individuals under this
part in the area in which the
``(C) Consequence of termination.--
``(i) Terminations for cause.--Any
individual whose election is terminated
under clause (i) or (ii) of
subparagraph (B) is deemed to have
elected the medicare fee-for-service
program option described in subsection
(a)(1)(A).
``(ii) Termination based on plan
termination or service area
reduction.--Any individual whose
election is terminated under
subparagraph (B)(iii) shall have a
special election period under
subsection (e)(4)(A) in which to change
coverage to coverage under another
MedicarePlus plan. Such an individual
who fails to make an election during
such period is deemed to have chosen to
change coverage to the medicare fee-
for-service program option described in
subsection (a)(1)(A).
``(D) Organization obligation with respect to
election forms.--Pursuant to a contract under
section 1857, each MedicarePlus organization
receiving an election form under subsection
(c)(2) shall transmit to the Secretary (at such
time and in such manner as the Secretary may
specify) a copy of such form or such other
information respecting the election as the
Secretary may specify.
``(h) Approval of Marketing Material and Application Forms.--
``(1) Submission.--No marketing material or
application form may be distributed by a MedicarePlus
organization to (or for the use of) MedicarePlus
eligible individuals unless--
``(A) at least 45 days before the date of
distribution the organization has submitted the
material or form to the Secretary for review,
``(B) the Secretary has not disapproved the
distribution of such material or form.
``(2) Review.--The standards established under
section 1856 shall include guidelines for the review of
all such material or form submitted and under such
guidelines the Secretary shall disapprove (or later
require the correction of) such material or form if the
material or form is materially inaccurate or misleading
or otherwise makes a material misrepresentation.
``(3) Deemed approval (1-stop shopping).--In the case
of material or form that is submitted under paragraph
(1)(A) to the Secretary or a regional office of the
Department of Health and Human Services and the
Secretary or the office has not disapproved the
distribution of marketing material or form under
paragraph (1)(B) with respect to a MedicarePlus plan in
an area, the Secretary is deemed not to have
disapproved such distribution in all other areas
covered by the plan and organization except to the
extent that such material or form is specific only to
an area involved.
``(4) Prohibition of certain marketing practices.--
Each MedicarePlus organization shall conform to fair
marketing standards, in relation to MedicarePlus plans
offered under this part, included in the standards
established under section 1856. Such standards shall
include aprohibition against a MedicarePlus
organization (or agent of such an organization) completing any portion
of any election form used to carry out elections under this section on
behalf of any individual.
``(i) Effect of Election of MedicarePlus Plan Option.--
Subject to sections 1852(a)(5), 1857(f)(2), and 1857(g)--
``(1) payments under a contract with a MedicarePlus
organization under section 1853(a) with respect to an
individual electing a MedicarePlus plan offered by the
organization shall be instead of the amounts which (in
the absence of the contract) would otherwise be payable
under parts A and B for items and services furnished to
the individual, and
``(2) subject to subsections (e) and (f) of section
1853, only the MedicarePlus organization shall be
entitled to receive payments from the Secretary under
this title for services furnished to the individual.
``benefits and beneficiary protections
``Sec. 1852. (a) Basic Benefits.--
``(1) In general.--Except as provided in section
1859(b)(2) for MSA plans, each MedicarePlus plan shall
provide to members enrolled under this part, through
providers and other persons that meet the applicable
requirements of this title and part A of title XI--
``(A) those items and services for which
benefits are available under parts A and B to
individuals residing in the area served by the
``(B) additional benefits required under
section 1854(f)(1)(A).
``(2) Satisfaction of requirement.--A MedicarePlus
plan (other than an MSA plan) offered by a MedicarePlus
organization satisfies paragraph (1)(A), with respect
to benefits for items and services furnished other than
through a provider that has a contract with the
organization offering the plan, if the plan provides
(in addition to any cost sharing provided for under the
plan) for at least the total dollar amount of payment
for such items and services as would otherwise be
authorized under parts A and B (including any balance
billing permitted under such parts).
``(3) Supplemental benefits.--
``(A) Benefits included subject to
secretary's approval.--Each MedicarePlus
organization may provide to individuals
enrolled under this part (without affording
those individuals an option to decline the
coverage) supplemental health care benefits
that the Secretary may approve. The Secretary
shall approve any such supplemental benefits
unless the Secretary determines that including
such supplemental benefits would substantially
discourage enrollment by MedicarePlus eligible
individuals with the organization.
``(B) At enrollees' option.--A MedicarePlus
enrolled under this part (other than under an
MSA plan) supplemental health care benefits
that the individuals may elect, at their
option, to have covered.
``(4) Organization as secondary payer.--
Notwithstanding any other provision of law, a
MedicarePlus organization may (in the case of the
provision of items and services to an individual under
a MedicarePlus plan under circumstances in which
payment under this title is made secondary pursuant to
section 1862(b)(2)) charge or authorize the provider of
such services to charge, in accordance with the charges
allowed under such a law, plan, or policy--
``(A) the insurance carrier, employer, or
other entity which under such law, plan, or
policy is to pay for the provision of such
services, or
``(B) such individual to the extent that the
individual has been paid under such law, plan,
or policy for such services.
``(5) National coverage determinations.--If there is
a national coverage determination made in the period
beginning on the date of an announcement under section
1853(b) and ending on the date of the next announcement
under such section and the Secretary projects that the
determination will result in a significant change in
the costs to a MedicarePlus organization of providing
the benefits that are the subject of such national
coverage determination and that such change in costs
was not incorporated in the determination of the annual
MedicarePlus capitation rate under section 1853
included in the announcement made at the beginning of
such period--
``(A) such determination shall not apply to
contracts under this part until the first
contract year that begins after the end of such
period, and
``(B) if such coverage determination provides
for coverage of additional benefits or coverage
under additional circumstances, section 1851(i)
shall not apply to payment for such additional
benefits or benefits provided under such
additional circumstances until the first
unless otherwise required by law.
``(b) Antidiscrimination.--
``(1) In general.--A MedicarePlus organization may
not deny, limit, or condition the coverage or provision
of benefits under this part, for individuals permitted
to be enrolled with the organization under this part,
based on any health status-related factor described in
section 2702(a)(1) of the Public Health Service Act.
``(2) Construction.--Paragraph (1) shall not be
construed as requiring a MedicarePlus organization to
enroll individuals who are determined to have end-stage
renal disease, except as provided under section
1851(a)(3)(B).
``(c) Detailed Description of Plan Provisions.--A
MedicarePlus organization shall disclose, in clear, accurate,
andstandardized form to each enrollee with a MedicarePlus plan
offered by the organization under this part at the time of enrollment
and at least annually thereafter, the following information regarding
such plan:
``(1) Service area.--The plan's service area.
``(2) Benefits.--Benefits offered (and not offered)
under the plan offered, including information described
in section 1851(d)(3)(A) and exclusions from coverage
and, if it is an MSA plan, a comparison of benefits
under such a plan with benefits under other
MedicarePlus plans.
``(3) Access.--The number, mix, and distribution of
plan providers and any point-of-service option
(including the supplemental premium for such option).
``(4) Out-of-area coverage.--Out-of-area coverage
provided by the plan.
``(5) Emergency coverage.--Coverage of emergency
services and urgently needed care, including--
``(A) the appropriate use of emergency
services, including use of the 911 telephone
system or its local equivalent in emergency
situations and an explanation of what
constitutes an emergency situation;
``(B) the process and procedures of the plan
for obtaining emergency services; and
``(C) the locations of (i) emergency
departments, and (ii) other settings, in which
plan physicians and hospitals provide emergency
services and post-stabilization care..
``(6) Supplemental benefits.--Supplemental benefits
available from the organization offering the plan,
``(A) whether the supplemental benefits are
``(B) the supplemental benefits covered, and
``(C) the premium price for the supplemental
``(7) Prior authorization rules.--Rules regarding
prior authorization or other review requirements that
could result in nonpayment.
``(8) Plan grievance and appeals procedures.--Any
appeal or grievance rights and procedures.
``(9) Quality assurance program.--A description of
the organization's quality assurance program under
subsection (e).
``(d) Access to Services.--
``(1) In general.--A MedicarePlus organization
offering a MedicarePlus plan may select the providers
from whom the benefits under the plan are provided so
long as--
``(A) the organization makes such benefits
available and accessible to each individual
electing the plan within the plan service area
with reasonable promptness and in a manner
which assures continuity in the provision of
benefits;
``(B) when medically necessary in the opinion
of the treating health care provider the
organization makes such benefits available and
accessible 24 hours a day and 7 days a week;
``(C) the plan provides for reimbursement
with respect to services which are covered
under subparagraphs (A) and (B) and which are
provided to such an individual other than
through the organization, if--
``(i) the services were medically
necessary in the opinion of the
treating health care provider and
immediately required because of an
unforeseen illness, injury, or
condition, and it was not reasonable
given the circumstances to obtain the
services through the organization,
``(ii) the services were renal
dialysis services and were provided
other than through the organization
because the individual was temporarily
out of the plan's service area, or
``(iii) the services are maintenance
care or post-stabilization care covered
under the guidelines established under
paragraph (2);
``(D) the organization provides access to
appropriate providers, including credentialed
specialists, for treatment and services when
such treatment and services are determined to
be medically necessary in the professional
opinion of the treating health care provider,
in consultation with the individual; and
``(E) coverage is provided for emergency
services (as defined in paragraph (3)) without
regard to prior authorization or the emergency
care provider's contractual relationship with
``(2) Guidelines respecting coordination of post-
stabilization care.--A MedicarePlus plan shall comply
with such guidelines as the Secretary may prescribe
relating to promoting efficient and timely coordination
of appropriate maintenance and post-stabilization care
of an enrollee after the enrollee has been determined
to be stable under section 1867.
``(3) Definition of emergency services.--In this
subsection--
``(A) In general.--The term `emergency
services' means, with respect to an individual
enrolled with an organization, covered
inpatient and outpatient services that--
``(i) are furnished by a provider
that is qualified to furnish such
services under this title, and
``(ii) are needed to evaluate or
stabilize an emergency medical
condition (as defined in subparagraph
(B)).
``(B) Emergency medical condition based on
prudent layperson.--The term `emergency medical
condition' means a medical condition
manifesting itself by acute symptoms of
sufficient severity such that a prudent
layperson, who possesses an average knowledgeof
health and medicine, could reasonably expect the absence of immediate
``(i) placing the health of the
individual (or, with respect to a
pregnant woman, the health of the woman
or her unborn child) in serious
jeopardy,
``(ii) serious impairment to bodily
functions, or
``(iii) serious dysfunction of any
bodily organ or part.
``(4) Determination of hospital length of stay.--
``(A) In general.--A MedicarePlus
organization shall cover the length of an
inpatient hospital stay under this part as
determined by the attending physician (or other
attending health care provider to the extent
permitted under State law) in consultation with
the patient to be medically appropriate.
``(B) Construction.--Nothing in this
paragraph shall be construed--
``(i) as requiring the provision of
inpatient coverage if the attending
physician (or other attending health
care provider to the extent permitted
under State law) and patient determine
that a shorter period of hospital stay
is medically appropriate, or
``(ii) as affecting the application
of deductibles and coinsurance.
``(e) Quality Assurance Program.--
``(1) In general.--Each MedicarePlus organization
must have arrangements, consistent with any regulation,
for an ongoing quality assurance program for health
care services it provides to individuals enrolled with
MedicarePlus plans of the organization.
``(2) Elements of program.--The quality assurance
program shall--
``(A) stress health outcomes and provide for
the collection, analysis, and reporting of data
(in accordance with a quality measurement
system that the Secretary recognizes) that will
permit measurement of outcomes and other
indices of the quality of MedicarePlus plans
and organizations;
``(B) provide for the establishment of
written protocols for utilization review, based
on current standards of medical practice;
``(C) provide review by physicians and other
health care professionals of the process
followed in the provision of such health care
``(D) monitor and evaluate high volume and
high risk services and the care of acute and
chronic conditions;
``(E) evaluate the continuity and
coordination of care that enrollees receive;
``(F) have mechanisms to detect both
underutilization and overutilization of
``(G) after identifying areas for
improvement, establish or alter practice
parameters;
``(H) take action to improve quality and
assesses the effectiveness of such action
through systematic followup;
``(I) make available information on quality
and outcomes measures to facilitate beneficiary
comparison and choice of health coverage
options (in such form and on such quality and
outcomes measures as the Secretary determines
to be appropriate);
``(J) be evaluated on an ongoing basis as to
its effectiveness;
``(K) include measures of consumer
satisfaction; and
``(L) provide the Secretary with such access
to information collected as may be appropriate
to monitor and ensure the quality of care
provided under this part.
``(3) External review.--Each MedicarePlus
organization shall, for each MedicarePlus plan it
operates, have an agreement with an independent quality
review and improvement organization approved by the
Secretary to perform functions of the type described in
sections 1154(a)(4)(B) and 1154(a)(14) with respect to
services furnished by MedicarePlus plans for which
payment is made under this title.
``(4) Treatment of accreditation.--The Secretary
shall provide that a MedicarePlus organization is
deemed to meet requirements of paragraphs (1) through
(3) of this subsection and subsection (h) (relating to
confidentiality and accuracy of enrollee records) if
the organization is accredited (and periodically
reaccredited) by a private organization under a process
that the Secretary has determined assures that the
organization, as a condition of accreditation, applies
and enforces standards with respect to the requirements
involved that are no less stringent than the standards
established under section 1856 to carry out the
respective requirements.
``(f) Coverage Determinations.--
``(1) Decisions on nonemergency care.--A MedicarePlus
organization shall make determinations regarding
authorization requests for nonemergency care on a
timely basis, depending on the urgency of the
situation. The organization shall provide notice of any
coverage denial, which notice shall include a statement
of the reasons for the denial and a description of the
grievance and appeals processes available.
``(2) Reconsiderations.--
``(A) In general.--Subject to subsection
(g)(4), a reconsideration of a determination of
an organization denying coverage shall be made
within 30 days of the date of receipt of
medical information, but not later than 60 days
after the date of the determination.
``(B) Physician decision on certain
reconsiderations.--A reconsideration relating
to a determination to deny coverage based on a
lack of medicalnecessity shall be made only by
a physician with appropriate expertise in the field of medicine which
necessitates treatment who is other than a physician involved in the
initial determination.
``(g) Grievances and Appeals.--
``(1) Grievance mechanism.--Each MedicarePlus
organization must provide meaningful procedures for
organization (including any entity or individual
through which the organization provides health care
services) and enrollees with MedicarePlus plans of the
organization under this part.
``(2) Appeals.--An enrollee with a MedicarePlus plan
of a MedicarePlus organization under this part who is
dissatisfied by reason of the enrollee's failure to
receive any health service to which the enrollee
believes the enrollee is entitled and at no greater
charge than the enrollee believes the enrollee is
required to pay is entitled, if the amount in
controversy is $100 or more, to a hearing before the
Secretary to the same extent as is provided in section
205(b), and in any such hearing the Secretary shall
make the organization a party. If the amount in
controversy is $1,000 or more, the individual or
organization shall, upon notifying the other party, be
entitled to judicial review of the Secretary's final
decision as provided in section 205(g), and both the
individual and the organization shall be entitled to be
parties to that judicial review. In applying sections
205(b) and 205(g) as provided in this paragraph, and in
applying section 205(l) thereto, any reference therein
to the Commissioner of Social Security or the Social
Security Administration shall be considered a reference
to the Secretary or the Department of Health and Human
Services, respectively.
``(3) Independent review of coverage denials.--The
Secretary shall contract with an independent, outside
entity to review and resolve in a timely manner
reconsiderations that affirm denial of coverage.
``(4) Expedited determinations and
reconsiderations.--
``(A) Receipt of requests.--An enrollee in a
MedicarePlus plan may request, either in
writing or orally, an expedited determination
or reconsideration by the MedicarePlus
organization regarding a matter described in
paragraph (2). The organization shall also
permit the acceptance of such requests by
physicians.
``(B) Organization procedures.--
``(i) In general.--The MedicarePlus
organization shall maintain procedures
for expediting organization
determinations and reconsiderations
when, upon request of an enrollee, the
organization determines that the
application of normal time frames for
making a determination (or a
reconsideration involving a
determination) could seriously
jeopardize the life or health of the
enrollee or the enrollee's ability to
regain maximum function.
``(ii) Timely response.--In an urgent
case described in clause (i), the
organization shall notify the enrollee
(and the physician involved, as
appropriate) of the determination (or
determination on the reconsideration)
as expeditiously as the enrollee's
health condition requires, but not
later than 72 hours (or 24 hours in the
case of a reconsideration) of the time
of receipt of the request for the
determination or reconsideration (or
receipt of the information necessary to
make the determination or
reconsideration), or such longer period
as the Secretary may permit in
specified cases.
``(iii) Secretarial report.--The
Secretary shall annually report
publicly on the number and disposition
of denials and appeals within each
MedicarePlus organization, and those
reviewed and resolved by the
independent entities under this
subsection.
``(h) Confidentiality and Accuracy of Enrollee Records.--Each
MedicarePlus organization shall establish procedures--
``(1) to safeguard the privacy of individually
identifiable enrollee information,
``(2) to maintain accurate and timely medical records
and other health information for enrollees, and
``(3) to assure timely access of enrollees to their
medical information.
``(i) Information on Advance Directives.--Each MedicarePlus
organization shall meet the requirement of section 1866(f)
(relating to maintaining written policies and procedures
respecting advance directives).
``(j) Rules Regarding Physician Participation.--
``(1) Procedures.--Each MedicarePlus organization
shall establish reasonable procedures relating to the
participation (under an agreement between a physician
and the organization) of physicians under MedicarePlus
plans offered by the organization under this part. Such
procedures shall include--
``(A) providing notice of the rules regarding
``(B) providing written notice of
participation decisions that are adverse to
physicians, and
``(C) providing a process within the
organization for appealing such adverse
decisions, including the presentation of
information and views of the physician
regarding such decision.
``(2) Consultation in medical policies.--A
MedicarePlus organization shall consult with physicians
who have entered into participation agreements with the
organization regarding the organization's medical
policy, quality, and medical management procedures.
``(3) Prohibiting interference with provider advice
to enrollees.--
``(A) In general.--Subject to subparagraphs
(B) and (C), a MedicarePlus organization (in
relation to an individual enrolled under a
MedicarePlus plan offered by the organization
under this part) shall not prohibit or
otherwise restrict a covered health care
professional (as defined in subparagraph (D))
from advising such an individual who is a
patient of the professional about the health
status of the individual or medical care or
treatment for the individual's condition or
disease, regardless of whether benefits for
such care or treatment are provided under the
plan, if the professional is acting within the
lawful scope of practice.
``(B) Conscience protection.--Subparagraph
(A) shall not be construed as requiring a
MedicarePlus plan to provide, reimburse for, or
provide coverage of a counseling or referral
service if the MedicarePlus organization
offering the plan--
``(i) objects to the provision of
such service on moral or religious
grounds; and
``(ii) in the manner and through the
written instrumentalities such
MedicarePlus organization deems
appropriate, makes available
information on its policies regarding
such service to prospective enrollees
before or during enrollment and to
enrollees within 90 days after the date
that the organization or plan adopts a
change in policy regarding such a
counseling or referral service.
``(C) Construction.--Nothing in subparagraph
(B) shall be construed to affect disclosure
requirements under State law or under the
Employee Retirement Income Security Act of
``(D) Health care professional defined.--For
purposes of this paragraph, the term `health
care professional' means a physician (as
defined in section 1861(r)) or other health
care professional if coverage for the
professional's services is provided under the
MedicarePlus plan for the services of the
professional. Such term includes a podiatrist,
optometrist, chiropractor, psychologist,
dentist, physician assistant, physical or
occupational therapist and therapy assistant,
speech-language pathologist, audiologist,
registered or licensed practical nurse
(including nurse practitioner, clinical nurse
specialist, certified registered nurse
anesthetist, and certified nurse-midwife),
licensed certified social worker, registered
respiratory therapist, and certified
respiratory therapy technician.
``(4) Limitations on health care provider incentive
plans.--
``(A) In general.--No MedicarePlus
organization may operate any health care
provider incentive plan (as defined in
subparagraph (B)) unless the following
requirements are met:
``(i) No specific payment is made
directly or indirectly under the plan
to a health care provider or health
care provider group as an inducement to
reduce or limit medically necessary
services provided with respect to a
specific individual enrolled with the
``(ii) If the plan places a health
care provider or health care provider
group at substantial financial risk (as
determined by the Secretary) for
services not provided by the health
group, the organization--
``(I) provides stop-loss
protection for the health care
provider or group that is
adequate and appropriate, based
on standards developed by the
Secretary that take into
account the number of health
care providers placed at such
substantial financial risk in
the group or under the plan and
the number of individuals
enrolled with the organization
who receive services from the
health care provider or group,
``(II) conducts periodic
surveys of both individuals
enrolled and individuals
previously enrolled with the
organization to determine the
degree of access of such
individuals to services
provided by the organization
and satisfaction with the
quality of such services.
``(iii) The organization provides the
Secretary with descriptive information
regarding the plan, sufficient to
permit the Secretary to determine
whether the plan is in compliance with
the requirements of this subparagraph.
``(B) Health care provider incentive plan
defined.--In this paragraph, the term `health
care provider incentive plan' means any
compensation arrangement between a MedicarePlus
organization and a health care provider or
health care provider group that may directly or
indirectly have the effect of reducing or
limiting services provided with respect to
individuals enrolled with the organization
``(C) Health care provider defined.--For the
care provider' has the meaning given the term
`health care professional' in paragraph (3)(D).
``(5) Limitation on provider indemnification.--A
MedicarePlus organization may not provide (directly or
indirectly) for a provider (or group of providers) to
indemnify the organization against any liability
resulting from a civil action brought for any damage
caused to an enrollee with a MedicarePlus plan of the
organization under this part by the organization's
denial of medically necessary care.
``(6) Limitation on non-compete clause.--A
MedicarePlus organization may not (directly or
indirectly) seek to enforce any contractual provision
which prevents a provider whose contractual obligations
to the organization for the provision of services
through the organization have ended from joining or
forming any competing MedicarePlusorganization that is
a provider-sponsored organization in the same area.
``(k) Treatment of Services Furnished by Certain Providers.--
A physician or other entity (other than a provider of services)
that does not have a contract establishing payment amounts for
services furnished to an individual enrolled under this part
with a MedicarePlus organization shall accept as payment in
full for covered services under this title that are furnished
to such an individual the amounts that the physician or other
entity could collect if the individual were not so enrolled.
Any penalty or other provision of law that applies to such a
payment with respect to an individual entitled to benefits
under this title (but not enrolled with a MedicarePlus
organization under this part) also applies with respect to an
individual so enrolled.
``(l) Disclosure of Use of DSH and Teaching Hospitals.--Each
MedicarePlus organization shall provide the Secretary with
information on--
``(1) the extent to which the organization provides
inpatient and outpatient hospital benefits under this
``(A) through the use of hospitals that are
eligible for additional payments under section
1886(d)(5)(F)(i) (relating to so-called DSH
hospitals), or
``(B) through the use of teaching hospitals
that receive payments under section 1886(h);
``(2) the extent to which differences between payment
rates to different hospitals reflect the
disproportionate share percentage of low-income
patients and the presence of medical residency training
programs in those hospitals.
``(m) Out-of-Network Access.--If an organization offers to
members enrolled under this section one plan which provides for
coverage of services covered under parts A and B primarily
through providers and other persons who are members of a
network of providers and other persons who have entered into a
contract with the organization to provide such services,
nothing in this section shall be construed as preventing the
organization from offering such members (at the time of
enrollment) another plan which provides for coverage of such
items which are not furnished through such network providers.
``(n) Non-Preemption of State Law.--A State may establish or
enforce requirements with respect to beneficiary protections in
this section, but only if such requirements are more stringent
than the requirements established under this section.
``(o) Nondiscrimination in Selection of Network Health
Professionals.--
offering a MedicarePlus plan offering network coverage
shall not discriminate in selecting the members of its
health professional network (or in establishing the
terms and conditions for membership in such network) on
the basis of the race, national origin, gender, age, or
disability (other than a disability that impairs the
ability of an individual to provide health care
services or that may threaten the health of enrollees)
of the health professional.
``(2) Appropriate range of services.--A MedicarePlus
organization shall not deny any health care
professionals, based solely on the license or
certification as applicable under State law, the
ability to participate in providing covered health care
services, or be reimbursed or indemnified by a network
plan for providing such services under this part.
``(3) Definitions.--For purposes of this subsection:
``(A) Network.--The term `network' means,
with respect to a MedicarePlus organization
offering a MedicarePlus plan, the participating
health professionals and providers through whom
the organization provides health care items and
services to enrollees.
``(B) Network coverage.--The term `network
coverage' means a MedicarePlus plan offered by
a MedicarePlus organization that provides or
arranges for the provision of health care items
and services to enrollees through participating
health professionals and providers.
``(C) Participating.--The term
`participating' means, with respect to a health
professional or provider, a health professional
or provider that provides health care items and
services to enrollees under network coverage
under an agreement with the MedicarePlus
organization offering the coverage.
``(p) Special Rule for Unrestricted Fee-for-Service MSA
Plans.--Subsections (j)(1) and (k) shall not apply to a
MedicarePlus organization with respect to an MSA plan it offers
if the plan does not limit the providers through whom benefits
may be obtained under the plan.
``payments to medicareplus organizations
``Sec. 1853. (a) Payments to Organizations.--
``(1) Monthly payments.--
``(A) In general.--Under a contract under
section 1857 and subject to subsections (e) and
(f), the Secretary shall make monthly payments
under this section in advance to each
MedicarePlus organization, with respect to
coverage of an individual under this part in a
MedicarePlus payment area for a month, in an
amount equal to \1/12\ of the annual
MedicarePlus capitation rate (as calculated
under subsection (c)) with respect to that
individual for that area, adjusted for such
risk factors as age, disability status, gender,
institutional status, and such other factors as
the Secretary determines to be appropriate, so
as to ensure actuarial equivalence. The
Secretary may add to, modify, or substitute for
such factors, if such changes will improve the
determination of actuarial equivalence.
disease.--The Secretary shall establish
separate rates of payment to a MedicarePlus
organization with respect to classes of
individuals determined to have end-stage renal
disease and enrolled in a MedicarePlus plan
ofthe organization. Such rates of payment shall be actuarially
equivalent to rates paid to other enrollees in the MedicarePlus payment
area (or such other area as specified by the Secretary). In accordance
with regulations, the Secretary shall provide for the application of
the seventh sentence of section 1881(b)(7) to payments under this
section covering the provision of renal dialysis treatment in the same
manner as such sentence applies to composite rate payments described in
such sentence.
``(2) Adjustment to reflect number of enrollees.--
``(A) In general.--The amount of payment
under this subsection may be retroactively
adjusted to take into account any difference
between the actual number of individuals
enrolled with an organization under this part
and the number of such individuals estimated to
be so enrolled in determining the amount of the
advance payment.
``(B) Special rule for certain enrollees.--
(ii), the Secretary may make
retroactive adjustments under
subparagraph (A) to take into account
individuals enrolled during the period
beginning on the date on which the
individual enrolls with a MedicarePlus
organization under a plan operated,
sponsored, or contributed to by the
individual's employer or former
employer (or the employer or former
employer of the individual's spouse)
and ending on the date on which the
individual is enrolled in the
organization under this part, except
that for purposes of making such
retroactive adjustments under this
subparagraph, such period may not
exceed 90 days.
``(ii) Exception.--No adjustment may
be made under clause (i) with respect
to any individual who does not certify
that the organization provided the
individual with the information
required to be disclosed under section
1852(c) at the time the individual
enrolled with the organization.
``(3) Establishment of risk adjustment factors.--
``(A) Report.--The Secretary shall develop,
and submit to Congress by not later than
October 1, 1999, a report on a method of risk
adjustment of payment rates under this section
that accounts for variations in per capita
costs based on health status. Such report shall
include an evaluation of such method by an
outside, independent actuary of the actuarial
soundness of the proposal.
``(B) Data collection.--In order to carry out
this paragraph, the Secretary shall require
MedicarePlus organizations (and eligible
organizations with risk-sharing contracts under
section 1876) to submit, for periods beginning
on or after January 1, 1998, data regarding
inpatient hospital services and other services
and other information the Secretary deems
``(C) Initial implementation.--The Secretary
shall first provide for implementation of a
risk adjustment methodology that accounts for
variations in per capita costs based on health
status and other demographic factors for
payments by no later than January 1, 2000.
``(b) Annual Announcement of Payment Rates.--
``(1) Annual announcement.--The Secretary shall
annually determine, and shall announce (in a manner
intended to provide notice to interested parties) not
later than August 1 before the calendar year
concerned--
``(A) the annual MedicarePlus capitation rate
for each MedicarePlus payment area for the
year, and
``(B) the risk and other factors to be used
in adjusting such rates under subsection
(a)(1)(A) for payments for months in that year.
``(2) Advance notice of methodological changes.--At
least 45 days before making the announcement under
paragraph (1) for a year, the Secretary shall provide
for notice to MedicarePlus organizations of proposed
changes to be made in the methodology from the
methodology and assumptions used in the previous
announcement and shall provide such organizations an
opportunity to comment on such proposed changes.
``(3) Explanation of assumptions.--In each
announcement made under paragraph (1), the Secretary
shall include an explanation of the assumptions and
changes in methodology used in the announcement in
sufficient detail so that MedicarePlus organizations
can compute monthly adjusted MedicarePlus capitation
rates for individuals in each MedicarePlus payment area
which is in whole or in part within the service area of
such an organization.
``(c) Calculation of Annual MedicarePlus Capitation Rates.--
``(1) In General.--For purposes of this part, each
annual MedicarePlus capitation rate, for a MedicarePlus
payment area for a contract year consisting of a
calendar year, is equal to the largest of the amounts
specified in the following subparagraphs (A), (B), or
(C):
``(A) Blended capitation rate.--The sum of--
``(i) area-specific percentage for
the year (as specified under paragraph
(2) for the year) of the annual area-
specific MedicarePlus capitation rate
for the year for the MedicarePlus
payment area, as determined under
paragraph (3), and
``(ii) national percentage (as
specified under paragraph (2) for the
year) of the input-price-adjusted
annual national MedicarePlus capitation
rate for the year, as determined under
paragraph (4),
multiplied by the payment adjustment factors
described in subparagraphs (A) and (B) of
``(B) Minimum amount.--12 multiplied by the
following amount:
``(i) For 1998, $350 (but not to
exceed, in the case of an area outside
Columbia, 150 percent of the annual per
capita rate of payment for 1997
determined under section 1876(a)(1)(C)
for the area).
``(ii) For a succeeding year, the
minimum amount specified in this clause
(or clause (i)) for the preceding year
increased by the national per capita
MedicarePlus growth percentage,
specified under paragraph (6) for that
succeeding year.
``(C) Minimum percentage increase.--
``(i) For 1998, the annual per capita
rate of payment for 1997 determined
under section 1876(a)(1)(C) for the
MedicarePlus payment area.
``(ii) For 1999 and 2000, 101 percent
of the annual MedicarePlus capitation
rate under this paragraph for the area
for the previous year.
``(iii) For a subsequent year, 102
percent of the annual MedicarePlus
capitation rate under this paragraph
for the area for the previous year.
``(2) Area-specific and national percentages.--For
purposes of paragraph (1)(A)--
``(A) for 1998, the `area-specific
percentage' is 90 percent and the `national
percentage' is 10 percent,
``(B) for 1999, the `area-specific
``(C) for 2000, the `area-specific
``(D) for 2001, the `area-specific
percentage' is 25 percent, and
``(E) for a year after 2001, the `area-
specific percentage' is 70 percent and the
`national percentage' is 30 percent.
``(3) Annual area-specific medicareplus capitation
rate.--
(1)(A), subject to subparagraph (B), the annual
area-specific MedicarePlus capitation rate for
a MedicarePlus payment area--
``(i) for 1998 is the annual per
for the area, increased by the national
per capita MedicarePlus growth
percentage for 1998 (as defined in
paragraph (6)); or
``(ii) for a subsequent year is the
annual area-specific MedicarePlus
capitation rate for the previous year
determined under this paragraph for the
area, increased by the national per
capita MedicarePlus growth percentage
for such subsequent year.
``(B) Removal of medical education and
disproportionate share hospital payments from
calculation of adjusted average per capita
cost.--
``(i) In general.--In determining the
area-specific MedicarePlus capitation
rate under subparagraph (A), for a year
(beginning with 1998), the annual per
shall be adjusted to exclude from the
rate the applicable percent (specified
in clause (ii)) of the payment
adjustments described in subparagraph
(C).
``(ii) Applicable percent.--For
purposes of clause (i), the applicable
percent for--
``(I) 1998 is 20 percent,
``(II) 1999 is 40 percent,
``(III) 2000 is 60 percent,
``(IV) 2001 is 80 percent,
``(V) a succeeding year is
100 percent.
``(C) Payment adjustment.--The payment
adjustments described in this subparagraph are
payment adjustments which the Secretary
estimates were payable during 1997--
``(i) under section 1886(d)(5)(F) for
hospitals serving a disproportionate
share of low-income patients,
``(ii) for the indirect costs of
medical education under section
1886(d)(5)(B), and
``(iii) for direct graduate medical
education costs under section 1886(h),
multiplied by a ratio (estimated by the
Secretary) of total payments under subsection
(h) and section 1858 in 1998 to payments under
such subsection and payments under such section
in such year for hospitals not reimbursed under
section 1814(b)(3).
``(4) Input-price-adjusted annual national
medicareplus capitation rate.--
(1)(A), the input-price-adjusted annual
national MedicarePlus capitation rate for a
MedicarePlus payment area for a year is equal
to the sum, for all the types of medicare
services (as classified by the Secretary), of
the product (for each such type of service)
``(i) the national standardized
annual MedicarePlus capitation rate
(determined under subparagraph (B)) for
the year,
``(ii) the proportion of such rate
for the year which is attributable to
such type of services, and
``(iii) an index that reflects (for
that year and that type of services)
the relative input price ofsuch
services in the area compared to the national average input price of
such services.
In applying clause (iii), the Secretary shall,
subject to subparagraph (C), apply those
indices under this title that are used in
applying (or updating) national payment rates
for specific areas and localities.
``(B) National standardized annual
medicareplus capitation rate.--In subparagraph
(A)(i), the `national standardized annual
MedicarePlus capitation rate' for a year is
equal to--
``(i) the sum (for all MedicarePlus
payment areas) of the product of--
``(I) the annual area-
specific MedicarePlus
capitation rate for that year
for the area under paragraph
(3), and
``(II) the average number of
medicare beneficiaries residing
in that area in the year,
multiplied by the average of
the risk factor weights used to
adjust payments under
subsection (a)(1)(A) for such
beneficiaries in such area;
``(ii) the sum of the products
described in clause (i)(II) for all
areas for that year.
``(C) Special rules for 1998.--In applying
this paragraph for 1998--
``(i) medicare services shall be
divided into 2 types of services: part
A services and part B services;
``(ii) the proportions described in
subparagraph (A)(ii)--
``(I) for part A services
shall be the ratio (expressed
as a percentage) of the
national average annual per
capita rate of payment for part
A for 1997 to the total
capita rate of payment for
parts A and B for 1997, and
``(II) for part B services
shall be 100 percent minus the
ratio described in subclause
(I);
``(iii) for part A services, 70
percent of payments attributable to
such services shall be adjusted by the
index used under section 1886(d)(3)(E)
to adjust payment rates for relative
hospital wage levels for hospitals
located in the payment area involved;
``(iv) for part B services--
``(I) 66 percent of payments
attributable to such services
shall be adjusted by the index
of the geographic area factors
under section 1848(e) used to
adjust payment rates for
physicians' services furnished
in the payment area, and
``(II) of the remaining 34
percent of the amount of such
payments, 40 percent shall be
adjusted by the index described
in clause (iii); and
``(v) the index values shall be
computed based only on the beneficiary
population who are 65 years of age or
older and who are not determined to
have end stage renal disease.
The Secretary may continue to apply the rules
described in this subparagraph (or similar
rules) for 1999.
``(5) Payment adjustment budget neutrality factors.--
For purposes of paragraph (1)(A)--
``(A) Blended rate payment adjustment
factor.--For each year, the Secretary shall
compute a blended rate payment adjustment
factor such that, not taking into account
subparagraphs (B) and (C) of paragraph (1) and
the application of the payment adjustment
factor described in subparagraph (B) but taking
into account paragraph (7), the aggregate of
the payments that would be made under this part
is equal to the aggregate payments that would
have been made under this part (not taking into
account such subparagraphs and such other
adjustment factor) if the area-specific
percentage under paragraph (1) for the year had
been 100 percent and the national percentage
had been 0 percent.
``(B) Floor-and-minimum-update payment
adjustment factor.--For each year, the
Secretary shall compute a floor-and-minimum-
update payment adjustment factor so that,
taking into account the application of the
blended rate payment adjustment factor under
subparagraph (A) and subparagraphs (B) and (C)
of paragraph (1) and the application of the
adjustment factor under this subparagraph, the
aggregate of the payments under this part shall
not exceed the aggregate payments that would
have been made under this part if subparagraphs
(B) and (C) of paragraph (1) did not apply and
if the floor-and-minimum-update payment
adjustment factor under this subparagraph was
``(6) National per capita medicareplus growth
percentage defined.--
``(A) In general.--In this part, the
`national per capita MedicarePlus growth
percentage' for a year is the percentage
determined by the Secretary, by April 30th
before the beginning of the year involved, to
reflect the Secretary's estimate of the
projected per capita rate of growth in
expenditures under this title for an individual
under part B, reduced by the number of
percentage points specified in subparagraph (B)
for the year. Separate determinations may be
made for aged enrollees, disabled enrollees,
and enrollees with end-stage renal disease.
Such percentage shall include an adjustment for
over or under projection in the growth
percentage for previous years.
``(B) Adjustment.--The number of percentage
points specified in this subparagraph is--
``(i) for 1998, 0.5 percentage
``(ii) for 1999, 0.5 percentage
``(iii) for 2000, 0.5 percentage
``(iv) for 2001, 0.5 percentage
``(v) for 2002, 0.5 percentage
points, and
``(vi) for a year after 2002, 0
percentage points.
``(7) treatment of areas with highly variable payment
rates.--In the case of a MedicarePlus payment area for
which the annual per capita rate of payment determined
under section 1876(a)(1)(C) for 1997 varies by more
than 20 percent from such rate for 1996, for purposes
of this subsection the Secretary may substitute for
such rate for 1997 a rate that is more representative
of the costs of the enrollees in the area.
``(d) MedicarePlus Payment Area Defined.--
``(1) In general.--In this part, except as provided
in paragraph (3), the term `MedicarePlus payment area'
means a county, or equivalent area specified by the
``(2) Rule for esrd beneficiaries.--In the case of
individuals who are determined to have end stage renal
disease, the MedicarePlus payment area shall be a State
or such other payment area as the Secretary specifies.
``(3) Geographic adjustment.--
``(A) In general.--Upon written request of
the chief executive officer of a State for a
contract year (beginning after 1998) made at
least 7 months before the beginning of the
year, the Secretary shall make a geographic
adjustment to a MedicarePlus payment area in
the State otherwise determined under paragraph
(1)--
``(i) to a single statewide
MedicarePlus payment area,
``(ii) to the metropolitan based
system described in subparagraph (C),
``(iii) to consolidating into a
single MedicarePlus payment area
noncontiguous counties (or equivalent
areas described in paragraph (1))
within a State.
Such adjustment shall be effective for payments
for months beginning with January of the year
following the year in which the request is
``(B) Budget neutrality adjustment.--In the
case of a State requesting an adjustment under
this paragraph, the Secretary shall adjust the
payment rates otherwise established under this
section for MedicarePlus payment areas in the
State in a manner so that the aggregate of the
payments under this section in the State shall
have been made under this section for
MedicarePlus payment areas in the State in the
absence of the adjustment under this paragraph.
``(C) Metropolitan based system.--The
metropolitan based system described in this
subparagraph is one in which--
``(i) all the portions of each
metropolitan statistical area in the
State or in the case of a consolidated
metropolitan statistical area, all of
the portions of each primary
metropolitan statistical area within
the consolidated area within the State,
are treated as a single MedicarePlus
payment area, and
``(ii) all areas in the State that do
not fall within a metropolitan
statistical area are treated as a
single MedicarePlus payment area.
``(D) Areas.--In subparagraph (C), the terms
`metropolitan statistical area', `consolidated
metropolitan statistical area', and `primary
metropolitan statistical area' mean any area
designated as such by the Secretary of
Commerce.
``(e) Special Rules for Individuals Electing MSA Plans.--
``(1) In general.--If the amount of the monthly
premium for an MSA plan for a MedicarePlus payment area
for a year is less than \1/12\ of the annual
MedicarePlus capitation rate applied under this section
for the area and year involved, the Secretary shall
deposit an amount equal to 100 percent of such
difference in a MedicarePlus MSA established (and, if
applicable, designated) by the individual under
``(2) Establishment and designation of medicareplus
medical savings account as requirement for payment of
contribution.--In the case of an individual who has
elected coverage under an MSA plan, no payment shall be
made under paragraph (1) on behalf of an individual for
a month unless the individual--
``(A) has established before the beginning of
the month (or by such other deadline as the
Secretary may specify) a MedicarePlus MSA (as
defined in section 138(b)(2) of the Internal
Revenue Code of 1986), and
``(B) if the individual has established more
than one such MedicarePlus MSA, has designated
one of such accounts as the individual's
MedicarePlus MSA for purposes of this part.
Under rules under this section, such an individual may
change the designation of such account under
subparagraph (B) for purposes of this part.
``(3) Lump sum deposit of medical savings account
contribution.--In the case of an individual electing an
MSA plan effective beginning with a month in a year,
the amount of the contribution to the MedicarePlus MSA
on behalf of the individual for that month and all
successive months in the year shall be deposited during
that first month. In the case of a termination of such
an election as of a month before the end of a year, the
Secretary shall provide for a procedure for the
recovery of deposits attributable to the remaining
months in the year.
``(f) Payments From Trust Fund.--The payment to a
MedicarePlus organization under this section for individuals
enrolled under this part with the organization and payments to
a MedicarePlus MSA under subsection (e)(1) shall be made from
the Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund in such proportion
as the Secretary determines reflects the relative weight that
benefits under part A and under part B represents of the
actuarial value of the total benefits under this title. Monthly
payments otherwise payable under this section for October 2001
shall be paid on the last business day of September 2001.
``(g) Special Rule for Certain Inpatient Hospital Stays.--In
the case of an individual who is receiving inpatient hospital
services from a subsection (d) hospital (as defined in section
1886(d)(1)(B)) as of the effective date of the individual's--
``(1) election under this part of a MedicarePlus plan
offered by a MedicarePlus organization--
``(A) payment for such services until the
date of the individual's discharge shall be
made under this title through the MedicarePlus
plan or the medicare fee-for-service program
option described in section 1851(a)(1)(A) (as
the case may be) elected before the election
with such organization,
``(B) the elected organization shall not be
financially responsible for payment for such
services until the date after the date of the
individual's discharge, and
``(C) the organization shall nonetheless be
paid the full amount otherwise payable to the
organization under this part; or
``(2) termination of election with respect to a
MedicarePlus organization under this part--
``(A) the organization shall be financially
responsible for payment for such services after
such date and until the date of the
individual's discharge,
``(B) payment for such services during the
stay shall not be made under section 1886(d) or
by any succeeding MedicarePlus organization,
``(C) the terminated organization shall not
receive any payment with respect to the
individual under this part during the period
the individual is not enrolled.
``premiums
``Sec. 1854. (a) Submission and Charging of Premiums.--
``(1) In general.--Subject to paragraph (3), each
MedicarePlus organization shall file with the Secretary
each year, in a form and manner and at a time specified
by the Secretary--
``(A) the amount of the monthly premium for
coverage for services under section 1852(a)
under each MedicarePlus plan it offers under
this part in each MedicarePlus payment area (as
defined in section 1853(d)) in which the plan
is being offered; and
``(B) the enrollment capacity in relation to
the plan in each such area.
``(2) Terminology.--In this part--
``(A) the term `monthly premium' means, with
respect to a MedicarePlus plan offered by a
MedicarePlus organization, the monthly premium
filed under paragraph (1), not taking into
account the amount of any payment made toward
the premium under section 1853; and
``(B) the term `net monthly premium' means,
with respect to such a plan and an individual
enrolled with the plan, the premium (as defined
in subparagraph (A)) for the plan reduced by
the amount of payment made toward such premium
under section 1853.
``(b) Monthly Premium Charged.--The monthly amount of the
premium charged by a MedicarePlus organization for a
MedicarePlus plan offered in a MedicarePlus payment area to an
individual under this part shall be equal to the net monthly
premium plus any monthly premium charged in accordance with
subsection (e)(2) for supplemental benefits.
``(c) Uniform Premium.--The monthly premium and monthly
amount charged under subsection (b) of a MedicarePlus
organization under this part may not vary among individuals who
reside in the same MedicarePlus payment area.
``(d) Terms and Conditions of Imposing Premiums.--Each
MedicarePlus organization shall permit the payment of net
monthly premiums on a monthly basis and may terminate election
of individuals for a MedicarePlus plan for failure to make
premium payments only in accordance with section
1851(g)(3)(B)(i). A MedicarePlus organization is not authorized
to provide for cash or other monetary rebates as an inducement
for enrollment or otherwise.
``(e) Limitation on Enrollee Cost-Sharing.--
``(1) For basic and additional benefits.--Except as
provided in paragraph (2), in no event may--
``(A) the net monthly premium (multiplied by
12) and the actuarial value of the deductibles,
coinsurance, and copayments applicable on
average to individuals enrolled under this part
with a MedicarePlus plan of an organization
with respect to required benefits described in
section 1852(a)(1) and additional benefits (if
any) required under subsection (f)(1) for a
year, exceed
``(B) the actuarial value of the deductibles,
coinsurance, and copayments that would be
applicable on average to individuals entitled
to benefits under part A and enrolled under
part B if they were not members of a
MedicarePlus organization for the year.
``(2) For supplemental benefits.--If the MedicarePlus
organization provides to its members enrolled under
this part supplemental benefits described in section
1852(a)(3), the sum of the monthly premium rate
(multiplied by 12) charged for such supplemental
benefits and the actuarial value of its deductibles,
coinsurance, and copayments charged with respect to
such benefits may not exceed the adjusted community
rate for such benefits (as defined in subsection
(f)(4)).
``(3) Exception for msa plans.--Paragraphs (1) and
(2) do not apply to an MSA plan.
``(4) Determination on other basis.--If the Secretary
determines that adequate data are not available to
determine the actuarial value under paragraph (1)(A) or
(2), the Secretary may determine such amount with
respect to all individuals in the MedicarePlus payment
area, the State, or in the United States, eligible to
enroll in the MedicarePlus plan involved under this
part or on the basis of other appropriate data.
``(f) Requirement for Additional Benefits.--
``(A) In general.--Each MedicarePlus
organization (in relation to a MedicarePlus
plan it offers) shall provide that if there is
an excess amount (as defined in subparagraph
(B)) for the plan for a contract year, subject
to the succeeding provisions of this
subsection, the organization shall provide to
individuals such additional benefits (as the
organization may specify) in a value which is
at least equal to the adjusted excess amount
(as defined in subparagraph (C)).
``(B) Excess amount.--For purposes of this
paragraph, the `excess amount', for an
organization for a plan, is the amount (if any)
by which--
``(i) the average of the capitation
payments made to the organization under
section 1853 for the plan at the
beginning of contract year, exceeds
``(ii) the actuarial value of the
required benefits described in section
1852(a)(1) under the plan for
individuals under this part, as
determined based upon an adjusted
community rate described in paragraph
(4) (as reduced for the actuarial value
of the coinsurance and deductibles
under parts A and B).
``(C) Adjusted excess amount.--For purposes
of this paragraph, the `adjusted excess
amount', for an organization for a plan, is the
excess amount reduced to reflect any amount
withheld and reserved for the organization for
the year under paragraph (2).
``(D) No application to msa plans.--
Subparagraph (A) shall not apply to an MSA
``(E) Uniform application.--This paragraph
shall be applied uniformly for all enrollees
for a plan in a MedicarePlus payment area.
``(F) Construction.--Nothing in this
subsection shall be construed as preventing a
MedicarePlus organization from providing health
care benefits that are in addition to the
benefits otherwise required to be provided
under this paragraph and from imposing a
premium for such additional benefits.
``(2) Stabilization fund.--A MedicarePlus
organization may provide that a part of the value of an
excess amount described in paragraph (1) be withheld
and reserved in the Federal Hospital Insurance Trust
Fund and in the Federal Supplementary Medical Insurance
Trust Fund (in such proportions as the Secretary
determines to be appropriate) by the Secretary for
subsequent annual contract periods, to the extent
required to stabilize and prevent undue fluctuations in
the additional benefits offered in those subsequent
periods by the organization in accordance with such
paragraph. Any of such value of the amount reserved
which is not provided as additional benefits described
in paragraph (1)(A) to individuals electing the
MedicarePlus plan of the organization in accordance
with such paragraph prior to the end of such periods,
shall revert for the use of such trust funds.
``(3) Determination based on insufficient data.--For
purposes of this subsection, if the Secretary finds
that there is insufficient enrollment experience
(including no enrollment experience in the case of a
provider-sponsored organization) to determine an
average of the capitation payments to be made under
this part at the beginning of a contract period, the
Secretary may determine such an average based on the
enrollment experience of other contracts entered into
``(4) Adjusted community rate.--
subsection, subject to subparagraph (B), the
term `adjusted community rate' for a service or
services means, at the election of a
MedicarePlus organization, either--
``(i) the rate of payment for that
service or services which the Secretary
annually determines would apply to an
individual electing a MedicarePlus plan
under this part if the rate of payment
were determined under a `community
rating system' (as defined in section
1302(8) of the Public Health Service
Act, other than subparagraph (C)), or
``(ii) such portion of the weighted
aggregate premium, which the Secretary
annually estimates would apply to such
an individual, as the Secretary
annually estimates is attributable to
that service or services,
but adjusted for differences between the
utilization characteristics of the individuals
electing coverage under this part and the
utilization characteristics of the other
enrollees with the plan (or, if the Secretary
finds that adequate data are not available to
adjust for those differences, the differences
between the utilization characteristics of
individuals selecting other MedicarePlus
coverage, or MedicarePlus eligible individuals
in the area, in the State, or in the United
States, eligible to elect MedicarePlus coverage
under this part and the utilization
characteristics of the rest of the population
States, respectively).
``(B) Special rule for provider-sponsored
organizations.--In the case of a MedicarePlus
organization that is a provider-sponsored
organization, the adjusted community rate under
subparagraph (A) for a MedicarePlus plan of the
organization may be computed (in a manner
specified by the Secretary) using data in the
general commercial marketplace or (during a
transition period) based on the costs incurred
by the organization in providing such a plan.
``(g) Periodic Auditing.--The Secretary shall provide for the
annual auditing of the financial records (including data
relating to medicare utilization, costs, and computation of the
adjusted community rate) of at least one-third of the
MedicarePlus organizations offering MedicarePlus plans under
this part. The Comptroller General shall monitor auditing
activities conducted under this subsection.
``(h) Prohibition of State Imposition of Premium Taxes.--No
State may impose a premium tax or similar tax with respect to
premiums on MedicarePlus plans or the offering of such plans.
``organizational and financial requirements for medicareplus
organizations; provider-sponsored organizations
``Sec. 1855. (a) Organized and Licensed Under State Law.--
a MedicarePlus organization shall be organized and
licensed under State law as a risk-bearing entity
eligible to offer health insurance or health benefits
coverage in each State in which it offers a
MedicarePlus plan.
``(2) Special exception for provider-sponsored
``(A) In general.--In the case of a provider-
sponsored organization that seeks to offer a
MedicarePlus plan in a State, the Secretary
shall waive the requirement of paragraph (1)
that the organization be licensed in that State
``(i) the organization files an
application for such waiver with the
Secretary, and
``(ii) the Secretary determines,
based on the application and other
evidence presented to the Secretary,
that any of the grounds for approval of
the application described in
subparagraph (B), (C), or (D) has been
met.
``(B) Failure to act on licensure application
on a timely basis.--A ground for approval of
such a waiver application is that the State has
failed to complete action on a licensing
application of the organization within 90 days
of the date of the State's receipt of the
application. No period before the date of the
enactment of this section shall be included in
determining such 90-day period.
``(C) Denial of application based on
discriminatory treatment.--A ground for
approval of such a waiver application is that
the State has denied such a licensing
application and--
``(i) the State has imposed
documentation or information
requirements not related to solvency
requirements that are not generally
applicable to other entities engaged in
substantially similar business, or
``(ii) the standards or review
process imposed by the State as a
condition of approval of the license
imposes any material requirements,
procedures, or standards (other than
requirements and standards relating to
solvency) to such organizations that
are not generally applicable to other
entities engaged in substantially
similar business.
``(D) Denial of application based on
application of solvency requirements.--A ground
for approval of such a waiver application is
that the State has denied such a licensing
application based (in whole or in part) on the
organization's failure to meet applicable
solvency requirements and--
``(i) such requirements are not the
same as the solvency standards
established under section 1856(a); or
``(ii) the State has imposed as a
any documentation or information
requirements relating to solvency or
other material requirements,
procedures, or standards relating to
solvency that are different from the
requirements, procedures, and standards
applied by the Secretary under
subsection (d)(2).
For purposes of this subparagraph, the term
`solvency requirements' means requirements
relating to solvency and other matters covered
under the standards established under section
1856(a).
``(E) Treatment of waiver.--Subject to
section 1852(m), in the case of a waiver
granted under this paragraph for a provider-
sponsored organization--
``(i) the waiver shall be effective
for a 36-month period, except it may be
renewed based on a subsequent
application filed during the last 6
months of such period,
``(ii) the waiver is conditioned upon
the pendency of the licensure
application during the period the
waiver is in effect, and
``(iii) any provisions of State law
which relate to the licensing of the
organization and which prohibit the
organization from providing coverage
pursuant to a contract under this part
shall be superseded.
Nothing in this subparagraph shall be construed
as limiting the number of times such a waiver
may be renewed. Nothing in clause (iii) shall
be construed as waiving any provision of State
law which relates to quality of care or
consumer protection (and does not relate to
solvency standards) and which is imposed on a
uniform basis and is generally applicable to
other entities engaged in substantially similar
``(F) Prompt action on application.--The
Secretary shall grant or deny such a waiver
application within 60 days after the date the
Secretary determines that a substantially
complete application has been filed. Nothing in
this section shall be construed as preventing
an organization which has had such a waiver
application denied from submitting a subsequent
waiver application.
``(3) Exception if required to offer more than
medicareplus plans.--Paragraph (1) shall not apply to a
MedicarePlus organization in a State if the State
requires the organization, as a condition of licensure,
to offer any product or plan other than a MedicarePlus
``(4) Licensure does not substitute for or constitute
certification.--The fact that an organization is
licensed in accordance with paragraph (1) does not deem
the organization to meet other requirements imposed
``(b) Prepaid Payment.--A MedicarePlus organization shall be
compensated (except for premiums, deductibles, coinsurance, and
copayments) for the provision of health care services to
enrolled members under the contract under this part by a
payment which is paid on a periodic basis without regard to the
date the health care services are provided and which is fixed
without regard to the frequency, extent, or kind of health care
service actually provided to a member.
``(c) Assumption of Full Financial Risk.--The MedicarePlus
organization shall assume full financial risk on aprospective
basis for the provision of the health care services (except, at the
election of the organization, hospice care) for which benefits are
required to be provided under section 1852(a)(1), except that the
``(1) may obtain insurance or make other arrangements
for the cost of providing to any enrolled member such
services the aggregate value of which exceeds $5,000 in
any year,
for the cost of such services provided to its enrolled
members other than through the organization because
medical necessity required their provision before they
could be secured through the organization,
for not more than 90 percent of the amount by which its
costs for any of its fiscal years exceed 115 percent of
its income for such fiscal year, and
``(4) may make arrangements with physicians or other
health professionals, health care institutions, or any
combination of such individuals or institutions to
assume all or part of the financial risk on a
prospective basis for the provision of basic health
services by the physicians or other health
professionals or through the institutions.
``(d) Certification of Provision Against Risk of Insolvency
for Unlicensed PSOs.--
that is a provider-sponsored organization, that is not
licensed by a State under subsection (a), and for which
a waiver application has been approved under subsection
(a)(2), shall meet standards established under section
1856(a) relating to the financial solvency and capital
adequacy of the organization.
``(2) Certification process for solvency standards
for psos.--The Secretary shall establish a process for
the receipt and approval of applications of a provider-
sponsored organization described in paragraph (1) for
certification (and periodic recertification) of the
organization as meeting such solvency standards. Under
such process, the Secretary shall act upon such an
application not later than 60 days after the date the
application has been received.
``(e) Provider-Sponsored Organization Defined.--
``(1) In general.--In this part, the term `provider-
sponsored organization' means a public or private
entity--
``(A) that is established or organized by a
health care provider, or group of affiliated
health care providers,
``(B) that provides a substantial proportion
(as defined by the Secretary in accordance with
paragraph (2)) of the health care items and
services under the contract under this part
directly through the provider or affiliated
group of providers, and
``(C) with respect to which those affiliated
providers that share, directly or indirectly,
substantial financial risk with respect to the
provision of such items and services have at
least a majority financial interest in the
entity.
``(2) Substantial proportion.--In defining what is a
`substantial proportion' for purposes of paragraph
(1)(B), the Secretary--
``(A) shall take into account (i) the need
for such an organization to assume
responsibility for a substantial proportion of
services in order to assure financial stability
and (ii) the practical difficulties in such an
organization integrating a very wide range of
service providers; and
``(B) may vary such proportion based upon
relevant differences among organizations, such
as their location in an urban or rural area.
``(3) Affiliation.--For purposes of this subsection,
a provider is `affiliated' with another provider if,
through contract, ownership, or otherwise--
``(A) one provider, directly or indirectly,
controls, is controlled by, or is under common
control with the other,
``(B) both providers are part of a controlled
group of corporations under section 1563 of the
Internal Revenue Code of 1986, or
``(C) both providers are part of an
affiliated service group under section 414 of
such Code.
``(4) Control.--For purposes of paragraph (3),
control is presumed to exist if one party, directly or
indirectly, owns, controls, or holds the power to vote,
or proxies for, not less than 51 percent of the voting
rights or governance rights of another.
``(5) Health care provider defined.--In this
subsection, the term `health care provider' means--
``(A) any individual who is engaged in the
delivery of health care services in a State and
who is required by State law or regulation to
be licensed or certified by the State to engage
in the delivery of such services in the State,
``(B) any entity that is engaged in the
that, if it is required by State law or
regulation to be licensed or certified by the
State to engage in the delivery of such
services in the State, is so licensed.
``(6) Regulations.--The Secretary shall issue
regulations to carry out this subsection.
``establishment of standards
``Sec. 1856. (a) Establishment of Solvency Standards for
Provider-Sponsored Organizations.--
``(1) Establishment.--
``(A) In general.--The Secretary shall
establish, on an expedited basis and using a
negotiated rulemaking process under subchapter
III of chapter 5 of title 5, United States
Code, standards described in section 1855(d)(1)
(relating to the financial solvency andcapital
adequacy of the organization) that entities must meet to qualify as
provider-sponsored organizations under this part.
``(B) Factors to consider for solvency
standards.--In establishing solvency standards
under subparagraph (A) for provider-sponsored
organizations, the Secretary shall consult with
interested parties and shall take into
account--
``(i) the delivery system assets of
such an organization and ability of
such an organization to provide
services directly to enrollees through
affiliated providers, and
``(ii) alternative means of
protecting against insolvency,
including reinsurance, unrestricted
surplus, letters of credit, guarantees,
organizational insurance coverage,
partnerships with other licensed
entities, and valuation attributable to
the ability of such an organization to
meet its service obligations through
direct delivery of care.
``(C) Enrollee protection against
insolvency.--Such standards shall include
provisions to prevent enrollees from being held
liable to any person or entity for the
MedicarePlus organization's debts in the event
of the organization's insolvency.
``(2) Publication of notice.--In carrying out the
rulemaking process under this subsection, the
Secretary, after consultation with the National
Association of Insurance Commissioners, the American
Academy of Actuaries, organizations representative of
medicare beneficiaries, and other interested parties,
shall publish the notice provided for under section
564(a) of title 5, United States Code, by not later
than 45 days after the date of the enactment of this
``(3) Target date for publication of rule.--As part
of the notice under paragraph (2), and for purposes of
this subsection, the `target date for publication'
(referred to in section 564(a)(5) of such title) shall
be April 1, 1998.
``(4) Abbreviated period for submission of
comments.--In applying section 564(c) of such title
under this subsection, `15 days' shall be substituted
for `30 days'.
``(5) Appointment of negotiated rulemaking committee
and facilitator.--The Secretary shall provide for--
``(A) the appointment of a negotiated
rulemaking committee under section 565(a) of
such title by not later than 30 days after the
end of the comment period provided for under
section 564(c) of such title (as shortened
under paragraph (4)), and
``(B) the nomination of a facilitator under
section 566(c) of such title by not later than
10 days after the date of appointment of the
``(6) Preliminary committee report.--The negotiated
rulemaking committee appointed under paragraph (5)
shall report to the Secretary, by not later than
January 1, 1998, regarding the committee's progress on
achieving a consensus with regard to the rulemaking
proceeding and whether such consensus is likely to
occur before one month before the target date for
publication of the rule. If the committee reports that
the committee has failed to make significant progress
towards such consensus or is unlikely to reach such
consensus by the target date, the Secretary may
terminate such process and provide for the publication
of a rule under this subsection through such other
methods as the Secretary may provide.
``(7) Final committee report.--If the committee is
not terminated under paragraph (6), the rulemaking
committee shall submit a report containing a proposed
rule by not later than one month before the target date
``(8) Interim, final effect.--The Secretary shall
publish a rule under this subsection in the Federal
Register by not later than the target date of
publication. Such rule shall be effective and final
immediately on an interim basis, but is subject to
change and revision after public notice and opportunity
for a period (of not less than 60 days) for public
comment. In connection with such rule, the Secretary
shall specify the process for the timely review and
approval of applications of entities to be certified as
provider-sponsored organizations pursuant to such rules
and consistent with this subsection.
``(9) Publication of rule after public comment.--The
Secretary shall provide for consideration of such
comments and republication of such rule by not later
than 1 year after the target date of publication.
``(b) Establishment of Other Standards.--
``(1) In general.--The Secretary shall establish by
regulation other standards (not described in subsection
(a)) for MedicarePlus organizations and plans
consistent with, and to carry out, this part.
``(2) Use of current standards.--Consistent with the
requirements of this part, standards established under
this subsection shall be based on standards established
under section 1876 to carry out analogous provisions of
such section. The Secretary shall also consider State
model and other standards relating to consumer
protection and assuring quality of care.
``(3) Use of interim standards.--For the period in
which this part is in effect and standards are being
developed and established under the preceding
provisions of this subsection, the Secretary shall
provide by not later than June 1, 1998, for the
application of such interim standards (without regard
to any requirements for notice and public comment) as
may be appropriate to provide for the expedited
implementation of this part. Such interim standards
shall not apply after the date standards are
established under the preceding provisions of this
``(4) Application of new standards to entities with a
contract.--In the case of a MedicarePlus organization
with a contract in effect under this part at the time
standards applicable to the organization under this
section are changed, the organization may elect not to
have such changes apply to the organization until the
end of the current contract year (or, if there is less
than 6 months remaining in the contract year, until 1
year after the end of the current contract year).
``(5) Relation to state laws.--Subject to section
1852(m), the standards established under this
subsection shall supersede any State law or regulation
with respect to MedicarePlus plans which are offered by
MedicarePlus organizations under this part to the
extent such law or regulation is inconsistent with such
standards. The previous sentence shall not be construed
as superseding a State law or regulation that is not
related to solvency, that is applied on a uniform basis
and is generally applicable to other entities engaged
in substantially similar business, and that provides
consumer protections in addition to, or more stringent
than, those provided under the standards under this
``contracts with medicareplus organizations
``Sec. 1857. (a) In General.--The Secretary shall not permit
the election under section 1851 of a MedicarePlus plan offered
by a MedicarePlus organization under this part, and no payment
shall be made under section 1853 to an organization, unless the
Secretary has entered into a contract under this section with
the organization with respect to the offering of such plan.
Such a contract with an organization may cover more than one
MedicarePlus plan. Such contract shall provide that the
organization agrees to comply with the applicable requirements
and standards of this part and the terms and conditions of
payment as provided for in this part.
``(b) Minimum Enrollment Requirements.--
the Secretary may not enter into a contract under this
section with a MedicarePlus organization unless the
organization has at least 5,000 individuals (or 1,500
individuals in the case of an organization that is a
provider-sponsored organization) who are receiving
health benefits through the organization, except that
the standards under section 1856 may permit the
organization to have a lesser number of beneficiaries
(but not less than 500 in the case of an organization
that is a provider-sponsored organization) if the
organization primarily serves individuals residing
outside of urbanized areas.
``(2) Exception for msa plan.--Paragraph (1) shall
not apply with respect to a contract that relates only
to an MSA plan.
``(3) Allowing transition.--The Secretary may waive
the requirement of paragraph (1) during the first 3
contract years with respect to an organization.
``(c) Contract Period and Effectiveness.--
``(1) Period.--Each contract under this section shall
be for a term of at least one year, as determined by
the Secretary, and may be made automatically renewable
from term to term in the absence of notice by either
party of intention to terminate at the end of the
current term.
``(2) Termination authority.--In accordance with
procedures established under subsection (h), the
Secretary may at any time terminate any such contract
or may impose the intermediate sanctions described in
an applicable paragraph of subsection (g)(3) on the
MedicarePlus organization if the Secretary determines
that the organization--
``(A) has failed substantially to carry out
the contract;
``(B) is carrying out the contract in a
manner inconsistent with the efficient and
effective administration of this part; or
``(C) no longer substantially meets the
applicable conditions of this part.
``(3) Effective date of contracts.--The effective
date of any contract executed pursuant to this section
shall be specified in the contract, except that in no
case shall a contract under this section which provides
for coverage under an MSA plan be effective before
January 1998 with respect to such coverage.
``(4) Previous terminations.--The Secretary may not
enter into a contract with a MedicarePlus organization
if a previous contract with that organization under
this section was terminated at the request of the
organization within the preceding five-year period,
except in circumstances which warrant special
consideration, as determined by the Secretary.
``(5) Contracting authority.--The authority vested in
the Secretary by this part may be performed without
regard to such provisions of law or regulations
relating to the making, performance, amendment, or
modification of contracts of the United States as the
Secretary may determine to be inconsistent with the
furtherance of the purpose of this title.
``(d) Protections Against Fraud and Beneficiary
Protections.--
``(1) Inspection and audit.--Each contract under this
section shall provide that the Secretary, or any person
or organization designated by the Secretary--
``(A) shall have the right to inspect or
otherwise evaluate (i) the quality,
appropriateness, and timeliness of services
performed under the contract and (ii) the
facilities of the organization when there is
reasonable evidence of some need for such
inspection, and
``(B) shall have the right to audit and
inspect any books and records of the
MedicarePlus organization that pertain (i) to
the ability of the organization to bear the
risk of potential financial losses, or(ii) to
services performed or determinations of amounts payable under the
``(2) Enrollee notice at time of termination.--Each
contract under this section shall require the
organization to provide (and pay for) written notice in
advance of the contract's termination, as well as a
description of alternatives for obtaining benefits
under this title, to each individual enrolled with the
``(3) Disclosure.--
organization shall, in accordance with
regulations of the Secretary, report to the
Secretary financial information which shall
include the following:
``(i) Such information as the
Secretary may require demonstrating
that the organization has a fiscally
sound operation.
``(ii) A copy of the report, if any,
filed with the Health Care Financing
Administration containing the
information required to be reported
under section 1124 by disclosing
``(iii) A description of
transactions, as specified by the
Secretary, between the organization and
a party in interest. Such transactions
shall include--
``(I) any sale or exchange,
or leasing of any property
between the organization and a
party in interest;
``(II) any furnishing for
consideration of goods,
services (including management
services), or facilities
party in interest, but not
including salaries paid to
employees for services provided
in the normal course of their
employment and health services
provided to members by
hospitals and other providers
and by staff, medical group (or
groups), individual practice
association (or associations),
or any combination thereof; and
``(III) any lending of money
or other extension of credit
between an organization and a
party in interest.
The Secretary may require that information
reported respecting an organization which
control with, another entity be in the form of
a consolidated financial statement for the
organization and such entity.
``(B) Party in interest defined.--For the
purposes of this paragraph, the term `party in
interest' means--
``(i) any director, officer, partner,
or employee responsible for management
or administration of a MedicarePlus
organization, any person who is
directly or indirectly the beneficial
owner of more than 5 percent of the
equity of the organization, any person
who is the beneficial owner of a
mortgage, deed of trust, note, or other
interest secured by, and valuing more
than 5 percent of the organization,
and, in the case of a MedicarePlus
organization organized as a nonprofit
corporation, an incorporator or member
of such corporation under applicable
State corporation law;
``(ii) any entity in which a person
described in clause (i)--
``(I) is an officer or
director;
``(II) is a partner (if such
entity is organized as a
partnership);
``(III) has directly or
indirectly a beneficial
interest of more than 5 percent
of the equity; or
``(IV) has a mortgage, deed
of trust, note, or other
interest valuing more than 5
percent of the assets of such
entity;
``(iii) any person directly or
indirectly controlling, controlled by,
or under common control with an
organization; and
``(iv) any spouse, child, or parent
of an individual described in clause
(i).
``(C) Access to information.--Each
MedicarePlus organization shall make the
information reported pursuant to subparagraph
(A) available to its enrollees upon reasonable
request.
``(4) Loan information.--The contract shall require
the organization to notify the Secretary of loans and
other special financial arrangements which are made
between the organization and subcontractors,
affiliates, and related parties.
``(e) Additional Contract Terms.--
``(1) In general.--The contract shall contain such
other terms and conditions not inconsistent with this
part (including requiring the organization to provide
the Secretary with such information) as the Secretary
may find necessary and appropriate.
``(2) Cost-sharing in enrollment-related costs.--The
contract with a MedicarePlus organization shall require
the payment to the Secretary for the organization's pro
rata share (as determined by the Secretary) of the
estimated costs to be incurred by the Secretary in
carrying out section 1851 (relating to enrollment and
dissemination of information) and section 4360 of the
Omnibus Budget Reconciliation Act of 1990 (relating to
the health insurance counseling and assistance
program). Such payments are appropriated to defray the
costs described in the preceding sentence, to remain
available until expended.
``(3) Notice to enrollees in case of
decertification.--If a contract with a MedicarePlus
organization is terminated under this section, the
organization shall notify each enrollee with the
organization under this part of such termination.
``(f) Prompt Payment by MedicarePlus Organization.--
``(1) Requirement.--A contract under this part shall
require a MedicarePlus organization to provide prompt
payment (consistent with the provisions of sections
1816(c)(2) and 1842(c)(2)) of claims submitted for
services and supplies furnished to individuals pursuant
to the contract, if the services or supplies are not
furnished under a contract between the organization and
the provider or supplier.
``(2) Secretary's option to bypass noncomplying
organization.--In the case of a MedicarePlus eligible
organization which the Secretary determines, after
notice and opportunity for a hearing, has failed to
make payments of amounts in compliance with paragraph
(1), the Secretary may provide for direct payment of
the amounts owed to providers and suppliers for covered
services and supplies furnished to individuals enrolled
under this part under the contract. If the Secretary
provides for the direct payments, the Secretary shall
provide for an appropriate reduction in the amount of
payments otherwise made to the organization under this
part to reflect the amount of the Secretary's payments
(and the Secretary's costs in making the payments).
``(g) Intermediate Sanctions.--
``(1) In general.--If the Secretary determines that a
MedicarePlus organization with a contract under this
section--
``(A) fails substantially to provide
medically necessary items and services that are
required (under law or under the contract) to
be provided to an individual covered under the
contract, if the failure has adversely affected
(or has substantial likelihood of adversely
affecting) the individual;
``(B) imposes net monthly premiums on
individuals enrolled under this part in excess
of the net monthly premiums permitted;
``(C) acts to expel or to refuse to re-enroll
an individual in violation of the provisions of
this part;
``(D) engages in any practice that would
reasonably be expected to have the effect of
denying or discouraging enrollment (except as
permitted by this part) by eligible individuals
with the organization whose medical condition
or history indicates a need for substantial
future medical services;
``(E) misrepresents or falsifies information
that is furnished--
``(i) to the Secretary under this
part, or
``(ii) to an individual or to any
other entity under this part;
``(F) fails to comply with the requirements
of section 1852(j)(3); or
``(G) employs or contracts with any
individual or entity that is excluded from
participation under this title under section
1128 or 1128A for the provision of health care,
utilization review, medical social work, or
administrative services or employs or contracts
with any entity for the provision (directly or
indirectly) through such an excluded individual
or entity of such services;
the Secretary may provide, in addition to any other
remedies authorized by law, for any of the remedies
described in paragraph (2).
``(2) Remedies.--The remedies described in this
paragraph are--
``(A) civil money penalties of not more than
$25,000 for each determination under paragraph
(1) or, with respect to a determination under
subparagraph (D) or (E)(i) of such paragraph,
of not more than $100,000 for each such
determination, plus, with respect to a
determination under paragraph (1)(B), double
the excess amount charged in violation of such
paragraph (and the excess amount charged shall
be deducted from the penalty and returned to
the individual concerned), and plus, with
respect to a determination under paragraph
(1)(D), $15,000 for each individual not
enrolled as a result of the practice involved,
``(B) suspension of enrollment of individuals
under this part after the date the Secretary
notifies the organization of a determination
under paragraph (1) and until the Secretary is
satisfied that the basis for such determination
has been corrected and is not likely to recur,
``(C) suspension of payment to the
organization under this part for individuals
enrolled after the date the Secretary notifies
the organization of a determination under
paragraph (1) and until the Secretary is
has been corrected and is not likely to recur.
``(3) Other intermediate sanctions.--In the case of a
MedicarePlus organization for which the Secretary makes
a determination under subsection (c)(2) the basis of
which is not described in paragraph (1), the Secretary
may apply the following intermediate sanctions:
$25,000 for each determination under subsection
(c)(2) if the deficiency that is the basis of
the determination has directly adversely
affected (or has the substantial likelihood of
adversely affecting) an individual covered
under the organization's contract
``(B) Civil money penalties of not more than
$10,000 for each week beginning after the
initiation of procedures by the Secretary under
subsection (g) during which the deficiency that
is the basis of a determination under
subsection (c)(2) exists.
``(C) Suspension of enrollment of individuals
under subsection (c)(2) and until the Secretary
is satisfied that the deficiency thatis the
basis for the determination has been corrected and is not likely to
recur.
``(h) Procedures for Termination.--
``(1) In general.--The Secretary may terminate a
contract with a MedicarePlus organization under this
section in accordance with formal investigation and
compliance procedures established by the Secretary
under which--
``(A) the Secretary provides the organization
with the reasonable opportunity to develop and
implement a corrective action plan to correct
the deficiencies that were the basis of the
Secretary's determination under subsection
(c)(2);
``(B) the Secretary shall impose more severe
sanctions on an organization that has a history
of deficiencies or that has not taken steps to
correct deficiencies the Secretary has brought
to the organization's attention;
``(C) there are no unreasonable or
unnecessary delays between the finding of a
deficiency and the imposition of sanctions; and
``(D) the Secretary provides the organization
with reasonable notice and opportunity for
hearing (including the right to appeal an
initial decision) before terminating the
``(2) Civil money penalties.--The provisions of
section 1128A (other than subsections (a) and (b))
shall apply to a civil money penalty under subsection
(f) or under paragraph (2) or (3) of subsection (g) in
the same manner as they apply to a civil money penalty
or proceeding under section 1128A(a).
``(3) Exception for imminent and serious risk to
health.--Paragraph (1) shall not apply if the Secretary
determines that a delay in termination, resulting from
compliance with the procedures specified in such
paragraph prior to termination, would pose an imminent
and serious risk to the health of individuals enrolled
under this part with the organization.
``definitions; miscellaneous provisions
``Sec. 1859. (a) Definitions Relating to MedicarePlus
Organizations.--In this part--
``(1) MedicarePlus organization.--The term
`MedicarePlus organization' means a public or private
entity that is certified under section 1856 as meeting
the requirements and standards of this part for such an
``(2) Provider-sponsored organization.--The term
`provider-sponsored organization' is defined in section
1855(e)(1).
``(b) Definitions Relating to MedicarePlus Plans.--
``(1) MedicarePlus plan.--The term `MedicarePlus
plan' means health benefits coverage offered under a
policy, contract, or plan by a MedicarePlus
organization pursuant to and in accordance with a
contract under section 1857.
``(2) MSA plan.--
``(A) In general.--The term `MSA plan' means
a MedicarePlus plan that--
``(i) provides reimbursement for at
least the items and services described
in section 1852(a)(1) in a year but
only after the enrollee incurs
countable expenses (as specified under
the plan) equal to the amount of an
annual deductible (described in
subparagraph (B));
``(ii) counts as such expenses (for
purposes of such deductible) at least
all amounts that would have been
payable under parts A and B, and that
would have been payable by the enrollee
as deductibles, coinsurance, or
copayments, if the enrollee had elected
to receive benefits through the
provisions of such parts; and
``(iii) provides, after such
deductible is met for a year and for
all subsequent expenses for items and
services referred to in clause (i) in
the year, for a level of reimbursement
that is not less than--
``(I) 100 percent of such
expenses, or
``(II) 100 percent of the
amounts that would have been
paid (without regard to any
deductibles or coinsurance)
under parts A and B with
respect to such expenses,
whichever is less.
``(B) Deductible.--The amount of annual
deductible under an MSA plan--
``(i) for contract year 1999 shall be
not more than $6,000; and
``(ii) for a subsequent contract year
shall be not more than the maximum
amount of such deductible for the
previous contract year under this
subparagraph increased by the national
percentage under section 1853(c)(6) for
If the amount of the deductible under clause
(ii) is not a multiple of $50, the amount shall
be rounded to the nearest multiple of $50.
``(c) Other References to Other Terms.--
``(1) MedicarePlus eligible individual.--The term
`MedicarePlus eligible individual' is defined in
section 1851(a)(3).
``(2) MedicarePlus payment area.--The term
`MedicarePlus payment area' is defined in section
1853(d).
percentage.--The `national per capita MedicarePlus
growth percentage' is defined in section 1853(c)(6).
``(4) Monthly premium; net monthly premium.--The
terms `monthly premium' and `net monthly premium' are
defined in section 1854(a)(2).
``(d) Coordinated Acute and Long-term Care Benefits Under a
MedicarePlus Plan.--Nothing in this part shall be construed as
preventing a State from coordinating benefits under a medicaid
plan under title XIX with those provided under a MedicarePlus
plan in a manner that assures continuity of a full-range of
acute care and long-term care services to poor elderly or
disabled individuals eligible for benefits under this title and
under such plan.
``(e) Restriction on Enrollment for Certain MedicarePlus
``(1) In general.--In the case of a MedicarePlus
religious fraternal benefit society plan described in
paragraph (2), notwithstanding any other provision of
this part to the contrary and in accordance with
regulations of the Secretary, the society offering the
plan may restrict the enrollment of individuals under
this part to individuals who are members of the church,
convention, or group described in paragraph (3)(B) with
which the society is affiliated.
``(2) Medicareplus religious fraternal benefit
society plan described.--For purposes of this
subsection, a MedicarePlus religious fraternal benefit
society plan described in this paragraph is a
MedicarePlus plan described in section 1851(a)(2)(A)
``(A) is offered by a religious fraternal
benefit society described in paragraph (3) only
to members of the church, convention, or group
described in paragraph (3)(B); and
``(B) permits all such members to enroll
under the plan without regard to health status-
related factors.
Nothing in this subsection shall be construed as
waiving any plan requirements relating to financial
solvency. In developing solvency standards under
section 1856, the Secretary shall take into account
open contract and assessment features characteristic of
fraternal insurance certificates.
``(3) Religious fraternal benefit society defined.--
For purposes of paragraph (2)(A), a `religious
fraternal benefit society' described in this section is
an organization that--
``(A) is exempt from Federal income taxation
under section 501(c)(8) of the Internal Revenue
Code of 1986;
``(B) is affiliated with, carries out the
tenets of, and shares a religious bond with, a
church or convention or association of churches
or an affiliated group of churches;
``(C) offers, in addition to a MedicarePlus
religious fraternal benefit society plan,
health coverage to individuals not entitled to
benefits under this title who are members of
such church, convention, or group; and
``(D) does not impose any limitation on
membership in the society based on any health
status-related factor.
``(4) Payment adjustment.--Under regulations of the
Secretary, in the case of individuals enrolled under
this part under a MedicarePlus religious fraternal
benefit society plan described in paragraph (2), the
Secretary shall provide for such adjustment to the
payment amounts otherwise established under section
1854 as may be appropriate to assure an appropriate
payment level, taking into account the actuarial
characteristics and experience of such individuals.''.
(b) Report on Coverage of Beneficiaries with End-Stage Renal
Disease.--The Secretary of Health and Human Services shall
provide for a study on the feasibility and impact of removing
the limitation under section 1851(b)(3)(B) of the Social
Security Act (as inserted by subsection (a)) on eligibility of
most individuals medically determined to have end-stage renal
disease to enroll in MedicarePlus plans. By not later than
October 1, 1998, the Secretary shall submit to Congress a
report on such study and shall include in the report such
recommendations regarding removing or restricting the
limitation as may be appropriate.
(c) Report on MedicarePlus Teaching Programs and Use of DSH
and Teaching Hospitals.--Based on the information provided to
the Secretary of Health and Human Services under section
1852(k) of the Social Security Act and such information as the
Secretary may obtain, by not later than October 1, 1999, the
Secretary shall submit to Congress a report on graduate medical
education programs operated by MedicarePlus organizations and
the extent to which MedicarePlus organizations are providing
for payments to hospitals described in such section.
(a) Authorizing Transitional Waiver of 50:50 Rule.--Section
1876(f) (42 U.S.C. 1395mm(f)) is amended--
(1) in paragraph (2), by striking ``The Secretary''
and inserting ``Subject to paragraph (4), the
Secretary'', and
``(4) Effective for contract periods beginning after December
31, 1996, the Secretary may waive or modify the requirement
imposed by paragraph (1) to the extent the Secretary finds that
it is in the public interest.''.
(b) Transition.--Section 1876 (42 U.S.C. 1395mm) is amended
by adding at the end the following new subsection:
``(k)(1) Except as provided in paragraph (3), the Secretary
shall not enter into, renew, or continue any risk-sharing
contract under this section with an eligible organization for
any contract year beginning on or after--
``(A) the date standards for MedicarePlus
organizations and plans are first established under
section 1856 with respect to MedicarePlus organizations
that are insurers or health maintenance organizations,
``(B) in the case of such an organization with such a
contract in effect as of the date such standards were
first established, 1 year after such date.
``(2) The Secretary shall not enter into, renew, or continue
any risk-sharing contract under this section with an eligible
organization for any contract year beginning on or after
January 1, 2000.
``(3) An individual who is enrolled in part B only and is
enrolled in an eligible organization with a risk-sharing
contract under this section on December 31, 1998, may continue
enrollment in such organization in accordance with regulations
issued by not later then July 1, 1998.
``(4) Notwithstanding subsection (a), the Secretary shall
provide that payment amounts under risk-sharing contracts under
this section for months in a year (beginning with January 1998)
shall be computed--
``(A) with respect to individuals entitled to
benefits under both parts A and B, by substituting
payment rates under section 1853(a) for the payment
rates otherwise established under subsection 1876(a),
``(B) with respect to individuals only entitled to
benefits under part B, by substituting an appropriate
proportion of such rates (reflecting the relative
proportion of payments under this title attributable to
such part) for the payment rates otherwise established
For purposes of carrying out this paragraph for payments for
months in 1998, the Secretary shall compute, announce, and
apply the payment rates under section 1853(a) (notwithstanding
any deadlines specified in such section) in as timely a manner
as possible and may (to the extent necessary) provide for
retroactive adjustment in payments made under this section not
in accordance with such rates.''.
(c) Enrollment Transition Rule.--An individual who is
enrolled on December 31, 1998, with an eligible organization
under section 1876 of the Social Security Act (42 U.S.C.
1395mm) shall be considered to be enrolled with that
organization on January 1, 1999, under part C of title XVIII of
such Act if that organization has a contract under that part
for providing services on January 1, 1999 (unless the
individual has disenrolled effective on that date).
(d) Advance Directives.--Section 1866(f) (42 U.S.C. 1395c(f))
(A) by inserting ``1855(i),'' after
``1833(s),'', and
(B) by inserting ``, MedicarePlus
organization,'' after ``provider of services'';
(2) in paragraph (2)(E), by inserting ``or a
MedicarePlus organization'' after ``section
1833(a)(1)(A)''.
(e) Extension of Provider Requirement.--Section 1866(a)(1)(O)
(42 U.S.C. 1395cc(a)(1)(O)) is amended--
(1) by striking ``in the case of hospitals and
skilled nursing facilities,'';
(2) by striking ``inpatient hospital and extended
care'';
(3) by inserting ``with a MedicarePlus organization
under part C or'' after ``any individual enrolled'';
(4) by striking ``(in the case of hospitals) or
limits (in the case of skilled nursing facilities)'';
(5) by inserting ``(less any payments under section
1858)'' after ``under this title''.
(f) Additional Conforming Changes.--
(1) Conforming references to previous part C.--Any
reference in law (in effect before the date of the
enactment of this Act) to part C of title XVIII of the
Social Security Act is deemed a reference to part D of
such title (as in effect after such date).
(2) Secretarial submission of legislative proposal.--
Not later than 90 days after the date of the enactment
of this Act, the Secretary of Health and Human Services
shall submit to the appropriate committees of Congress
a legislative proposal providing for such technical and
conforming amendments in the law as are required by the
provisions of this chapter.
(g) Immediate Effective Date for Certain Requirements for
Demonstrations.--Section 1857(e)(2) of the Social Security Act
(requiring contribution to certain costs related to the
enrollment process comparative materials) applies to
demonstrations with respect to which enrollment is effected or
coordinated under section 1851 of such Act.
(h) Use of Interim, Final Regulations.--In order to carry out
the amendments made by this chapter in a timely manner, the
Secretary of Health and Human Services may promulgate
regulations that take effect on an interim basis, after notice
and pending opportunity for public comment.
(i) Transition Rule for PSO Enrollment.--In applying
subsection (g)(1) of section 1876 of the Social Security Act
(42 U.S.C. 1395mm) to a risk-sharing contract entered into with
an eligible organization that is a provider-sponsored
organization (as defined in section 1855(e)(1) of such Act, as
inserted by section 4001) for a contract year beginning on or
after January 1, 1998, there shall be substituted for the
minimum number of enrollees provided under such section the
minimum number of enrollees permitted under section 1857(b)(1)
of such Act (as so inserted).
(a) Conforming Amendments to MedicarePlus Changes.--
(1) In general.--Section 1882(d)(3)(A)(i) (42 U.S.C.
1395ss(d)(3)(A)(i)) is amended--
(A) in the matter before subclause (I), by
inserting ``(including an individual electing a
MedicarePlus plan under section 1851)'' after
``of this title''; and
(B) in subclause (II)--
(i) by inserting ``in the case of an
individual not electing a MedicarePlus
plan'' after ``(II)'', and
(ii) by inserting before the comma at
the end the following: ``or in the case
of an individual electing a
MedicarePlus plan, a medicare
supplemental policy with knowledge that
the policy duplicates health benefits
to which the individual is
otherwiseentitled under the MedicarePlus plan or under another medicare
supplemental policy''.
(2) Conforming amendments.--Section
1882(d)(3)(B)(i)(I) (42 U.S.C. 1395ss(d)(3)(B)(i)(I))
is amended by inserting ``(including any MedicarePlus
plan)'' after ``health insurance policies''.
(3) MedicarePlus plans not treated as medicare
supplementary policies.--Section 1882(g)(1) (42 U.S.C.
1395ss(g)(1)) is amended by inserting ``or a
MedicarePlus plan or'' after ``does not include''
(b) Additional Rules Relating to Individuals Enrolled in MSA
Plans.--Section 1882 (42 U.S.C. 1395ss) is further amended by
``(u)(1) It is unlawful for a person to sell or issue a
policy described in paragraph (2) to an individual with
knowledge that the individual has in effect under section 1851
an election of an MSA plan.
``(2) A policy described in this subparagraph is a health
insurance policy that provides for coverage of expenses that
are otherwise required to be counted toward meeting the annual
deductible amount provided under the MSA plan.''.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to amounts specifically
excluded from gross income) is amended by redesignating section
138 as section 139 and by inserting after section 137 the
following new section:
``SEC. 138. MEDICAREPLUS MSA.
``(a) Exclusion.--Gross income shall not include any payment
to the MedicarePlus MSA of an individual by the Secretary of
Health and Human Services under part C of title XVIII of the
Social Security Act.
``(b) MedicarePlus MSA.--For purposes of this section, the
term `MedicarePlus MSA' means a medical savings account (as
defined in section 220(d))--
``(1) which is designated as a MedicarePlus MSA,
``(2) with respect to which no contribution may be
made other than--
``(A) a contribution made by the Secretary of
Health and Human Services pursuant to part C of
title XVIII of the Social Security Act, or
``(B) a trustee-to-trustee transfer described
in subsection (c)(4),
``(3) the governing instrument of which provides that
trustee-to-trustee transfers described in subsection
(c)(4) may be made to and from such account, and
``(4) which is established in connection with an MSA
plan described in section 1859(b)(2) of the Social
Security Act.
``(c) Special Rules for Distributions.--
``(1) Distributions for qualified medical expenses.--
In applying section 220 to a MedicarePlus MSA--
``(A) qualified medical expenses shall not
include amounts paid for medical care for any
individual other than the account holder, and
``(B) section 220(d)(2)(C) shall not apply.
``(2) Penalty for distributions from medicareplus msa
not used for qualified medical expenses if minimum
balance not maintained.--
``(A) In general.--The tax imposed by this
chapter for any taxable year in which there is
a payment or distribution from a MedicarePlus
MSA which is not used exclusively to pay the
qualified medical expenses of the account
holder shall be increased by 50 percent of the
excess (if any) of--
``(i) the amount of such payment or
distribution, over
``(ii) the excess (if any) of--
``(I) the fair market value
of the assets in such MSA as of
the close of the calendar year
preceding the calendar year in
which the taxable year begins,
``(II) an amount equal to 60
percent of the deductible under
the MedicarePlus MSA plan
covering the account holder as
of January 1 of the calendar
year in which the taxable year
begins.
Section 220(f)(2) shall not apply to any
payment or distribution from a MedicarePlus
MSA.
``(B) Exceptions.--Subparagraph (A) shall not
apply if the payment or distribution is made on
or after the date the account holder--
``(i) becomes disabled within the
meaning of section 72(m)(7), or
``(ii) dies.
``(C) Special rules.--For purposes of
subparagraph (A)--
``(i) all MedicarePlus MSAs of the
account holder shall be treated as 1
``(ii) all payments and distributions
not used exclusively to pay the
qualified medical expenses of the
account holder during any taxable year
shall be treated as 1 distribution, and
``(iii) any distribution of property
shall be taken into account at its fair
market value on the date of the
``(3) Withdrawal of erroneous contributions.--Section
220(f)(2) and paragraph (2) of this subsection shall
not apply to any payment or distribution from a
MedicarePlus MSA to the Secretary of Health and Human
Services of an erroneous contribution to such MSA and
of the net income attributable to such contribution.
``(4) Trustee-to-trustee transfers.--Section
not apply to any trustee-to-trustee transfer from a
MedicarePlus MSA of an account holder to another
MedicarePlus MSA of such account holder.
``(d) Special Rules for Treatment of Account After Death of
Account Holder.--In applying section 220(f)(8)(A) to an account
which was a MedicarePlus MSA of a decedent, the rules of
section 220(f) shall apply in lieu of the rules of subsection
(c) of this section with respect to the spouse as the account
holder of such MedicarePlus MSA.
``(e) Reports.--In the case of a MedicarePlus MSA, the report
under section 220(h)--
``(1) shall include the fair market value of the
assets in such MedicarePlus MSA as of the close of each
calendar year, and
``(2) shall be furnished to the account holder--
``(A) not later than January 31 of the
calendar year following the calendar year to
which such reports relate, and
``(B) in such manner as the Secretary
prescribes in such regulations.
``(f) Coordination With Limitation on Number of Taxpayers
Having Medical Savings Accounts.--Subsection (i) of section 220
shall not apply to an individual with respect to a MedicarePlus
MSA, and MedicarePlus MSA's shall not be taken into account in
determining whether the numerical limitations under section
220(j) are exceeded.''
(b) Technical Amendments.--
(1) The last sentence of section 4973(d) of such Code
is amended by inserting ``or section 138(c)(3)'' after
``section 220(f)(3)''.
(2) Subsection (b) of section 220 of such Code is
amended by adding at the end the following new
``(7) Medicare eligible individuals.--The limitation
under this subsection for any month with respect to an
individual shall be zero for the first month such
individual is entitled to benefits under title XVIII of
the Social Security Act and for each month
thereafter.''
(3) The table of sections for part III of subchapter
B of chapter 1 of such Code is amended by striking the
last item and inserting the following:
``Sec. 139. Cross references to other Acts.''
shall apply to taxable years beginning after December 31, 1998.
(a) Payments to Managed Care Organizations Operating Graduate
Medical Education Programs.--Section 1853 (as inserted by
section 4001) is amended by adding at the end the following:
``(h) Payments for Direct Costs of Graduate Medical Education
Programs.--
``(1) Additional payment to be made.--Effective
January 1, 1998, each contract with a MedicarePlus
organization under this section (and each risk-sharing
contract with an eligible organization under section
1876) shall provide for an additional payment for
Medicare's share of allowable direct graduate medical
education costs incurred by such an organization for an
approved medical residency program.
``(2) Allowable costs.--If the organization has an
approved medical residency program that incurs all or
substantially all of the costs of the program, subject
to section 1858(a)(3), the allowable costs for such a
program shall equal the national average per resident
amount times the number of full-time-equivalent
residents in the program in non-hospital settings.
``(3) Definitions.--As used in this subsection:
``(A) The terms `approved medical residency
program', `direct graduate medical education
costs', and `full-time-equivalent residents'
have the same meanings as under section
1886(h).
``(B) The term `Medicare's share' means, with
respect to a MedicarePlus or eligible
organization, the ratio of the number of
under this part (or enrolled under a risk-
sharing contract under section 1876,
respectively) to the total number of
individuals enrolled with the organization.
``(C) The term `national average per resident
amount' means an amount estimated by the
Secretary to equal the weighted average amount
that would be paid per full-time-equivalent
resident under section 1886(h) for the calendar
year (determined separately for primary care
residency programs as defined under section
1886(h) (including obstetrics and gynecology
residency programs) and for other residency
programs).''.
(b) Payments to Hospitals for Direct and Indirect Costs of
Graduate Medical Education Programs Attributable to Managed
Care Enrollees.--Part C of title XVIII, as amended by section
4001, is amended by inserting after section 1857 the following
new section:
``payments to hospitals for certain costs attributable to managed care
enrollees
``Sec. 1858. (a) Costs of Graduate Medical Education.--
``(1) In general.--For portions of cost reporting
periods occurring on or after January 1, 1998, the
Secretary shall provide for an additional payment
amount for each subsection (d) hospital (as defined in
section1886(d)(1)(B)), each PPS-exempt hospital
described in clause (i) through (v) of such section, and for each
hospital reimbursed under a reimbursement system authorized section
1814(b)(3) that--
``(A) furnishes services to individuals who
are enrolled under a risk-sharing contract with
an eligible organization under section 1876 and
who are entitled to part A and to individuals
who are enrolled with a MedicarePlus
organization under part C, and
``(B) has an approved medical residency
training program.
``(2) Payment amount.--
``(A) In general.--Subject to paragraph
(3)(B), the amount of the payment under this
subsection shall be the sum of--
``(i) the amount determined under
subparagraph (B), and
``(ii) the amount determined under
subparagraph (C).
Clause (ii) shall not apply in the case of a
hospital that is not a PPS-exempt hospital
described in clause (i) through (v) of section
1886(d)(1)(B),
``(B) Direct amount.--The amount determined
under this subparagraph for a period is equal
to the product of--
``(i) the aggregate approved amount
(as defined in section 1886(h)(3)(B))
for that period; and
``(ii) the fraction of the total
number of inpatient-bed-days (as
established by the Secretary) during
the period which are attributable to
individuals described in paragraph (1).
``(C) Indirect amount.--The amount determined
under this subparagraph is equal to the product
``(i) the amount of the indirect
teaching adjustment factor applicable
to the hospital under section
1886(d)(5)(B); and
``(ii) the product of--
``(I) the number of
discharges attributable to
individuals described in
``(II) the estimated average
per discharge amount that would
otherwise have been paid under
section 1886(d)(1)(A) if the
individuals had not been
enrolled as described in such
``(D) Special rule.--The Secretary shall
establish rules for the application of
subparagraph (B) and for the computation of the
amounts described in subparagraph (C)(i)) and
subparagraph (C)(ii)(I) to a hospital
reimbursed under a reimbursement system
authorized under section 1814(b)(3) in a manner
similar to the manner of applying such
subparagraph and computing such amounts as if
the hospital were not reimbursed under such
``(3) Limitation.--
``(A) Determinations.--At the beginning of
each year, the Secretary shall--
``(i) estimate the sum of the amount
of the payments under this subsection
and the payments under section 1853(h),
for services or discharges occurring in
the year, and
``(ii) determine the amount of the
annual payment limit under subparagraph
(C) for such year.
``(B) Imposition of limit.--If the amount
estimated under subparagraph (A)(i) for a year
exceeds the amount determined under
subparagraph (A)(ii) for the year, then the
Secretary shall adjust the amounts of the
payments described in subparagraph (A)(i) for
the year in a pro rata manner so that the total
of such payments in the year do not exceed the
annual payment limit determined under
subparagraph (A)(ii) for that year.
``(C) Annual payment limit.--
``(i) In general.--The annual payment
limit under this subparagraph for a
year is the sum, over all counties or
MedicarePlus payment areas, of the
product of--
``(I) the annual GME per
capita payment rate (described
in clause (ii)) for the county
or area, and
``(II) the Secretary's
projection of average
enrollment of individuals
described in paragraph (1) who
are residents of that county or
area, adjusted to reflect the
relative demographic or risk
characteristics of such
``(ii) GME per capita payment rate.--
The GME per capita payment rate
described in this clause for a
particular county or MedicarePlus
payment area for a year is the GME
proportion (as specified in clause
(iii)) of the annual MedicarePlus
capitation rate (as calculated under
section 1853(c)) for the county or area
and year involved.
``(iii) GME proportion.--For purposes
of clause (ii), the GME proportion for
a county or area and a year is equal to
the phase-in percentage (specified in
clause (vi)) of the ratio of (I) the
projected GME payment amount for the
county or area (as determined under
clause (v)), to (II) the average per
capita cost for the county or area for
the year (determined under clause
(vi)).
``(iv) Phase-in percentage.--The
phase-in percentage specified in this
clause for--
``(IV) 2001 is 80 percent, or
``(V) any subsequent year is
``(v) Projected GME payment amount.--
The projected GME payment amount for a
county or area--
``(I) for 1998, is the amount
included in the per capita rate
of payment for 1997 determined
under section 1876(a)(1)(C) for
the payment adjustments
described in section
1886(d)(5)(B) and section
1886(h) for that county or
area, adjusted by the general
GME update factor (as defined
in clause (vii)) for 1998, or
``(II) for a subsequent year,
is the projected GME payment
amount for the county or area
for the previous year, adjusted
by the general GME update
factor for such subsequent
The Secretary shall determine the amount described in subclause
(I) for a county or other area that includes hospitals
reimbursed under section 1814(b)(3) as though such hospitals
had not been reimbursed under such section.
``(vi) Average per capita cost.--The
average per capita cost for the county
or area determined under this clause
for--
``(I) 1998 is the annual per
determined under section
1876(a)(1)(C) for the county or
area, increased by the national
percentage for 1998 (as defined
in section 1853(c)(6), but
determined without regard to
the adjustment described in
subparagraph (B) of such
section); or
``(II) a subsequent year is
the average per capita cost
determined under this clause
for the previous year increased
by the national per capita
MedicarePlus growth percentage
for the year involved (as
defined in section 1853(c)(6),
but determined without regard
to the adjustment described in
section).
``(vii) General gme update factor.--
For purposes of clause (v), the
`general GME update factor' for a year
is equal to the Secretary's estimate of
the national average percentage change
in average per capita payments under
sections 1886(d)(5)(B) and 1886(h) from
the previous year to the year involved.
Such amount takes into account changes
in law and regulation affecting payment
amounts under such sections.''.
Section 1858, as inserted by section 4008(b), is further
amended by adding at the end the following new subsection:
``(b) Disproportionate Share Hospital Payments.--
section 1886(d)(1)(B)) and for each hospital reimbursed
a demonstration project reimbursement system under
section 1814(b)(3) that--
organization under this part, and
``(B) is (or, if it were not reimbursed under
section 1814(b)(3), would qualify as) a
disproportionate share hospital described in
section 1886(d)(5)(F)(i).
``(2) Amount of payment.--Subject to paragraph
(3)(B), the amount of the payment under this subsection
shall be the product of--
``(A) the amount of the disproportionate
share adjustment percentage applicable to the
hospital under section 1886(d)(5)(F); and
``(B) the product described in subsection
(a)(2)(C)(ii).
The Secretary shall establish rules for the computation
of the amount described in subparagraph (A) for a
hospital reimbursed under section 1814(b)(3).
``(3) Limit.--
``(A) Determination.--At the beginning of
``(i) estimate the sum of the
payments under this subsection for
services or discharges occurring in the
(C)) for such year.
payments under this subsection for the year in
a pro rata manner so that the total of such
payments in the year do not exceed the annual
payment limit determined under subparagraph
(A)(ii) for that year.
``(C) Annual payment limit.--The annual
payment limit under this subparagraph for a
year shall be determined in the same manner as
the annual payment limit is determined under
clause (i) of subsection (a)(3)(C), except
that, for purposes of this clause, any
reference in clauses (i) through (vii) of such
``(i) to a payment adjustment under
subsection (a) is deemed a reference to
a payment adjustment under this
subsection, or
``(ii) to payments or payment
adjustments under section 1886(d)(5)(B)
and 1886(h) isdeemed a reference to
payments and payment adjustments under section 1886(d)(5)(F).''.
For provision amending title XVIII of the Social Security Act
to provide for payments to, and coverage of benefits under,
Programs of All-inclusive Care for the Elderly (PACE), see
For provision amending title XIX of the Social Security Act
to establish the PACE program as a medicaid State option, see
Subchapter B--Social Health Maintenance Organizations
(a) Extension of Demonstration Project Authorities.--Section
4018(b) of the Omnibus Budget Reconciliation Act of 1987 is
(1) in paragraph (1), by striking ``1997'' and
inserting ``2000'', and
inserting ``2001''.
(b) Expansion of Cap.--Section 13567(c) of the Omnibus Budget
Reconciliation Act of 1993 is amended by striking ``12,000''
and inserting ``36,000''.
(b) Report on Integration and Transition.--
Services shall submit to Congress, by not later than
January 1, 1999, a plan for the integration of health
plans offered by social health maintenance
organizations (including SHMO I and SHMO II sites
developed under section 2355 of the Deficit Reduction
Act of 1984 and under the amendment made by section
4207(b)(3)(B)(i) of OBRA-1990, respectively) and
similar plans as an option under the MedicarePlus
program under part C of title XVIII of the Social
(2) Provision for transition.--Such plan shall
include a transition for social health maintenance
organizations operating under demonstration project
authority under such section.
(3) Payment policy.--The report shall also include
recommendations on appropriate payment levels for plans
offered by such organizations, including an analysis of
the application of risk adjustment factors appropriate
to the population served by such organizations.
Section 9215 of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended by section 6135 of OBRA-
1989 and section 13557 of OBRA-1993, is further amended--
(1) by inserting ``(a)'' before ``The Secretary'',
(2) by adding at the end the following: ``Subject to
subsection (c), the Secretary may further extend such
demonstration projects through December 31, 2000, but
only with respect to individuals who are enrolled with
such projects before January 1, 1998.
``(b) The Secretary shall work with each such demonstration
project to develop a plan, to be submitted to the Committee on
Ways and Means of the House of Representatives and the
Committee on Finance of the Senate by March 31, 1998, for the
orderly transition of demonstration projects and the project
enrollees to a non-demonstration project health care delivery
system, such as through integration with a private or public
health plan, including a medicaid managed care or MedicarePlus
``(c) A demonstration project under subsection (a) which does
not develop and submit a transition plan under subsection (b)
by March 31, 1998, or, if later, 6 months after the date of the
enactment of this Act, shall be discontinued as of December 31,
1998. The Secretary shall provide appropriate technical
assistance to assist in the transition so that disruption of
medical services to project enrollees may be minimized.''.
Notwithstanding any other provision of law, demonstration
projects conducted under section 4079 of the Omnibus Budget
Reconciliation Act of 1987 may be conducted for an additional
period of 2 years, and the deadline for any report required
relating to the results of such projects shall be not later
than 6 months before the end of such additional period.
(a) In General.--Title XVIII is amended by inserting after
section 1804 the following new section:
``medicare payment advisory commission
``Sec. 1805. (a) Establishment.--There is hereby established
the Medicare Payment Advisory Commission (in this section
referred to as the `Commission').
``(b) Duties.--
``(1) Review of payment policies and annual
reports.--The Commission shall--
``(A) review payment policies under this
title, including the topics described in
``(B) make recommendations to Congress
concerning such payment policies; and
``(C) by not later than March 1 of each year
(beginning with 1998), submit a report to
Congress containing the results of such reviews
and its recommendationsconcerning such policies
and an examination of issues affecting the medicare program.
``(2) Specific topics to be reviewed.--
``(A) Medicareplus program.--Specifically,
the Commission shall review, with respect to
the MedicarePlus program under part C, the
``(i) The methodology for making
payment to plans under such program,
including the making of differential
payments and the distribution of
differential updates among different
payment areas.
``(ii) The mechanisms used to adjust
payments for risk and the need to
adjust such mechanisms to take into
account health status of beneficiaries.
``(iii) The implications of risk
selection both among MedicarePlus
organizations and between the
MedicarePlus option and the medicare
fee-for-service option.
``(iv) The development and
implementation of mechanisms to assure
the quality of care for those enrolled
with MedicarePlus organizations.
``(v) The impact of the MedicarePlus
program on access to care for medicare
beneficiaries.
``(vi) The appropriate role for the
medicare program in addressing the
needs of individuals with chronic
illnesses.
``(vii) Other major issues in
implementation and further development
of the MedicarePlus program.
``(B) Fee-for-service system.--Specifically,
the Commission shall review payment policies
under parts A and B, including--
``(i) the factors affecting
expenditures for services in different
sectors, including the process for
updating hospital, skilled nursing
facility, physician, and other fees,
``(ii) payment methodologies, and
``(iii) their relationship to access
and quality of care for medicare
``(C) Interaction of medicare payment
policies with health care delivery generally.--
Specifically, the Commission shall review the
effect of payment policies under this title on
the delivery of health care services other than
under this title and assess the implications of
changes in health care delivery in the United
States and in the general market for health
care services on the medicare program.
``(3) Comments on certain secretarial reports.--If
the Secretary submits to Congress (or a committee of
Congress) a report that is required by law and that
relates to payment policies under this title, the
Secretary shall transmit a copy of the report to the
Commission. The Commission shall review the report and,
not later than 6 months after the date of submittal of
the Secretary's report to Congress, shall submit to the
appropriate committees of Congress written comments on
such report. Such comments may include such
recommendations as the Commission deems appropriate.
``(4) Agenda and additional reviews.--The Commission
shall consult periodically with the chairmen and
ranking minority members of the appropriate committees
of Congress regarding the Commission's agenda and
progress towards achieving the agenda. The Commission
may conduct additional reviews, and submit additional
reports to the appropriate committees of Congress, from
time to time on such topics relating to the program
under this title as may be requested by such chairmen
and members and as the Commission deems appropriate.
``(5) Availability of reports.--The Commission shall
transmit to the Secretary a copy of each report
submitted under this subsection and shall make such
reports available to the public.
``(6) Appropriate committees.--For purposes of this
section, the term `appropriate committees of Congress'
means the Committees on Ways and Means and Commerce of
the House of Representatives and the Committee on
Finance of the Senate.
``(c) Membership.--
``(1) Number and appointment.--The Commission shall
be composed of 11 members appointed by the Comptroller
``(2) Qualifications.--
``(A) In general.--The membership of the
Commission shall include individuals with
national recognition for their expertise in
health finance and economics, actuarial
science, health facility management, health
plans and integrated delivery systems,
reimbursement of health facilities, allopathic
and osteopathic physicians, and other providers
of health services, and other related fields,
who provide a mix of different professionals,
broad geographic representation, and a balance
between urban and rural representatives.
``(B) Inclusion.--The membership of the
Commission shall include (but not be limited
to) physicians and other health professionals,
employers, third party payers, individuals
skilled in the conduct and interpretation of
biomedical, health services, and health
economics research and expertise in outcomes
and effectiveness research and technology
assessment. Such membership shall also include
representatives of consumers and the elderly.
``(C) Majority nonproviders.--Individuals who
are directly involved in the provision, or
management of the delivery, of items and
services covered under this title shall not
constitute a majority of the membership of the
Commission.
``(D) Ethical disclosure.--The Comptroller
General shall establish a system for public
disclosure bymembers of the Commission of
financial and other potential conflicts of interest relating to such
``(3) Terms.--
``(A) In general.--The terms of members of
the Commission shall be for 3 years except that
the Comptroller General shall designate
staggered terms for the members first
``(B) Vacancies.--Any member appointed to
fill a vacancy occurring before the expiration
of the term for which the member's predecessor
was appointed shall be appointed only for the
remainder of that term. A member may serve
after the expiration of that member's term
until a successor has taken office. A vacancy
in the Commission shall be filled in the manner
in which the original appointment was made.
``(4) Compensation.--While serving on the business of
the Commission (including traveltime), a member of the
Commission shall be entitled to compensation at the per
diem equivalent of the rate provided for level IV of
the Executive Schedule under section 5315 of title 5,
United States Code; and while so serving away from home
and member's regular place of business, a member may be
allowed travel expenses, as authorized by the Chairman
of the Commission. Physicians serving as personnel of
the Commission may be provided a physician
comparability allowance by the Commission in the same
manner as Government physicians may be provided such an
allowance by an agency under section 5948 of title 5,
United States Code, and for such purpose subsection (i)
of such section shall apply to the Commission in the
same manner as it applies to the Tennessee Valley
Authority. For purposes of pay (other than pay of
members of the Commission) and employment benefits,
rights, and privileges, all personnel of the Commission
shall be treated as if they were employees of the
United States Senate.
``(5) Chairman; vice chairman.--The Comptroller
General shall designate a member of the Commission, at
the time of appointment of the member, as Chairman and
a member as Vice Chairman for that term of appointment.
``(6) Meetings.--The Commission shall meet at the
call of the Chairman.
``(d) Director and Staff; Experts and Consultants.--Subject
to such review as the Comptroller General deems necessary to
assure the efficient administration of the Commission, the
Commission may--
``(1) employ and fix the compensation of an Executive
Director (subject to the approval of the Comptroller
General) and such other personnel as may be necessary
to carry out its duties (without regard to the
provisions of title 5, United States Code, governing
appointments in the competitive service);
``(2) seek such assistance and support as may be
required in the performance of its duties from
appropriate Federal departments and agencies;
``(3) enter into contracts or make other
arrangements, as may be necessary for the conduct of
the work of the Commission (without regard to section
3709 of the Revised Statutes (41 U.S.C. 5));
``(4) make advance, progress, and other payments
which relate to the work of the Commission;
``(5) provide transportation and subsistence for
persons serving without compensation; and
``(6) prescribe such rules and regulations as it
deems necessary with respect to the internal
organization and operation of the Commission.
``(e) Powers.--
``(1) Obtaining official data.--The Commission may
secure directly from any department or agency of the
United States information necessary to enable it to
carry out this section. Upon request of the Chairman,
the head of that department or agency shall furnish
that information to the Commission on an agreed upon
``(2) Data collection.--In order to carry out its
functions, the Commission shall--
``(A) utilize existing information, both
published and unpublished, where possible,
collected and assessed either by its own staff
or under other arrangements made in accordance
with this section,
``(B) carry out, or award grants or contracts
for, original research and experimentation,
where existing information is inadequate, and
``(C) adopt procedures allowing any
interested party to submit information for the
Commission's use in making reports and
``(3) Access of gao to information.--The Comptroller
General shall have unrestricted access to all
deliberations, records, and nonproprietary data of the
Commission, immediately upon request.
``(4) Periodic audit.--The Commission shall be
subject to periodic audit by the Comptroller General.
``(f) Authorization of Appropriations.--
``(1) Request for appropriations.--The Commission
shall submit requests for appropriations in the same
manner as the Comptroller General submits requests for
appropriations, but amounts appropriated for the
Commission shall be separate from amounts appropriated
for the Comptroller General.
``(2) Authorization.--There are authorized to be
appropriated such sums as may be necessary to carry out
the provisions of this section; 60 percent of such
appropriation shall be payable from the Federal
Hospital Insurance Trust Fund, and 40 percent of such
Supplementary Medical Insurance Trust Fund.''.
(b) Abolition of ProPAC and PPRC.--
(1) Propac.--
(A) In general.--Section 1886(e) (42 U.S.C.
1395ww(e)) is amended--
(i) by striking paragraphs (2) and
(6); and
(ii) in paragraph (3), by striking
``(A) The Commission'' and all that
follows through ``(B)''.
(B) Conforming amendment.--Section 1862 (42
U.S.C. 1395y) is amended by striking
``Prospective Payment Assessment Commission''
each place it appears in subsection (a)(1)(D)
and subsection (i) and inserting ``Medicare
Payment Advisory Commission''.
(2) PPRC.--
(A) In general.--Title XVIII is amended by
striking section 1845 (42 U.S.C. 1395w-1).
(B) Elimination of certain reports.--Section
1848 (42 U.S.C. 1395w-4) is amended by striking
subparagraph (B) of subsection (f)(1).
(C) Conforming amendments.--Section 1848 (42
U.S.C. 1395w-4) is amended by striking
``Physician Payment Review Commission'' and
inserting ``Medicare Payment Advisory
Commission'' each place it appears in
subsections (c)(2)(B)(iii), (g)(6)(C), and
(g)(7)(C).
(c) Effective Date; Transition.--
(1) In general.--The Comptroller General shall first
provide for appointment of members to the Medicare
Payment Advisory Commission (in this subsection
referred to as ``MedPAC'') by not later than September
(2) Transition.--As quickly as possible after the
date a majority of members of MedPAC are first
appointed, the Comptroller General, in consultation
with the Prospective Payment Assessment Commission (in
this subsection referred to as ``ProPAC'') and the
Physician Payment Review Commission (in this subsection
referred to as ``PPRC''), shall provide for the
termination of the ProPAC and the PPRC. As of the date
of termination of the respective Commissions, the
amendments made by paragraphs (1) and (2),
respectively, of subsection (b) become effective. The
Comptroller General, to the extent feasible, shall
provide for the transfer to the MedPAC of assets and
staff of the ProPAC and the PPRC, without any loss of
benefits or seniority by virtue of such transfers. Fund
balances available to the ProPAC or the PPRC for any
period shall be available to the MedPAC for such period
for like purposes.
(3) Continuing responsibility for reports.--The
MedPAC shall be responsible for the preparation and
submission of reports required by law to be submitted
(and which have not been submitted by the date of
establishment of the MedPAC) by the ProPAC and the
PPRC, and, for this purpose, any reference in law to
either such Commission is deemed, after the appointment
of the MedPAC, to refer to the MedPAC.
(a) Guaranteeing Issue Without Preexisting Conditions for
Continuously Covered Individuals.--Section 1882(s) (42 U.S.C.
1395ss(s)) is amended--
(1) in paragraph (3), by striking ``paragraphs (1)
and (2)'' and inserting ``this subsection'',
(2) by redesignating paragraph (3) as paragraph (4),
``(3)(A) The issuer of a medicare supplemental policy--
``(i) may not deny or condition the issuance or
effectiveness of a medicare supplemental policy
described in subparagraph (C) that is offered and is
available for issuance to new enrollees by such issuer;
``(ii) may not discriminate in the pricing of such
policy, because of health status, claims experience,
receipt of health care, or medical condition; and
``(iii) may not impose an exclusion of benefits based
on a pre-existing condition under such policy,
in the case of an individual described in subparagraph (B) who
seeks to enroll under the policy not later than 63 days after
the date of the termination of enrollment described in such
subparagraph and who submits evidence of the date of
termination or disenrollment along with the application for
such medicare supplemental policy.
``(B) An individual described in this subparagraph is an
individual described in any of the following clauses:
``(i) The individual is enrolled under an employee
welfare benefit plan that provides health benefits that
supplement the benefits under this title and the plan
terminates or ceases to provide all such supplemental
health benefits to the individual.
``(ii) The individual is enrolled with a MedicarePlus
organization under a MedicarePlus plan under part C,
and there are circumstances permitting discontinuance
of the individual's election of the plan under section
``(iii) The individual is enrolled with an eligible
organization under a contract under section 1876, a
similar organization operating under demonstration
project authority, with an organization under an
agreement under section 1833(a)(1)(A), or with an
organization under a policy described in subsection
(t), and such enrollment ceases under the same
circumstances that would permit discontinuance of an
individual's election of coverage under section
1851(e)(4) and, in the case of a policy described in
subsection (t), there is no provision under applicable
State law for the continuation of coverage under such
``(iv) The individual is enrolled under a medicare
supplemental policy under this section and such
enrollment ceases because--
``(I) of the bankruptcy or insolvency of the
issuer or because of other involuntary
termination of coverage or enrollment under
such policy and there is no provision under
applicable State law for the continuation of
such coverage;
``(II) the issuer of the policy substantially
violated a material provision of the policy; or
``(III) the issuer (or an agent or other
entity acting on the issuer's behalf)
materially misrepresented the policy's
provisions in marketing the policy to the
``(v) The individual--
``(I) was enrolled under a medicare
supplemental policy under this section,
``(II) subsequently terminates such
enrollment and enrolls, for the first time,
with any MedicarePlus organization under a
MedicarePlus plan under part C, any eligible
organization under a contract under section
1876, any similar organization operating under
demonstration project authority, any
organization under an agreement under section
1833(a)(1)(A), or any policy described in
subsection (t), and
``(III) the subsequent enrollment under
subclause (II) is terminated by the enrollee
during the first 6 months (or 3 months for
terminations occurring on or after January 1,
2003) of such enrollment.
``(vi) The individual--
during or after the annual, coordinated
election period under section 1851(e)(3)(B)
occurring during 2002, with an organization or
policy described in clause (v)(II), and
during the next annual, coordinated election
period under such section.
``(C)(i) Subject to clauses (ii) and (iii), a medicare
supplemental policy described in this subparagraph has a
benefit package classified as `A', `B', `C', or `F' under the
standards established under subsection (p)(2).
``(ii) Only for purposes of an individual described in
subparagraph (B)(v), a medicare supplemental policy described
in this subparagraph also includes (if available from the same
issuer) the same medicare supplemental policy referred to in
such subparagraph in which the individual was most recently
previously enrolled.
``(iii) For purposes of applying this paragraph in the case
of a State that provides for offering of benefit packages other
than under the classification referred to in clause (i), the
references to benefit packages in such clause are deemed
references to comparable benefit packages offered in such
``(D) At the time of an event described in subparagraph (B)
because of which an individual ceases enrollment or loses
coverage or benefits under a contract or agreement, policy, or
plan, the organization that offers the contract or agreement,
the insurer offering the policy, or the administrator of the
plan, respectively, shall notify the individual of the rights
of the individual, and obligations of issuers of medicare
supplemental policies, under subparagraph (A).''.
(b) Limitation on Imposition of Preexisting Condition
Exclusion During Initial Open Enrollment Period.--Section
1882(s)(2) (42 U.S.C. 1395ss(s)(2)) is amended--
(1) in subparagraph (B), by striking ``subparagraph
(C)'' and inserting ``subparagraphs (C) and (D)'', and
``(D) In the case of a policy issued during the 6-month
period described in subparagraph (A) to an individual who is 65
years of age or older as of the date of issuance and who as of
the date of the application for enrollment has a continuous
period of creditable coverage (as defined in 2701(c) of the
Public Health Service Act) of--
``(i) at least 6 months, the policy may not exclude
benefits based on a pre-existing condition; or
``(ii) of less than 6 months, if the policy excludes
benefits based on a preexisting condition, the policy
shall reduce the period of any preexisting condition
exclusion by the aggregate of the periods of creditable
coverage (if any, as so defined) applicable to the
individual as of the enrollment date.
The Secretary shall specify the manner of the reduction under
clause (ii), based upon the rules used by the Secretary in
carrying out section 2701(a)(3) of such Act.''.
(c) Effective Dates.--
(1) Guaranteed issue.--The amendment made by
subsection (a) shall take effect on July 1, 1998.
(2) Limit on preexisting condition exclusions.--The
amendment made by subsection (b) shall apply to
policies issued on or after July 1, 1998.
(d) Transition Provisions.--
(1) In general.--If the Secretary of Health and Human
Services identifies a State as requiring a change to
its statutes or regulations to conform its regulatory
program to the changes made by this section, the State
regulatory program shall not be considered to be out of
compliance with the requirements of section 1882 of the
Social Security Act due solely to failure to make such
change until the date specified in paragraph (4).
(2) NAIC standards.--If, within 9 months after the
date of the enactment of this Act, the National
Association of Insurance Commissioners (in this
subsection referred to as the ``NAIC'') modifies its
NAIC Model Regulation relating to section 1882 of the
Social Security Act (referred to in such section as the
1991 NAIC Model Regulation, as modified pursuant to
section 171(m)(2) of the Social Security Act Amendments
of 1994 (Public Law 103-432) and as modified pursuant
to section 1882(d)(3)(A)(vi)(IV) of the Social Security
Act, as added by section 271(a) of the Health Insurance
Portability and Accountability Act of 1996 (Public Law
104-191) to conform to the amendments made by this
section, such revised regulation incorporating the
modifications shall be considered to be the applicable
NAIC model regulation (including the revised NAIC model
regulation and the 1991 NAIC Model Regulation) for the
purposes of such section.
(3) Secretary standards.--If the NAIC does not make
the modifications described in paragraph (2) within the
period specified in such paragraph, the Secretary of
Health and Human Services shall make the modifications
described in such paragraph and such revised regulation
incorporating the modifications shall be considered to
be the appropriate Regulation for the purposes of such
(4) Date specified.--
the date specified in this paragraph for a
State is the earlier of--
(i) the date the State changes its
statutes or regulations to conform its
regulatory program to the changes made
by this section, or
(ii) 1 year after the date the NAIC
or the Secretary first makes the
modifications under paragraph (2) or
(3), respectively.
(B) Additional legislative action required.--
In the case of a State which the Secretary
identifies as--
(i) requiring State legislation
(other than legislation appropriating
funds) to conform its regulatory
program to the changes made in this
section, but
(ii) having a legislature which is
not scheduled to meet in 1999 in a
legislative session in which such
legislation may be considered,
the date specified in this paragraph is the
first day of the first calendar quarter
beginning after the close ofthe first
legislative session of the State legislature that begins on or after
July 1, 1999. For purposes of the previous sentence, in the case of a
State that has a 2-year legislative session, each year of such session
shall be deemed to be a separate regular session of the State
legislature.
(a) Establishment of Project.--The Secretary of Health and
Human Services shall provide, beginning not later than 1 year
after the date of the enactment of this Act, for implementation
of a project (in this section referred to as the ``project'')
to demonstrate the application of, and the consequences of
applying, a market-oriented pricing system for the provision of
a full range of medicare benefits in a geographic area.
(b) Research Design Advisory Committee.--
(1) In general.--Before implementing the project
under this section, the Secretary shall appoint a
national advisory committee, including independent
actuaries and individuals with expertise in competitive
health plan pricing, to make recommendations to the
Secretary concerning the appropriate research design
for implementing the project.
(2) Initial recommendations.--The committee initially
shall submit recommendations respecting the method for
area selection, benefit design among plans offered,
structuring choice among health plans offered, methods
for setting the price to be paid to plans, collection
of plan information (including information concerning
quality and access to care), information dissemination,
and methods of evaluating the results of the project.
(3) Advice during implementation.--Upon
implementation of the project, the committee shall
continue to advise the Secretary on the application of
the design in different areas and changes in the
project based on experience with its operations.
(c) Area Selection.--
(1) In general.--Taking into account the
recommendations of the advisory committee submitted
under subsection (b), the Secretary shall designate
areas in which the project will operate.
(2) Appointment of area advisory committee.--Upon the
designation of an area for inclusion in the project,
the Secretary shall appoint an area advisory committee,
composed of representatives of health plans, providers,
and medicare beneficiaries in the area, to advise the
Secretary concerning how the project will actually be
implemented in the area. Such advice may include advice
concerning the marketing and pricing of plans in the
area and other salient factors relating.
(d) Monitoring and Report.--
(1) Monitoring impact.--Taking into consideration the
recommendations of the general advisory committee
(appointed under subsection (b)), the Secretary shall
closely monitor the impact of projects in areas on the
price and quality of, and access to, medicare covered
services, choice of health plan, changes in enrollment,
and other relevant factors.
(2) Report.--The Secretary shall periodically report
to Congress on the progress under the project under
(e) Waiver Authority.--The Secretary of Health and Human
Services may waive such requirements of section 1876 (and such
requirements of part C of title XVIII, as amended by chapter
1), of the Social Security Act as may be necessary for the
purposes of carrying out the project.
(f) Relationship to Other Authority.--Except pursuant to this
section the Secretary of Health and Human Services may not
conduct or continue any medicare demonstration project relating
to payment of health maintenance organizations, MedicarePlus
organizations, or similar prepaid managed care entities on the
basis of a competitive bidding process or pricing system
described in subsection (a) rather than on the bases described
in section 1853 or 1876 of the Social Security Act.
(a) Providing Annual Screening Mammography for Women Over Age
39.--Section 1834(c)(2)(A) (42 U.S.C. 1395m(c)(2)(A)) is
(1) in clause (iii), to read as follows:
``(iii) In the case of a woman over
39 years of age, payment may not be
made under this part for screening
mammography performed within 11 months
following the month in which a previous
screening mammography was performed.'';
(2) by striking clauses (iv) and (v).
(b) Waiver of Deductible.--The first sentence of section
1833(b) (42 U.S.C. 1395l(b)) is amended--
(1) by striking ``and'' before ``(4)'', and
(2) by inserting before the period at the end the
following: ``, and (5) such deductible shall not apply
with respect to screening mammography (as described in
section 1861(jj))''.
(c) Conforming Amendment.--Section 1834(c)(1)(C) of such Act
(42 U.S.C. 1395m(c)(1)(C)) is amended by striking ``, subject
to the deductible established under section 1833(b),''.
shall apply to items and services furnished on or after January
(a) Coverage of Pelvic Exam; Increasing Frequency of Coverage
of Pap Smear.--Section 1861(nn) (42 U.S.C. 1395x(nn)) is
(1) in the heading, by striking ``Smear'' and
inserting ``Smear; Screening Pelvic Exam'';
(2) by inserting ``or vaginal'' after ``cervical''
each place it appears;
(3) by striking ``(nn)'' and inserting ``(nn)(1)'';
(4) by striking ``3 years'' and all that follows and
inserting ``3 years, or during the preceding year in
the case of a woman described in paragraph (3).''; and
paragraphs:
``(2) The term `screening pelvic exam' means a pelvic
examination provided to a woman if the woman involved has not
had such an examination during the preceding 3 years, or during
the preceding year in the case of a woman described in
paragraph (3), and includes a clinical breast examination.
``(3) A woman described in this paragraph is a woman who--
``(A) is of childbearing age and has not had a test
described in this subsection during each of the
preceding 3 years that did not indicate the presence of
cervical or vaginal cancer; or
``(B) is at high risk of developing cervical or
vaginal cancer (as determined pursuant to factors
identified by the Secretary).''.
1833(b) (42 U.S.C. 1395l(b)), as amended by section 4101(b), is
with respect to screening pap smear and screening
pelvic exam (as described in section 1861(nn))''.
(c) Conforming Amendments.--Sections 1861(s)(14) and
1862(a)(1)(F) (42 U.S.C. 1395x(s)(14), 1395y(a)(1)(F)) are each
amended by inserting ``and screening pelvic exam'' after
``screening pap smear''.
(d) Payment Under Physician Fee Schedule.--Section
1848(j)(3)(42 U.S.C. 1395w-4(j)(3)) is amended by striking
``and (4)'' and inserting ``, (4) and (14) (with respect to
services described in section 1861(nn)(2))''.
(f) Report on Rescreening Pap Smears.--Not later than 6
months after the date of the enactment of this Act, the
Secretary of Health and Human Services shall submit to Congress
a report on the extent to which the use of supplemental
computer-assisted diagnostic tests consisting of interactive
automated computer-imaging of an exfoliative cytology test, in
conjunction with the pap smears, improves the early detection
of cervical or vaginal cancer and the costs implications for
coverage of such supplemental tests under the medicare program.
(a) Coverage.--Section 1861 (42 U.S.C. 1395x) is amended--
(1) in subsection (s)(2)--
subparagraphs (N) and (O), and
(B) by inserting after subparagraph (O) the
``(P) prostate cancer screening tests (as defined in
subsection (oo)); and''; and
``Prostate Cancer Screening Tests
``(oo)(1) The term `prostate cancer screening test' means a
test that consists of any (or all) of the procedures described
in paragraph (2) provided for the purpose of early detection of
prostate cancer to a man over 50 years of age who has not had
such a test during the preceding year.
``(2) The procedures described in this paragraph are as
``(A) A digital rectal examination.
``(B) A prostate-specific antigen blood test.
``(C) For years beginning after 2001, such other
procedures as the Secretary finds appropriate for the
purpose of early detection of prostate cancer, taking
into account changes in technology and standards of
medical practice, availability, effectiveness, costs,
and such other factors as the Secretary considers
appropriate.''.
(b) Payment for Prostate-specific Antigen Blood Test Under
Clinical Diagnostic Laboratory Test Fee Schedules.--Section
1833(h)(1)(A) (42 U.S.C. 1395l(h)(1)(A)) is amended by
inserting after ``laboratory tests'' the following:
``(including prostate cancer screening tests under section
1861(oo) consisting of prostate-specific antigen blood
tests)''.
(c) Conforming Amendment.--Section 1862(a) (42 U.S.C.
1395y(a)) is amended--
(A) in subparagraph (E), by striking ``and''
at the end,
(B) in subparagraph (F), by striking the
semicolon at the end and inserting ``, and'',
(C) by adding at the end the following new
``(G) in the case of prostate cancer screening tests
(as defined in section 1861(oo)), which are performed
more frequently than is covered under such section;'';
(2) in paragraph (7), by striking ``paragraph (1)(B)
or under paragraph (1)(F)'' and inserting
``subparagraphs (B), (F), or (G) of paragraph (1)''.
1848(j)(3)(42 U.S.C. 1395w-4(j)(3)), as amended by section
4102, is amended by inserting ``(2)(P) (with respect to
services described in subparagraphs (A) and (C) of section
1861(oo),'' after ``(2)(G)''
(a) Coverage.--
(1) In general.--Section 1861 (42 U.S.C. 1395x), as
amended by section 4103(a), is amended--
(A) in subsection (s)(2)--
(i) by striking ``and'' at the end of
subparagraph (P);
(ii) by adding ``and'' at the end of
subparagraph (Q); and
(iii) by adding at the end the
``(R) colorectal cancer screening tests (as defined
in subsection (pp)); and''; and
``Colorectal Cancer Screening Tests
``(pp)(1) The term `colorectal cancer screening test' means
any of the following procedures furnished to an individual for
the purpose of early detection of colorectal cancer:
``(A) Screening fecal-occult blood test.
``(B) Screening flexible sigmoidoscopy.
``(C) In the case of an individual at high risk for
colorectal cancer, screening colonoscopy.
``(D) Screening barium enema, if found by the
Secretary to be an appropriate alternative to screening
flexible sigmoidoscopy under subparagraph (B) or
screening colonoscopy under subparagraph (C).
``(E) For years beginning after 2002, such other
purpose of early detection of colorectal cancer, taking
``(2) In paragraph (1)(C), an `individual at high risk for
colorectal cancer' is an individual who, because of family
history, prior experience of cancer or precursor neoplastic
polyps, a history of chronic digestive disease condition
(including inflammatory bowel disease, Crohn's Disease, or
ulcerative colitis), the presence of any appropriate recognized
gene markers for colorectal cancer, or other predisposing
factors, faces a high risk for colorectal cancer.''.
(2) Deadline for decision on coverage of screening
barium enema.--Not later than 2 years after the date of
the enactment of this section, the Secretary of Health
and Human Services shall issue and publish a
determination on the treatment of screening barium
enema as a colorectal cancer screening test under
section 1861(pp) (as added by subparagraph (B)) as an
alternative procedure to a screening flexible
sigmoidoscopy or screening colonoscopy.
(b) Frequency and Payment Limits.--
(1) In general.--Section 1834 (42 U.S.C. 1395m) is
amended by inserting after subsection (c) the following
new subsection:
``(d) Frequency and Payment Limits for Colorectal Cancer
Screening Tests.--
``(1) Screening fecal-occult blood tests.--
``(A) Payment limit.--In establishing fee
schedules under section 1833(h) with respect to
colorectal cancer screening tests consisting of
screening fecal-occult blood tests, except as
provided by the Secretary under paragraph
(4)(A), the payment amount established for
tests performed--
``(i) in 1998 shall not exceed $5;
``(ii) in a subsequent year, shall
not exceed the limit on the payment
amount established under this
subsection for such tests for the
preceding year, adjusted by the
applicable adjustment under section
1833(h) for tests performed in such
``(B) Frequency limit.--Subject to revision
by the Secretary under paragraph (4)(B), no
payment may be made under this part for
colorectal cancer screening test consisting of
a screening fecal-occult blood test--
``(i) if the individual is under 50
years of age; or
``(ii) if the test is performed
within the 11 months after a previous
screening fecal-occult blood test.
``(2) Screening flexible sigmoidoscopies.--
``(A) Fee schedule.--The Secretary shall
establish a payment amount under section 1848
with respect to colorectal cancer screening
tests consisting of screening flexible
sigmoidoscopies that is consistent with payment
amounts under such section for similar or
related services, except that such payment
amount shall be established without regard to
subsection (a)(2)(A) of such section.
``(B) Payment limit.--In the case of
screening flexible sigmoidoscopy services--
``(i) the payment amount may not
exceed such amount as the Secretary
specifies, based upon the rates
recognized under this part for
diagnostic flexible sigmoidoscopy
``(ii) that, in accordance with
regulations, may be performed in an
ambulatory surgical center and for
which the Secretary permits ambulatory
surgical center payments under this
part and that are performed in an
ambulatory surgical center or hospital
outpatient department, the payment
amount under this part may not exceed
the lesser of (I) the payment rate that
wouldapply to such services if they
were performed in a hospital outpatient department, or (II) the payment
rate that would apply to such services if they were performed in an
ambulatory surgical center.
``(C) Special rule for detected lesions.--If
during the course of such screening flexible
sigmoidoscopy, a lesion or growth is detected
which results in a biopsy or removal of the
lesion or growth, payment under this part shall
not be made for the screening flexible
sigmoidoscopy but shall be made for the
procedure classified as a flexible
sigmoidoscopy with such biopsy or removal.
``(D) Frequency limit.--Subject to revision
payment may be made under this part for a
a screening flexible sigmoidoscopy--
``(ii) if the procedure is performed
screening flexible sigmoidoscopy.
``(3) Screening colonoscopy for individuals at high
risk for colorectal cancer.--
test consisting of a screening colonoscopy for
individuals at high risk for colorectal cancer
(as defined in section 1861(pp)(2)) that is
consistent with payment amounts under such
section for similar or related services, except
that such payment amount shall be established
without regard to subsection (a)(2)(A) of such
screening colonoscopy services--
diagnostic colonoscopy services; and
``(ii) that are performed in an
would apply to such services if they
were performed in a hospital outpatient
department, or (II) the payment rate
that would apply to such services if
they were performed in an ambulatory
surgical center.
during the course of such screening
colonoscopy, a lesion or growth is detected
not be made for the screening colonoscopy but
shall be made for the procedure classified as a
colonoscopy with such biopsy or removal.
a screening colonoscopy for individuals at high
risk for colorectal cancer if the procedure is
performed within the 23 months after a previous
screening colonoscopy.
``(4) Reductions in payment limit and revision of
frequency.--
``(A) Reductions in payment limit for
screening fecal-occult blood tests.--The
Secretary shall review from time to time the
appropriateness of the amount of the payment
limit established for screening fecal-occult
blood tests under paragraph (1)(A). The
Secretary may, with respect to tests performed
in a year after 2000, reduce the amount of such
limit as it applies nationally or in any area
to the amount that the Secretary estimates is
required to assure that such tests of an
appropriate quality are readily and
conveniently available during the year.
``(B) Revision of frequency.--
``(i) Review.--The Secretary shall
review periodically the appropriate
frequency for performing colorectal
cancer screening tests based on age and
such other factors as the Secretary
believes to be pertinent.
``(ii) Revision of frequency.--The
Secretary, taking into consideration
the review made under clause (i), may
revise from time to time the frequency
with which such tests may be paid for
under this subsection, but no such
revision shall apply to tests performed
before January 1, 2001.
``(5) Limiting charges of nonparticipating
physicians.--
``(A) In general.--In the case of a
a screening flexible sigmoidoscopy or a
screening colonoscopy provided to an individual
at high risk for colorectal cancer for which
payment may be made under this part, if a
nonparticipating physician provides the
procedure to an individual enrolled under this
part, the physician may not charge the
individual more than the limiting charge (as
defined in section 1848(g)(2)).
``(B) Enforcement.--If a physician or
supplier knowing and willfully imposes a charge
in violation of subparagraph (A), the Secretary
may apply sanctions against such physician or
supplier in accordance with section
1842(j)(2).''.
(2) Special rule for screening barium enema.--If the
Secretary of Health and Human Services issues a
determination under subsection (a)(2) that screening
barium enema should be covered as a colorectal cancer
screening test under section 1861(pp) (as added by
subsection (a)(1)(B)), the Secretary shall establish
frequency limits(including revisions of frequency
limits) for such procedure consistent with the frequency limits for
other colorectal cancer screening tests under section 1834(d) (as added
by subsection (b)(1)), and shall establish payment limits (including
limits on charges of nonparticipating physicians) for such procedure
consistent with the payment limits under part B of title XVIII for
diagnostic barium enema procedures.
(c) Conforming Amendments.--(1) Paragraphs (1)(D) and (2)(D)
of section 1833(a) (42 U.S.C. 1395l(a)) are each amended by
inserting ``or section 1834(d)(1)'' after ``subsection
(h)(1)''.
(2) Section 1833(h)(1)(A) (42 U.S.C. 1395l(h)(1)(A)) is
amended by striking ``The Secretary'' and inserting ``Subject
to paragraphs (1) and (4)(A) of section 1834(d), the
Secretary''.
(3) Clauses (i) and (ii) of section 1848(a)(2)(A) (42 U.S.C.
1395w-4(a)(2)(A)) are each amended by inserting after ``a
service'' the following: ``(other than a colorectal cancer
screening test consisting of a screening colonoscopy provided
to an individual at high risk for colorectal cancer or a
screening flexible sigmoidoscopy)''.
(4) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by
(A) in paragraph (1)--
(i) in subparagraph (F), by striking ``and''
(ii) in subparagraph (G), by striking the
(iii) by adding at the end the following new
``(H) in the case of colorectal cancer screening
tests, which are performed more frequently than is
covered under section 1834(d);''; and
(B) in paragraph (7), by striking ``or (G)'' and
inserting ``(G), or (H)''.
(a) Coverage of Diabetes Outpatient Self-management Training
subparagraph (Q);
subparagraph (R); and
``(S) diabetes outpatient self-management training
services (as defined in subsection (qq)); and''; and
``Diabetes Outpatient Self-Management Training Services
``(qq)(1) The term `diabetes outpatient self-management
training services' means educational and training services
furnished to an individual with diabetes by a certified
provider (as described in paragraph (2)(A)) in an outpatient
setting by an individual or entity who meets the quality
standards described in paragraph (2)(B), but only if the
physician who is managing the individual's diabetic condition
certifies that such services are needed under a comprehensive
plan of care related to the individual's diabetic condition to
provide the individual with necessary skills and knowledge
(including skills related to the self-administration of
injectable drugs) to participate in the management of the
individual's condition.
``(2) In paragraph (1)--
``(A) a `certified provider' is a physician, or other
individual or entity designated by the Secretary, that,
in addition to providing diabetes outpatient self-
management training services, provides other items or
services for which payment may be made under this
``(B) a physician, or such other individual or
entity, meets the quality standards described in this
paragraph if the physician, or individual or entity,
meets quality standards established by the Secretary,
except that the physician or other individual or entity
shall be deemed to have met such standards if the
physician or other individual or entity meets
applicable standards originally established by the
National Diabetes Advisory Board and subsequently
revised by organizations who participated in the
establishment of standards by such Board, or is
recognized by an organization that represents
individuals (including individuals under this title)
with diabetes as meeting standards for furnishing the
services.''.
(2) Payment Under Physician Fee Schedule.--Section
1848(j)(3)(42 U.S.C. 1395w-4(j)(3)) as amended in
sections 4102 and 4103, is amended by inserting
``(2)(S),'' before ``(3),''.
(3) Consultation with organizations in establishing
payment amounts for services provided by physicians.--
In establishing payment amounts under section 1848 of
the Social Security Act for physicians' services
consisting of diabetes outpatient self-management
training services, the Secretary of Health and Human
Services shall consult with appropriate organizations,
including such organizations representing individuals
or medicare beneficiaries with diabetes, in determining
the relative value for such services under section
1848(c)(2) of such Act.
(b) Blood-testing Strips for Individuals With Diabetes.--
(1) Including strips and monitors as durable medical
equipment.--The first sentence of section 1861(n) (42
U.S.C. 1395x(n)) is amended by inserting before the
semicolon the following: ``, and includes blood-
testingstrips and blood glucose monitors for individuals with diabetes
without regard to whether the individual has Type I or Type II diabetes
or to the individual's use of insulin (as determined under standards
established by the Secretary in consultation with the appropriate
organizations)''.
(2) 10 percent reduction in payments for testing
strips.--Section 1834(a)(2)(B)(iv) (42 U.S.C.
1395m(a)(2)(B)(iv)) is amended by adding before the
period the following: ``(reduced by 10 percent, in the
case of a blood glucose testing strip furnished after
1997 for an individual with diabetes)''.
(c) Establishment of Outcome Measures for Beneficiaries With
Diabetes.--
Services, in consultation with appropriate
organizations, shall establish outcome measures,
including glysolated hemoglobin (past 90-day average
blood sugar levels), for purposes of evaluating the
improvement of the health status of medicare
beneficiaries with diabetes mellitus.
(2) Recommendations for modifications to screening
benefits.--Taking into account information on the
health status of medicare beneficiaries with diabetes
mellitus as measured under the outcome measures
established under subparagraph (A), the Secretary shall
from time to time submit recommendations to Congress
regarding modifications to the coverage of services for
such beneficiaries under the medicare program.
(a) In General.--Section 1861 (42 U.S.C. 1395x), as amended
by sections 4103(a), 4104(a), 4105(a), is amended--
(1) in subsection (s)--
(A) in paragraph (12)(C), by striking ``and''
paragraph (14) and inserting ``; and'',
(C) by redesignating paragraphs (15) and (16)
as paragraphs (16) and (17), respectively, and
(D) by inserting after paragraph (14) the
``(15) bone mass measurement (as defined in
subsection (rr)).''; and
(2) by inserting after subsection (qq) the following
``Bone Mass Measurement
``(rr)(1) The term `bone mass measurement' means a radiologic
or radioisotopic procedure or other procedure approved by the
Food and Drug Administration performed on a qualified
individual (as defined in paragraph (2)) for the purpose of
identifying bone mass or detecting bone loss or determining
bone quality, and includes a physician's interpretation of the
results of the procedure.
``(2) For purposes of this subsection, the term `qualified
individual' means an individual who is (in accordance with
regulations prescribed by the Secretary)--
``(A) an estrogen-deficient woman at clinical risk
for osteoporosis;
``(B) an individual with vertebral abnormalities;
``(C) an individual receiving long-term
glucocorticoid steroid therapy;
``(D) an individual with primary hyperparathyroidism;
``(E) an individual being monitored to assess the
response to or efficacy of an approved osteoporosis
drug therapy.
``(3) The Secretary shall establish such standards regarding
the frequency with which a qualified individual shall be
eligible to be provided benefits for bone mass measurement
under this title.''.
(b) Payment Under Physician Fee Schedule.--Section 1848(j)(3)
(42 U.S.C. 1395w-4(j)(3)), as amended by sections 4102, 4103,
and 4105, is amended--
(1) by striking ``(4) and (14)'' and inserting ``(4),
(14)'' and
(2) by inserting ``and (15)'' after ``1861(nn)(2))''.
(c) Conforming Amendments.--Sections 1864(a), 1902(a)(9)(C),
and 1915(a)(1)(B)(ii)(I) (42 U.S.C. 1395aa(a), 1396a(a)(9)(C),
and 1396n(a)(1)(B)(ii)(I)) are amended by striking ``paragraphs
(15) and (16)'' each place it appears and inserting
``paragraphs (16) and (17)''.
shall apply to bone mass measurements performed on or after
July 1, 1998.
(a) Extension of Influenza and Pneumococcal Vaccination
Campaign.--In order to increase utilization of pneumococcal and
influenza vaccines in medicare beneficiaries, the Influenza and
Pneumococcal Vaccination Campaign carried out by the Health
Care Financing Administration in conjunction with the Centers
for Disease Control and Prevention and the National Coalition
for Adult Immunization, is extended until the end of fiscal
(b) Appropriation.--There are hereby appropriated for each of
fiscal years 1998 through 2002, $8,000,000 to the Campaign
described in subsection (a). Of the amount of such
appropriation in each fiscal year, 60 percent of such
appropriation shall be payable from the Federal Hospital
Insurance Trust Fund, and 40 percent shall be payable from the
Federal Supplementary Medical Insurance Trust Fund under title
XVIII of the Social Security Act (42 U.S.C. 1395i, 1395t).
request the National Academy of Sciences, inconjunction with
the United States Preventive Services Task Force, to analyze the
expansion or modification of preventive benefits provided to medicare
beneficiaries under title XVIII of the Social Security Act. The
analysis shall consider both the short term and long term benefits, and
costs to the medicare program, of such expansion or modification,
(1) Initial report.--Not later than 2 years after the
submit a report on the findings of the analysis
conducted under subsection (a) to the Committee on Ways
and Means and the Committee on Commerce of the House of
Representatives and the Committee on Finance of the
Senate.
(2) Contents.--Such report shall include specific
findings with respect to coverage of the following
preventive benefits:
(A) Nutrition therapy, including parenteral
and enteral nutrition.
(B) Skin cancer screening.
(C) Medically necessary dental care.
(D) Routine patient care costs for
beneficiaries enrolled in approved clinical
trial programs.
(E) Elimination of time limitation for
coverage of immunosuppressive drugs for
transplant patients.
(3) Funding.--From funds appropriated to the
Department of Health and Human Services for fiscal
years 1998 and 1999, the Secretary shall provide for
such funding as may be necessary for the conduct of the
analysis by the National Academy of Sciences under this
(a) Purpose and Authorization.--
(1) In general.--Not later than 9 months after the
date of enactment of this section, the Secretary of
Health and Human Services shall provide for a
demonstration project described in paragraph (2).
(2) Description of project.--
(A) In general.--The demonstration project
described in this paragraph is a single
demonstration project to use eligible health
care provider telemedicine networks to apply
high-capacity computing and advanced networks
to improve primary care (and prevent health
care complications) to medicare beneficiaries
with diabetes mellitus who are residents of
medically underserved rural areas or residents
of medically underserved inner-city areas.
(B) Medically underserved defined.--As used
in this paragraph, the term ``medically
underserved'' has the meaning given such term
in section 330(b)(3) of the Public Health
Service Act (42 U.S.C. 254b(b)(3)).
(3) Waiver.--The Secretary shall waive such
provisions of title XVIII of the Social Security Act as
may be necessary to provide for payment for services
under the project in accordance with subsection (d).
(4) Duration of project.--The project shall be
conducted over a 4-year period.
(b) Objectives of Project.--The objectives of the project
(1) Improving patient access to and compliance with
appropriate care guidelines for individuals with
diabetes mellitus through direct telecommunications
link with information networks in order to improve
patient quality-of-life and reduce overall health care
(2) Developing a curriculum to train, and providing
standards for credentialing and licensure of, health
professionals (particularly primary care health
professionals) in the use of medical informatics and
telecommunications.
(3) Demonstrating the application of advanced
technologies, such as video-conferencing from a
patient's home, remote monitoring of a patient's
medical condition, interventional informatics, and
applying individualized, automated care guidelines, to
assist primary care providers in assisting patients
with diabetes in a home setting.
(4) Application of medical informatics to residents
with limited English language skills.
(5) Developing standards in the application of
telemedicine and medical informatics.
(6) Developing a model for the cost-effective
delivery of primary and related care both in a managed
care environment and in a fee-for-service environment.
(c) Eligible Health Care Provider Telemedicine Network
Defined.--For purposes of this section, the term ``eligible
health care provider telemedicine network'' means a consortium
that includes at least one tertiary care hospital (but no more
than 2 such hospitals), at least one medical school, no more
than 4 facilities in rural or urban areas, and at least one
regional telecommunications provider and that meets the
following requirements:
(1) The consortium is located in an area with one of
the highest concentrations of medical schools and
tertiary care facilities in the United States and has
appropriate arrangements (within or outside the
consortium) with such schools and facilities,
universities, and telecommunications providers, in
order to conduct the project.
(2) The consortium submits to the Secretary an
application at such time, in such manner, and
containing such information as the Secretary may
require, including a description of the use to which
the consortium would apply any amounts received under
the project and the source and amount of non-Federal
funds used in the project.
(3) The consortium guarantees that it will be
responsible for payment for all costs of the project
that are not paid under this section and that the
maximum amount of payment that may be made to the
consortium under thissection shall not exceed the
amount specified in subsection (d)(3).
(d) Coverage as Medicare Part B Services.--
(1) In general.--Subject to the succeeding provisions
of this subsection, services related to the treatment
or management of (including prevention of complications
from) diabetes for medicare beneficiaries furnished
under the project shall be considered to be services
covered under part B of title XVIII of the Social
(2) Payments.--
(A) In general.--Subject to paragraph (3),
payment for such services shall be made at a
rate of 50 percent of the costs that are
reasonable and related to the provision of such
services. In computing such costs, the
Secretary shall include costs described in
subparagraph (B), but may not include costs
described in subparagraph (C).
(B) Costs that may be included.--The costs
described in this subparagraph are the
permissible costs (as recognized by the
Secretary) for the following:
(i) The acquisition of telemedicine
equipment for use in patients' homes
(but only in the case of patients
located in medically underserved
areas).
(ii) Curriculum development and
training of health professionals in
medical informatics and telemedicine.
(iii) Payment of telecommunications
costs (including salaries and
maintenance of equipment), including
costs of telecommunications between
patients' homes and the eligible
network and between the network and
other entities under the arrangements
described in subsection (c)(1).
(iv) Payments to practitioners and
providers under the medicare programs.
(C) Costs not included.--The costs described
in this subparagraph are costs for any of the
(i) The purchase or installation of
transmission equipment (other than such
equipment used by health professionals
to deliver medical informatics services
under the project).
(ii) The establishment or operation
of a telecommunications common carrier
(iii) Construction (except for minor
renovations related to the installation
of reimbursable equipment) or the
acquisition or building of real
(3) Limitation.--The total amount of the payments
that may be made under this section shall not exceed
(4) Limitation on cost-sharing.--The project may not
impose cost sharing on a medicare beneficiary for the
receipt of services under the project in excess of 20
percent of the recognized costs of the project
attributable to such services.
(e) Reports.--The Secretary shall submit to the Committees on
Ways and Means and Commerce of the House of Representatives and
the Committee on Finance of the Senate interim reports on the
project and a final report on the project within 6 months after
the conclusion of the project. The final report shall include
an evaluation of the impact of the use of telemedicine and
medical informatics on improving access of medicare
beneficiaries to health care services, on reducing the costs of
such services, and on improving the quality of life of such
(f) Definitions.--For purposes of this section:
(1) Interventional informatics.--The term
``interventional informatics'' means using information
technology and virtual reality technology to intervene
in patient care.
(2) Medical informatics.--The term ``medical
informatics'' means the storage, retrieval, and use of
biomedical and related information for problem solving
and decision-making through computing and
communications technologies.
(3) Project.--The term ``project'' means the
demonstration project under this section.
Section 1128(c)(3) (42 U.S.C. 1320a-7(c)(3)) is amended--
(1) in subparagraph (A), by inserting ``or in the
case described in subparagraph (G)'' after ``subsection
(b)(12)'';
(2) in subparagraphs (B) and (D), by striking ``In
the case'' and inserting ``Subject to subparagraph (G),
in the case''; and
``(G) In the case of an exclusion of an individual under
subsection (a) based on a conviction occurring on or after the
date of the enactment of this subparagraph, if the individual
has (before, on, or after such date and before the date of the
conviction for which the exclusion is imposed) been convicted--
``(i) on one previous occasion of one or more
offenses for which an exclusion may be effected under
such subsection, the period of the exclusion shall be
not less than 10 years, or
``(ii) on 2 or more previous occasions of one or more
permanent.''.
(a) Medicare Part A.--Section 1866(b)(2) (42 U.S.C.
1395cc(b)(2)) is amended--
(1) by striking ``or'' at the end of subparagraph
(B);
(C) and inserting ``, or''; and
(3) by adding after subparagraph (C) the following
new subparagraph:
``(D) has ascertained that the provider has
been convicted of a felony under Federal or
State law for an offense which the Secretary
determines is inconsistent with the best
interests of program beneficiaries.''.
(b) Medicare Part B.--Section 1842 (42 U.S.C. 1395u) is
amended by adding after subsection (r) the following new
``(s) The Secretary may refuse to enter into an agreement
with a physician or supplier under subsection (h) or may
terminate or refuse to renew such agreement, in the event that
such physician or supplier has been convicted of a felony under
Federal or State law for an offense which the Secretary
determines is inconsistent with the best interests of program
beneficiaries.''.
(c) Medicaid.--Section 1902(a)(23) (42 U.S.C. 1396(a)) is
(1) by relocating the matter that precedes ``provide
that, (A)'' immediately before the semicolon;
(2) by inserting a semicolon after ``1915'';
(3) by striking the comma after ``Guam'' and
inserting a semicolon; and
(4) by inserting before the semicolon at the end the
following: ``and except that this provision does not
require a State to provide medical assistance for such
services furnished by a person or entity convicted of a
felony under Federal or State law for an offense which
the State agency determines is inconsistent with the
best interests of beneficiaries under the State plan''.
shall take effect on the date of the enactment of this Act and
apply to the entry and renewal of contracts on or after such
(a) In General.--Section 1842(h)(7) (42 U.S.C. 1395u(h)(7))
``(E) a toll-free telephone number maintained by the
Inspector General in the Department of Health and Human
Services for the receipt of complaints and information
about waste, fraud, and abuse in the provision or
billing of services under this title.''.
shall apply to explanations of benefits provided on or after
such date (not later than January 1, 1999) as the Secretary of
Health and Human Services shall provide.
(a) Reimbursement to the Secretary for Amounts Paid to
Excluded Providers.--
(1) Requirements for fiscal intermediaries.--
(A) In general.--Section 1816 (42 U.S.C.
1395h) is amended by adding at the end the
``(m) An agreement with an agency or organization under this
section shall require that such agency or organization
reimburse the Secretary for any amounts paid by the agency or
organization for a service under this title which is furnished,
directed, or prescribed by an individual or entity during any
period for which the individual or entity is excluded pursuant
to section 1128, 1128A, or 1156, from participation in the
program under this title, if the amounts are paid after the
Secretary notifies the agency or organization of the
exclusion.''.
(B) Conforming amendment.--Subsection (i) of
such section is amended by adding at the end
the following new paragraph:
``(4) Nothing in this subsection shall be construed to
prohibit reimbursement by an agency or organization under
subsection (m).''.
(2) Requirements for carriers.--Section 1842(b)(3)
(42 U.S.C. 1395u(b)(3)) is amended--
subparagraph (I); and
(B) by inserting after subparagraph (I) the
``(J) will reimburse the Secretary for any amounts
paid by the carrier for an item or service under this
part which is furnished, directed, or prescribed by an
individual or entity during any period for which the
individual or entity is excluded pursuant to section
1128, 1128A, or 1156, from participation in the program
under this title, if the amounts are paid after the
Secretary notifies the carrier of the exclusion, and''.
(3) Medicaid Provision.--Section 1902(a)(39) (42
U.S.C. 1396a(a)(39)) is amended by inserting before the
semicolon at the end the following: ``, and provide
further for reimbursement to the Secretary of any
payments made under the plan or any item or service
furnished, directed, or prescribed by the excluded
individual or entity during such period, after the
Secretary notifies the State of such exclusion''.
(b) Conforming Repeal of Mandatory Payment Rule.--Paragraph
(2) of section 1862(e) (42 U.S.C. 1395y(e)) is amended to read
``(2) No individual or entity may bill (or collect any amount
from) any individual for any item or service for which payment
is denied under paragraph (1). No person is liable for payment
of any amounts billed for such an item or service in violation
of the previous sentence.''.
(c) Effective Dates.--The amendments made by this section
shall apply to contracts and agreements entered into, renewed,
or extended after the date of the enactment of this Act, but
only with respect to claims submitted on or after the later of
January 1, 1998, or the date such entry, renewal, or extension
becomes effective.
(a) In General.--Section 1128 (42 U.S.C. 1320a-7) is
(1) in subsection (b)(8)(A)--
(A) by striking ``or'' at the end of clause
(i), and
(B) by striking the dash at the end of clause
(ii) and inserting ``; or'', and
(C) by inserting after clause (ii) the
``(iii) who was described in clause (i) but
is no longer so described because of a transfer
of ownership or control interest, in
anticipation of (or following) a conviction,
assessment, or exclusion described in
subparagraph (B) against the person, to an
immediate family member (as defined in
subsection (j)(1)) or a member of the household
of the person (as defined in subsection (j)(2))
who continues to maintain an interest described
in such clause--''; and
(2) by adding after subsection (i) the following new
``(j) Definition of Immediate Family Member and Member of
Household.--For purposes of subsection (b)(8)(A)(iii):
``(1) The term `immediate family member' means, with
respect to a person--
``(A) the husband or wife of the person;
``(B) the natural or adoptive parent, child,
or sibling of the person;
``(C) the stepparent, stepchild, stepbrother,
or stepsister of the person;
``(D) the father-, mother-, daughter-, son-,
brother-, or sister-in-law of the person;
``(E) the grandparent or grandchild of the
person; and
``(F) the spouse of a grandparent or
grandchild of the person.
``(2) The term `member of the household' means, with
respect to a person, any individual sharing a common
abode as part of a single family unit with the person,
including domestic employees and others who live
together as a family unit, but not including a roomer
or boarder.''.
shall take effect on the date that is 45 days after the date of
the enactment of this Act.
(a) Civil Money Penalties for Persons That Contract With
Excluded Individuals.--Section 1128A(a) (42 U.S.C. 1320a-7a(a))
(1) by striking ``or'' at the end of paragraph (4);
(2) by adding ``or'' at the end of paragraph (5); and
(3) by adding after paragraph (5) the following new
``(6) arranges or contracts (by employment or
otherwise) with an individual or entity that the person
knows or should know is excluded from participation in
a Federal health care program (as defined in section
1128B(f)), for the provision of items or services for
which payment may be made under such a program;''.
(b) Effective Dates.--The amendments made by subsection (a)
shall apply to arrangements and contracts entered into after
(a) Disclosure of Information and Surety Bond Requirement for
Suppliers of Durable Medical Equipment.--Section 1834(a) (42
U.S.C. 1395m(a)) is amended by inserting after paragraph (15)
``(16) Conditions for issuance of provider number.--
The Secretary shall not provide for the issuance (or
renewal) of a provider number for a supplier of durable
medical equipment, for purposes of payment under this
part for durable medical equipment furnished by the
supplier, unless the supplier provides the Secretary on
a continuing basis with--
``(A)(i) full and complete information as to
the identity of each person with an ownership
or control interest (as defined in section
1124(a)(3)) in the supplier or in any
subcontractor (as defined by the Secretary in
regulations) in which the supplier directly or
indirectly has a 5 percent or more ownership
interest, and
``(ii) to the extent determined to be
feasible under regulations of the Secretary,
the name of any disclosing entity (as defined
in section 1124(a)(2)) with respect to which a
person with such an ownership or control
interest in the supplier is a person with such
an ownership or control interest in the
disclosing entity; and
``(B) a surety bond in a form specified by
the Secretary and in an amount that is not less
than $50,000.
The Secretary may waive the requirement of a bond under
subparagraph (B) in the case of a supplier that
provides a comparable surety bond under State law.''.
(b) Surety Bond Requirement for Home Health Agencies.--
(1) In general.--Section 1861(o) (42 U.S.C. 1395x(o))
(A) in paragraph (7), by inserting ``and
including providing the Secretary on a
continuing basis with asurety bond in a form
specified by the Secretary and in an amount that is not less than
$50,000,'' after ``financial security of the program'', and
(B) by adding at the end the following: ``The
Secretary may waive the requirement of a bond
under paragraph (7) in the case of an agency or
organization that provides a comparable surety
bond under State law.''.
(2) Conforming amendments.--Section 1861(v)(1)(H) (42
U.S.C. 1395x(v)(1)(H)) is amended--
(A) in clause (i), by striking ``the
financial security requirement'' and inserting
``the financial security and surety bond
requirements''; and
(B) in clause (ii), by striking ``the
financial security requirement described in
subsection (o)(7) applies'' and inserting ``the
financial security and surety bond requirements
described in subsection (o)(7) apply''.
(3) Reference to current disclosure requirement.--For
provision of current law requiring home health agencies
to disclose information on ownership and control
interests, see section 1124 of the Social Security Act.
(c) Authorizing Application of Disclosure and Surety Bond
Requirements to Ambulance Services and Certain Clinics.--
Section 1834(a)(16) (42 U.S.C. 1395m(a)(16)), as added by
subsection (a), is amended by adding at the end the following:
``The Secretary, in the Secretary's discretion, may impose the
requirements of the previous sentence with respect to some or
all classes of suppliers of ambulance services described in
section 1861(s)(7) and clinics that furnish medical and other
health services (other than physicians' services) under this
part.''.
(d) Application to Comprehensive Outpatient Rehabilitation
Facilities (CORFs).--Section 1861(cc)(2) (42 U.S.C.
1395x(cc)(2)) is amended--
(1) in subparagraph (I), by inserting before the
period at the end the following: ``and providing the
Secretary on a continuing basis with a surety bond in a
form specified by the Secretary and in an amount that
is not less than $50,000'', and
(2) by adding after and below subparagraph (I) the
``The Secretary may waive the requirement of a bond under
subparagraph (I) in the case of a facility that provides a
comparable surety bond under State law.''.
(e) Application to Rehabilitation Agencies.--Section 1861(p)
(42 U.S.C. 1395x(p)) is amended--
(1) in paragraph (4)(A)(v), by inserting after ``as
the Secretary may find necessary,'' the following:
``and provides the Secretary, to the extent required by
the Secretary, on a continuing basis with a surety bond
in a form specified by the Secretary and in an amount
that is not less than $50,000'', and
(2) by adding at the end the following: ``The
Secretary may waive the requirement of a bond under
paragraph (4)(A)(v) in the case of a clinic or agency
that provides a comparable surety bond under State
law.''.
(f) Effective Dates.--(1) The amendment made by subsection
(a) shall apply to suppliers of durable medical equipment with
respect to such equipment furnished on or after January 1,
(2) The amendments made by subsection (b) shall apply to home
health agencies with respect to services furnished on or after
such date. The Secretary of Health and Human Services shall
modify participation agreements under section 1866(a)(1) of the
Social Security Act with respect to home health agencies to
provide for implementation of such amendments on a timely
(3) The amendments made by subsections (c) through (e) shall
take effect on the date of the enactment of this Act and may be
applied with respect to items and services furnished on or
after the date specified in paragraph (1).
(a) Requirements to Disclose Employer Identification Numbers
(EINS) and Social Security Account Numbers (SSNs).--Section
1124(a)(1) (42 U.S.C. 1320a-3(a)(1)) is amended by inserting
before the period at the end the following: ``and supply the
Secretary with both the employer identification number
(assigned pursuant to section 6109 of the Internal Revenue Code
of 1986) and social security account number (assigned under
section 205(c)(2)(B)) of the disclosing entity, each person
with an ownership or control interest (as defined in subsection
(a)(3)), and any subcontractor in which the entity directly or
indirectly has a 5 percent or more ownership interest. Use of
the social security account number under this section shall be
limited to identity verification and identity matching purposes
only. The social security account number shall not be disclosed
to any person or entity other than the Secretary, the Social
Security Administration, or the Secretary of the Treasury, In
obtaining the social security account numbers of the disclosing
entity and other persons described in this section, the
Secretary shall comply with section 7 of the Privacy Act of
1974 (5 U.S.C. 552a note)''.
(b) Other Medicare Providers.--Section 1124A (42 U.S.C.
1320a-3a) is amended--
paragraph (2) and inserting ``; and''; and
``(3) including the employer identification number
(assigned pursuant to section 6109 of the Internal
Revenue Code of 1986) and social security account
number (assigned under section 205(c)(2)(B)) of the
disclosing part B provider and any person, managing
employee, or other entity identified or described under
paragraph (1) or (2).''; and
(2) in subsection (c) by inserting ``(or, for
purposes of subsection (a)(3), any entity receiving
payment)'' after ``on an assignment-related basis''.
(c) Verification by Social Security Administration (ssa).--
Section 1124A (42 U.S.C. 1320a-3a) is amended--
(1) by redesignating subsection (c) as subsection
(d); and
(2) by inserting after subsection (b) the following
``(c) Verification.--
``(1) Transmittal by hhs.--The Secretary shall
transmit--
``(A) to the Commissioner of Social Security
information concerning each social security
account number (assigned under section
205(c)(2)(B)), and
``(B) to the Secretary of the Treasury
information concerning each employer
identification number (assigned pursuant to
section 6109 of the Internal Revenue Code of
supplied to the Secretary pursuant to subsection (a)(3)
or section 1124(c) to the extent necessary for
verification of such information in accordance with
``(2) Verification.--The Commissioner of Social
Security and the Secretary of the Treasury shall verify
the accuracy of, or correct, the information supplied
by the Secretary to such official pursuant to paragraph
(1), and shall report such verifications or corrections
to the Secretary.
``(3) Fees for verification.--The Secretary shall
reimburse the Commissioner and Secretary of the
Treasury, at a rate negotiated between the Secretary
and such official, for the costs incurred by such
official in performing the verification and correction
services described in this subsection.''.
(d) Report.--Before this subsection shall be effective, the
a report on steps the Secretary has taken to assure the
confidentiality of social security account numbers that will be
provided to the Secretary under the amendments made by this
section. If Congress determines that the Secretary has not
taken adequate steps to assure the confidentiality of social
security account numbers to be provided to the Secretary under
the amendments made by this section, the amendments made by
this section shall not take effect.
(e) Effective Dates.--Subject to subsection (d)--
(1) the amendment made by subsection (a) shall apply
to the application of conditions of participation, and
entering into and renewal of contracts and agreements,
occurring more than 90 days after the date of
submission of the report under subsection (d); and
(2) the amendments made by subsection (b) shall apply
to payment for items and services furnished more than
90 days after the date of submission of such report.
Section 1877(g) (42 U.S.C. 1395nn(g)) is amended by adding at
the end the following new paragraph:
``(6) Advisory opinions.--
``(A) In general.--The Secretary shall issue
written advisory opinions concerning whether a
referral relating to designated health services
(other than clinical laboratory services) is
prohibited under this section.
``(B) Binding as to secretary and parties
involved.--Each advisory opinion issued by the
Secretary shall be binding as to the Secretary
and the party or parties requesting the
``(C) Application of certain procedures.--The
Secretary shall, to the extent practicable,
apply the regulations promulgated under section
1128D(b)(5) to the issuance of advisory
opinions under this paragraph.
``(D) Applicability.--This paragraph shall
apply to requests for advisory opinions made
during the period described in section
1128D(b)(6).''.
(a) Notification of Availability of Home Health Agencies As
Part of Discharge Planning Process.--Section 1861(ee)(2) (42
U.S.C. 1395x(ee)(2)) is amended--
(1) in subparagraph (D), by inserting before the
period the following: ``, including the availability of
home health services through individuals and entities
that participate in the program under this title and
that serve the area in which the patient resides and
that request to be listed by the hospital as
available''; and
``(H) Consistent with section 1802, the discharge
plan shall--
``(i) not specify or otherwise limit the
qualified provider which may provide post-
hospital home health services, and
``(ii) identify (in a form and manner
specified by the Secretary) any home health
agency (to whom the individual is referred) in
which the hospital has a disclosable financial
interest (as specified by the Secretary
consistent with section 1866(a)(1)(R)) or which
has such an interest in the hospital.''.
(b) Maintenance and Disclosure of Information on Post-
Hospital Home Health Agencies.--Section 1866(a)(1) (42 U.S.C.
1395cc(a)(1)) is amended--
(Q),
(R), and
``(S) in the case of a hospital that has a financial
interest (as specified by the Secretary in regulations)
in a home health agency, or in which such an agency has
such a financial interest, or in which another entity
has such a financial interest (directly or indirectly)
with such hospital and such an agency, to maintain and
disclose to the Secretary (in a form and manner
specified by the Secretary) information on--
``(i) the nature of such financial interest,
``(ii) the number of individuals who were
discharged from the hospital and who were
identified as requiring home health services,
``(iii) the percentage of such individuals
who received such services from such provider
(or another such provider).''.
(c) Disclosure of Information to the Public.--Title XI is
``public disclosure of certain information on hospital financial
interest and referral patterns
``Sec. 1146. The Secretary shall make available to the
public, in a form and manner specified by the Secretary,
information disclosed to the Secretary pursuant to section
1866(a)(1)(R).''.
(d) Effective Dates.--
(1) The amendments made by subsection (a) shall apply
to discharges occurring on or after 90 days after the
(2) The Secretary of Health and Human Services shall
issue regulations by not later than 1 year after the
date of the enactment of this Act to carry out the
amendments made by subsections (b) and (c) and such
amendments shall take effect as of such date (on or
after the issuance of such regulations) as the
Secretary specifies in such regulations.
(a) Reference Correction.--(1) Section 1128D(b)(2)(D) (42
U.S.C. 1320a-7d(b)(2)(D)), as added by section 205 of the
Health Insurance Portability and Accountability Act of 1996, is
amended by striking ``1128B(b)'' and inserting ``1128A(b)''.
(2) Section 1128E(g)(3)(C) (42 U.S.C. 1320a-7e(g)(3)(C)) is
amended by striking ``Veterans' Administration'' and inserting
``Department of Veterans Affairs''.
(b) Language in Definition of Conviction.--Section
1128E(g)(5) (42 U.S.C. 1320a-7e(g)(5)), as inserted by section
221(a) of the Health Insurance Portability and Accountability
Act of 1996, is amended by striking ``paragraph (4)'' and
inserting ``paragraphs (1) through (4)''.
(c) Implementation of Exclusions.--Section 1128 (42 U.S.C.
1320a-7) is amended--
(1) in subsection (a), by striking ``any program
under title XVIII and shall direct that the following
individuals and entities be excluded from participation
in any State health care program (as defined in
subsection (h))'' and inserting ``any Federal health
care program (as defined in section 1128B(f))''; and
(2) in subsection (b), by striking ``any program
under title XVIII and may direct that the following
in any State health care program'' and inserting ``any
Federal health care program (as defined in section
1128B(f))''.
(d) Sanctions for Failure to Report.--Section 1128E(b) (42
U.S.C. 1320a-7e(b)), as inserted by section 221(a) of the
``(6) Sanctions for failure to report.--
``(A) Health plans.--Any health plan that
fails to report information on an adverse
action required to be reported under this
subsection shall be subject to a civil money
penalty of not more than $25,000 for each such
adverse action not reported. Such penalty shall
be imposed and collected in the same manner as
civilmoney penalties under subsection (a) of
section 1128A are imposed and collected under that section.
``(B) Governmental agencies.--The Secretary
shall provide for a publication of a public
report that identifies those Government
agencies that have failed to report information
on adverse actions as required to be reported
under this subsection.''.
(e) Effective Dates.--
(1) In general.--Except as provided in this
subsection, the amendments made by this section shall
be effective as if included in the enactment of the
Health Insurance Portability and Accountability Act of
(2) Federal health program.--The amendments made by
subsection (c) shall take effect on the date of the
(3) Sanction for failure to report.--The amendment
made by subsection (d) shall apply to failures
occurring on or after the date of the enactment of this
(a) Elimination of FDO for Ambulatory Surgical Center
Procedures.--Section 1833(i)(3)(B)(i)(II) (42 U.S.C.
1395l(i)(3)(B)(i)(II)) is amended--
(1) by striking ``of 80 percent''; and
(2) by striking the period at the end and inserting
the following: ``, less the amount a provider may
charge as described in clause (ii) of section
1866(a)(2)(A).''.
(b) Elimination of FDO for Radiology Services and Diagnostic
Procedures.--Section 1833(n)(1)(B)(i) (42 U.S.C.
1395l(n)(1)(B)(i)) is amended--
(1) by striking ``of 80 percent'', and
following: ``, less the amount a provider may charge as
described in clause (ii) of section 1866(a)(2)(A)''.
shall apply to services furnished during portions of cost
reporting periods occurring on or after October 1, 1997.
(a) Reduction in Payments for Capital-Related Costs.--Section
1861(v)(1)(S)(ii)(I) (42 U.S.C. 1395x(v)(1)(S)(ii)(I)) is
amended by striking ``through 1998'' and inserting ``through
1999 and during fiscal year 2000 before January 1, 2000''.
(b) Reduction in Payments for Other Costs.--Section
1861(v)(1)(S)(ii)(II) (42 U.S.C. 1395x(v)(1)(S)(ii)(II)) is
SEC. 4413. PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES.
(a) In General.--Section 1833 (42 U.S.C. 1395l) is amended by
adding at the end the following:
``(t) Prospective Payment System for Hospital Outpatient
Department Services.--
``(1) In general.--With respect to hospital
outpatient services designated by the Secretary (in
this section referred to as `covered OPD services') and
furnished during a year beginning with 1999, the amount
of payment under this part shall be determined under a
prospective payment system established by the Secretary
in accordance with this subsection.
``(2) System requirements.--Under the payment
system--
``(A) the Secretary shall develop a
classification system for covered OPD services;
``(B) the Secretary may establish groups of
covered OPD services, within the classification
system described in subparagraph (A), so that
services classified within each group are
comparable clinically and with respect to the
use of resources;
``(C) the Secretary shall, using data on
claims from 1996 and using data from the most
recent available cost reports, establish
relative payment weights for covered OPD
services (and any groups of such services
described in subparagraph (B)) based on median
hospital costs and shall determine projections
of the frequency of utilization of each such
service (or group of services) in 1999;
``(D) the Secretary shall determine a wage
adjustment factor to adjust the portion of
payment and coinsurance attributable to labor-
related costs for relative differences in labor
and labor-related costs across geographic
regions in a budget neutral manner;
``(E) the Secretary shall establish other
adjustments, in a budget neutral manner, as
determined to be necessary to ensure equitable
payments, such as outlier adjustments,
adjustments to account for variations in
coinsurance payments for procedures with
similar resource costs, or adjustments for
certain classes of hospitals; and
``(F) the Secretary shall develop a method
for controlling unnecessary increases in the
volume of covered OPD services.
``(3) Calculation of base amounts.--
``(A) Aggregate amounts that would be payable
if deductibles were disregarded.--The Secretary
shall estimate the total amounts that would be
payable from the Trust Fund under this part for
covered OPD services in 1999, determined
without regard to this subsection, as though
the deductible under section 1833(b) did not
apply, and as though the coinsurance described
in section 1866(a)(2)(A)(ii) (as in effect
before the date of the enactment of this
subsection) continued to apply.
``(B) Unadjusted copayment amount.--
``(i) In general.--For purposes of
this subsection, subject to clause
(ii), the `unadjusted copayment amount'
applicable to a covered OPD service (or
group of such services) is 20 percent
of national median of the charges for
the service (or services within the
group) furnished during 1996, updated
to 1999 using the Secretary's estimate
of charge growth during the period.
``(ii) Adjusted to be 20 percent when
fully phased in.--If the pre-deductible
payment percentage for a covered OPD
service (or group of such services)
furnished in a year would be equal to
or exceed 80 percent, then the
unadjusted copayment amount shall be 25
percent of amount determined under
subparagraph (D)(i).
``(iii) Rules for new services.--The
Secretary shall establish rules for
establishment of an unadjusted
copayment amount for a covered OPD
service not furnished during 1996,
based upon its classification within a
group of such services.
``(C) Calculation of conversion factors.--
``(I) In general.--The
Secretary shall establish a
1999 conversion factor for
determining the medicare pre-
deductible OPD fee payment
amounts for each covered OPD
service (or group of such
services) furnished in 1999.
Such conversion factor shall be
established on the basis of the
weights and frequencies
described in paragraph (2)(C)
and in a manner such that the
sum for all services and groups
of the products (described in
subclause (II) for each such
service or group) equals the
total projected amount
described in subparagraph (A).
``(II) Product described.--The
product described in this subclause,
for a service or group, is the product
of the medicare pre-deductible OPD fee
payment amounts (taking into account
appropriate adjustments described in
paragraphs (2)(D) and (2)(E)) and the
frequencies for such service or group.
``(ii) Subsequent years.--Subject to
paragraph (8)(B), the Secretary shall
establish a conversion factor for
covered OPD services furnished in
subsequent years in an amount equal to
the conversion factor established under
this subparagraph and applicable to
such services furnished in the previous
year increased by the OPD payment
increase factor specified under clause
(iii) for the year involved.
``(iii) OPD payment increase
factor.--For purposes of this
subparagraph, the `OPD payment increase
factor' for services furnished in a
year is equal to the sum of--
``(I) market basket
percentage increase (applicable
under section
1886(b)(3)(B)(iii)) to hospital
discharges occurring during the
fiscal year ending in such
``(II) in the case of a
covered OPD service (or group
of such services) furnished in
a year in which the pre-
deductible payment percentage
would not exceed 80 percent,
3.5 percentage points, but in
no case greater than such
number of percentage points as
will result in the pre-
exceeding 80 percent.
In applying the previous sentence for
years beginning with 2000, the
Secretary may substitute forthe market
basket percentage increase under subclause (I) an annual percentage
increase that is computed and applied with respect to covered OPD
services furnished in a year in the same manner as the market basket
percentage increase is determined and applied to inpatient hospital
services for discharges occurring in a fiscal year.
``(D) Pre-deductible payment percentage.--The
pre-deductible payment percentage for a covered
OPD service (or group of such services)
furnished in a year is equal to the ratio of--
``(i) the conversion factor
established under subparagraph (C) for
the year, multiplied by the weighting
factor established under paragraph
(2)(C) for the service (or group), to
``(ii) the sum of the amount
determined under clause (i) and the
unadjusted copayment amount determined
under subparagraph (B) for such service
or group.
``(E) Calculation of medicare opd fee
schedule amounts.--The Secretary shall compute
a medicare OPD fee schedule amount for each
covered OPD service (or group of such services)
furnished in a year, in an amount equal to the
``(i) the conversion factor computed
under subparagraph (C) for the year,
``(ii) the relative payment weight
(determined under paragraph (2)(C)) for
the service or group.
``(4) Medicare payment amount.--The amount of payment
made from the Trust Fund under this part for a covered
OPD service (and such services classified within a
group) furnished in a year is determined as follows:
``(A) Fee schedule and copayment amount.--Add
(i) the medicare OPD fee schedule amount
(computed under paragraph (3)(E)) for the
service or group and year, and (ii) the
unadjusted copayment amount (determined under
paragraph (3)(B)) for the service or group.
``(B) Subtract applicable deductible.--Reduce
the adjusted sum by the amount of the
deductible under section 1833(b), to the extent
``(C) Apply payment proportion to
remainder.--Multiply the amount so determined
under subparagraph (B) by the pre-deductible
payment percentage (as determined under
paragraph (3)(D)) for the service or group and
``(D) Labor-related adjustment.--The amount
of payment is the product determined under
subparagraph (C) with the labor-related portion
of such product adjusted for relative
differences in the cost of labor and other
factors determined by the Secretary, as
computed under paragraph (2)(D).
``(5) Copayment amount.--
``(A) In general.--Except as provided in
subparagraph (B), the copayment amount under
this subsection is determined as follows:
``(i) Unadjusted copayment.--Compute
the amount by which the amount
described in paragraph (4)(B) exceeds
the amount of payment determined under
paragraph (4)(C).
``(ii) Labor adjustment.--The
copayment amount is the difference
determined under clause (i) with the
labor-related portion of such
difference adjusted for relative
differences in the cost of labor and
other factors determined by the
Secretary, as computed under paragraphs
(2)(D). The adjustment under this
clause shall be made in a manner that
does not result in any change in the
aggregate copayments made in any year
if the adjustment had not been made.
``(B) Election to offer reduced copayment
amount.--The Secretary shall establish a
procedure under which a hospital, before the
beginning of a year (beginning with 1999), may
elect to reduce the copayment amount otherwise
established under subparagraph (A) for some or
all covered OPD services to an amount that is
not less than 25 percent of the medicare OPD
fee schedule amount (computed under paragraph
(3)(E)) for the service involved, adjusted for
relative differences in the cost of labor and
other factors determined by the Secretary, as
computed under subparagraphs (D) and (E) of
paragraph (2). Under such procedures, such
reduced copayment amount may not be further
reduced or increased during the year involved
and the hospital may disseminate information on
the reduction of copayment amount effected
under this subparagraph.
``(C) No impact on deductibles.--Nothing in
this paragraph shall be construed as affecting
a hospital's authority to waive the charging of
a deductible under section 1833(b).
``(6) Periodic review and adjustments components of
prospective payment system.--
``(A) Periodic review.--The Secretary may
periodically review and revise the groups, the
relative payment weights, and the wage and
other adjustments described in paragraph (2) to
take into account changes in medical practice,
changes in technology, the addition of new
services, new cost data, and other relevant
information and factors.
``(B) Budget neutrality adjustment.--If the
Secretary makes adjustments under subparagraph
(A), then the adjustments for a year may not
cause the estimated amount of expenditures
under this part for the year to increase or
decrease from the estimated amount of
expenditures under this part that would have
been made if the adjustments had not been made.
``(C) Update factor.--If the Secretary
determines under methodologies described in
subparagraph (2)(F) that the volume of services
paid for under this subsection increased beyond
amounts established through those
methodologies, the Secretary may appropriately
adjust the update to the conversion factor
otherwise applicable in a subsequent year.
``(7) Special rule for ambulance services.--The
Secretary shall pay for hospital outpatient services
that are ambulance services on the basis described in
the matter in subsection (a)(1) preceding subparagraph
(A).
``(8) Special rules for certain hospitals.--In the
case of hospitals described in section
1886(d)(1)(B)(v)--
``(A) the system under this subsection shall
not apply to covered OPD services furnished
before January 1, 2000; and
``(B) the Secretary may establish a separate
conversion factor for such services in a manner
that specifically takes into account the unique
costs incurred by such hospitals by virtue of
their patient population and service intensity.
``(9) Limitation on review.--There shall be no
administrative or judicial review under section 1869,
1878, or otherwise of--
``(A) the development of the classification
system under paragraph (2), including the
establishment of groups and relative payment
weights for covered OPD services, of wage
adjustment factors, other adjustments, and
methods described in paragraph (2)(F);
``(B) the calculation of base amounts under
``(C) periodic adjustments made under
``(D) the establishment of a separate
conversion factor under paragraph (8)(B).''.
(b) Coinsurance.--Section 1866(a)(2)(A)(ii) (42 U.S.C.
1395cc(a)(2)(A)(ii)) is amended by adding at the end the
following: ``In the case of items and services for which
payment is made under part B under the prospective payment
system established under section 1833(t), clause (ii) of the
first sentence shall be applied by substituting for 20 percent
of the reasonable charge, the applicable copayment amount
established under section 1833(t)(5).''.
(c) Treatment of Reduction in Copayment Amount.--Section
1128A(i)(6) (42 U.S.C. 1320a-7a(i)(6)) is amended--
(B),
(C) and inserting ``; or'', and
``(D) a reduction in the copayment amount for
covered OPD services under section
1833(t)(5)(B).''.
(d) Conforming Amendments.--
(1) Approved asc procedures performed in hospital
outpatient departments.--
(A)(i) Section 1833(i)(3)(A) (42 U.S.C.
13951(i)(3)(A)) is amended--
(I) by inserting ``before January 1,
1999,'' after ``furnished'', and
(II) by striking ``in a cost
reporting period''.
(ii) The amendment made by clause (i) shall
apply to services furnished on or after January
(B) Section 1833(a)(4) (42 U.S.C.
13951(a)(4)) is amended by inserting ``or
subsection (t)'' before the semicolon.
(2) Radiology and other diagnostic procedures.--
(A) Section 1833(n)(1)(A) (42 U.S.C.
1395l(n)(1)(A)) is amended by inserting ``and
before January 1, 1999,'' after ``October 1,
1988,'' and after ``October 1, 1989,''.
(B) Section 1833(a)(2)(E) (42 U.S.C.
1395l(a)(2)(E)) is amended by inserting ``or,
for services or procedures performed on or
after January 1, 1999, (t)'' before the
semicolon.
(3) Other hospital outpatient services.--Section -
1833(a)(2)(B) (42 U.S.C. 1395l(a)(2)(B)) is amended--
(A) in clause (i), by inserting ``furnished
before January 1, 1999,'' after ``(i)'',
(B) in clause (ii), by inserting ``before
January 1, 1999,'' after ``furnished'',
(C) by redesignating clause (iii) as clause
(iv),and
(D) by inserting after clause (ii), the
``(iii) if such services are
furnished on or after January 1, 1999,
the amount determined under subsection
(t), or''.
(a) Payment Based on Fee Schedule.--
(1) Special payment rules.--Section 1833(a) (42
U.S.C. 1395l(a)) is amended--
(A) in paragraph (2) in the matter before
subparagraph (A), by inserting ``(C),'' before
``(D)'';
(B) in paragraph (6), by striking ``and'' at
the end;
(C) in paragraph (7), by striking the period
at the end and inserting ``; and'';
(D) by adding at the end the following new
``(8) in the case of services described in section
1832(a)(2)(C) (that are not described in section
1832(a)(2)(B)), the amounts described in section
1834(k).''.
(2) Payment rates.--Section 1834 (42 U.S.C. 1395m) is
``(k) Payment for Outpatient Therapy Services.--
``(1) In general.--With respect to outpatient
physical therapy services (which includes outpatient
speech-language pathology services) and outpatient
occupational therapy services for which payment is
determined under this subsection, the payment basis
shall be--
``(A) for services furnished during 1998, the
amount determined under paragraph (2); or
``(B) for services furnished during a
subsequent year, 80 percent of the lesser of--
``(i) the actual charge for the
``(ii) the applicable fee schedule
amount (as defined in paragraph (3))
for the services.
``(2) Payment in 1998 based upon charges or adjusted
reasonable costs.--The amount under this paragraph for
services is the lesser of--
``(A) the charges imposed for the services,
``(B) the adjusted reasonable costs (as
defined in paragraph (4)) for the services,
less 20 percent of the amount of the charges imposed
for such services.
``(3) Applicable fee schedule amount.--In this
paragraph, the term `applicable fee schedule amount'
means, with respect to services furnished in a year,
the fee schedule amount established under section 1848
for such services furnished during the year or, if
there is no such fee schedule amount established for
such services, for such comparable services as the
Secretary specifies.
``(4) Adjusted reasonable costs.--In paragraph (2),
the term `adjusted reasonable costs' means reasonable
costs determined reduced by--
``(A) 5.8 percent of the reasonable costs for
operating costs, and
``(B) 10 percent of the reasonable costs for
capital costs.
``(5) Uniform coding.--For claims for services
submitted on or after April 1, 1998, for which the
amount of payment is determined under this subsection,
the claim shall include a code (or codes) under a
uniform coding system specified by the Secretary that
identifies the services furnished.
``(6) Restraint on billing.--The provisions of
subparagraphs (A) and (B) of section 1842(b)(18) shall
apply to therapy services for which payment is made
under this subsection in the same manner as they apply
to services provided by a practitioner described in
section 1842(b)(18)(C).''.
(b) Application of Standards to Outpatient Occupational and
Physical Therapy Services Provided As an Incident to a
Physician's Professional Services.--Section 1862(a), as amended
by section 4401(b), (42 U.S.C. 1395y(a)) is amended--
(1) by striking ``or'' at the end of paragraph (16);
(17) and inserting ``; or''; and
(3) by inserting after paragraph (17) the following:
``(18) in the case of outpatient occupational therapy
services or outpatient physical therapy services
furnished as an incident to a physician's professional
services (as described in section 1861(s)(2)(A)), that
do not meet the standards and conditions under the
second sentence of section 1861(g) or 1861(p) as such
standards and conditions would apply to such therapy
services if furnished by a therapist.''.
(c) Applying Financial Limitation to All Rehabilitation
Services.--Section 1833(g) (42 U.S.C. 1395l(g)) is amended--
(1) in the first sentence, by striking ``services
described in the second sentence of section 1861(p)''
and inserting ``physical therapy services of the type
described in section 1861(p) (regardless of who
furnishes the services or whether the services may be
covered as physicians' services so long as the services
are furnished other than in a hospital setting)'', and
(2) in the second sentence, by striking ``outpatient
occupational therapy services which are described in
the second sentence of section 1861(p) through the
operation of section 1861(g)'' and inserting
``occupational therapy services (of the type that are
described in section 1861(p) through the operation of
section 1861(g)), regardless of who furnishes the
services or whether the services may be covered as
physicians' services so long as the services are
furnished other than in a hospital setting''.
apply to services furnished on or after January 1, 1998; except
that the amendments made by subsection (c) apply to services
furnished on or after January 1, 1999.
U.S.C. 1395l(a)), as amended by section 4421(a), is
(A) in paragraph (3), by striking
``subparagraphs (D) and (E) of section
1832(a)(2)'' and inserting ``section
1832(a)(2)(E)'';
1832(a)(2)(E), the amounts described in section
(2) Payment rates.--Section 1834(k) (42 U.S.C.
1395m(k)), as added by section 4421(a), is amended--
(A) in the heading, by inserting ``and
Comprehensive Outpatient Rehabilitation
Facility Services'' after ``Therapy Services'';
(B) in paragraph (1), by inserting ``and with
respect to comprehensive outpatient
rehabilitation facility services'' after
``occupational therapy services''.
shall apply to services furnished on or after January 1, 1998,
and to portions of cost reporting periods occurring on or after
such date.
(a) Interim Reductions.--
(1) Payments determined on reasonable cost basis.--
Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended
``(U) In determining the reasonable cost of ambulance
services (as described in subsection (s)(7)) provided
during a fiscal year (beginning with fiscal year 1998
and ending with fiscal year 2002), the Secretary shall
not recognize the costs per trip in excess of costs
recognized as reasonable for ambulance services
provided on a per trip basis during the previous fiscal
year after application of this subparagraph, increased
by the percentage increase in the consumer price index
for all urban consumers (U.S. city average) as
estimated by the Secretary for the 12-month period
ending with the midpoint of the fiscal year involved
reduced (in the case of each of fiscal years 1998 and
1999) by 1 percentage point.''.
(2) Payments determined on reasonable charge basis.--
Section 1842(b) (42 U.S.C. 1395u(b)) is amended by
``(19) For purposes of section 1833(a)(1), the reasonable
charge for ambulance services (as described in section
1861(s)(7)) provided during a fiscal year (beginning with
fiscal year 1998 and ending with fiscal year 2002) may not
exceed the reasonable charge for such services provided during
the previous fiscal year after the application of this
subparagraph, increased by the percentage increase in the
consumer price index for all urban consumers (U.S. city
average) as estimated by the Secretary for the 12-month period
ending with the midpoint of the year involved reduced (in the
case of each of fiscal years 1998 and 1999) by 1 percentage
point.''.
(b) Establishment of Prospective Fee Schedule.--
(1) Payment in accordance with fee schedule.--Section
1833(a)(1) (42 U.S.C. 1395l(a)(1)), as amended by
section 4619(b)(1), is amended--
(A) by striking ``and (P)'' and inserting
``(P)''; and
(B) by striking the semicolon at the end and
inserting the following: ``, and (Q) with
respect to ambulance service, the amounts paid
shall be 80 percent of the lesser of the actual
charge for the services or the amount
determined by a fee schedule established by the
Secretary under section 1834(l);''.
(2) Establishment of schedule.--Section 1834 (42
U.S.C. 1395m), as amended by section 4421(a)(2), is
``(l) Establishment of Fee Schedule for Ambulance Services.--
fee schedule for payment for ambulance services under
this part through a negotiated rulemaking process
described in title 5, United States Code, and in
accordance with the requirements of this subsection.
``(2) Considerations.--In establishing such fee
schedule the Secretary shall--
``(A) establish mechanisms to control
increases in expenditures for ambulance
services under this part;
``(B) establish definitions for ambulance
services which link payments to the type of
services provided;
``(C) consider appropriate regional and
operational differences;
``(D) consider adjustments to payment rates
to account for inflation and other relevant
factors; and
``(E) phase in the application of the payment
rates under the fee schedule in an efficient
and fair manner.
``(3) Savings.--In establishing such fee schedule the
Secretary shall--
``(A) ensure that the aggregate amount of
payments made for ambulance services under this
part during 2000 does not exceed the aggregate
amount of payments which would have been made
for such services under this part during such
year if the amendments made by section 4431 of
the Balanced Budget Act of 1997 had not been
made; and
``(B) set the payment amounts provided under
the fee schedule for services furnished in 2001
and each subsequent year at amounts equal to
the payment amounts under the fee schedule for
service furnished during the previous year,
increased by the percentage increase in the
consumer price index for all urban consumers
(U.S. city average) for the 12-month period
ending with June of the previous year.
``(4) Consultation.--In establishing the fee schedule
for ambulance services under this subsection, the
Secretary shall consult with various national
organizations representing individuals and entities who
furnish and regulate ambulance services and share with
such organizations relevant data in establishing such
administrative or judicial review under section 1869 or
otherwise of the amounts established under the fee
schedule forambulance services under this subsection,
including matters described in paragraph (2).
apply to ambulance services for which payment is made
section apply to ambulance services furnished on or
after January 1, 2000.
(c) Authorizing Payment for Paramedic Intercept Service
Providers in Rural Communities.--In promulgating regulations to
carry out section 1861(s)(7) of the Social Security Act (42
U.S.C. 1395x(s)(7)) with respect to the coverage of ambulance
service, the Secretary of Health and Human Services may include
coverage of advanced life support services (in this subsection
referred to as ``ALS intercept services'') provided by a
paramedic intercept service provider in a rural area if the
following conditions are met:
(1) The ALS intercept services are provided under a
contract with one or more volunteer ambulance services
and are medically necessary based on the health
condition of the individual being transported.
(2) The volunteer ambulance service involved--
(A) is certified as qualified to provide
ambulance service for purposes of such section,
(B) provides only basic life support services
at the time of the intercept, and
(C) is prohibited by State law from billing
for any services.
(3) The entity supplying the ALS intercept services--
(A) is certified as qualified to provide such
services under the medicare program under title
XVIII of the Social Security Act, and
(B) bills all recipients who receive ALS
intercept services from the entity, regardless
of whether or not such recipients are medicare
MEDICARE THROUGH CONTRACTS WITH UNITS OF LOCAL
(a) Demonstration Project Contracts with Local Governments.--
The Secretary of Health and Human Services shall establish up
to 3 demonstration projects under which, at the request of a
county or parish, the Secretary enters into a contract with the
county or parish under which--
(1) the county or parish furnishes (or arranges for
the furnishing) of ambulance services for which payment
may be made under part B of title XVIII of the Social
Security Act for individuals residing in the county or
parish who are enrolled under such part, except that
the county or parish may not enter into the contract
unless the contract covers at least 80 percent of the
individuals residing in the county or parish who are
enrolled under such part;
(2) any individual or entity furnishing ambulance
services under the contract meets the requirements
otherwise applicable to individuals and entities
furnishing such services under such part; and
(3) for each month during which the contract is in
effect, the Secretary makes a capitated payment to the
county or parish in accordance with subsection (b).
The projects may extend over a period of not to exceed 3 years
each.
(b) Amount of Payment.--
(1) In general.--The amount of the monthly payment
made for months occurring during a calendar year to a
county or parish under a demonstration project contract
under subsection (a) shall be equal to the product of--
(A) the Secretary's estimate of the number of
individuals covered under the contract for the
month; and
(B) \1/12\ of the capitated payment rate for
the year established under paragraph (2).
(2) Capitated payment rate defined.--In this
subsection, the ``capitated payment rate'' applicable
to a contract under this subsection for a calendar year
is equal to 95 percent of--
(A) for the first calendar year for which the
contract is in effect, the average annual per
capita payment made under part B of title XVIII
of the Social Security Act with respect to
ambulance services furnished to such
individuals during the 3 most recent calendar
years for which data on the amount of such
payment is available; and
(B) for a subsequent year, the amount
provided under this paragraph for the previous
year increased by the percentage increase in
the consumer price index for all urban
consumers (U.S. city average) for the 12-month
period ending with June of the previous year.
(c) Other Terms of Contract.--The Secretary and the county or
parish may include in a contract under this section such other
terms as the parties consider appropriate, including--
(1) covering individuals residing in additional
counties or parishes (under arrangements entered into
between such counties or parishes and the county or
parish involved);
(2) permitting the county or parish to transport
individuals to non-hospital providers if such providers
are able to furnish quality services at a lower cost
than hospital providers; or
(3) implementing such other innovations as the county
or parish may propose to improve the quality of
ambulance services and control the costs of such
(d) Contract Payments in Lieu of Other Benefits.--Payments
under a contract to a county or parish under this section shall
be instead of the amounts which (in the absence of the
contract) would otherwise be payable under partB of title XVIII
of the Social Security Act for the services covered under the contract
which are furnished to individuals who reside in the county or parish.
(e) Report on Effects of Capitated Contracts.--
(1) Study.--The Secretary shall evaluate the
demonstration projects conducted under this section.
Such evaluation shall include an analysis of the
quality and cost-effectiveness of ambulance services
furnished under the projects.
(2) Report.--Not later than January 1, 2000, the
Secretary shall submit a report to Congress on the
study conducted under paragraph (1), and shall include
in the report such recommendations as the Secretary
considers appropriate, including recommendations
regarding modifications to the methodology used to
determine the amount of payments made under such
contracts and extending or expanding such projects.
(a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as
amended by section 4011, is amended by adding at the end the
``prospective payment for home health services
``Sec. 1895. (a) In General.--Notwithstanding section
1861(v), the Secretary shall provide, for cost reporting
periods beginning on or after October 1, 1999, for payments for
home health services in accordance with a prospective payment
system established by the Secretary under this section.
``(b) System of Prospective Payment for Home Health
``(1) In general.--The Secretary shall establish
under this subsection a prospective payment system for
payment for all costs of home health services. Under
the system under this subsection all services covered
and paid on a reasonable cost basis under the medicare
home health benefit as of the date of the enactment of
the this section, including medical supplies, shall be
paid for on the basis of a prospective payment amount
determined under this subsection and applicable to the
services involved. In implementing the system, the
Secretary may provide for a transition (of not longer
than 4 years) during which a portion of such payment is
based on agency-specific costs, but only if such
transition does not result in aggregate payments under
this title that exceed the aggregate payments that
would be made if such a transition did not occur.
``(2) Unit of payment.--In defining a prospective
payment amount under the system under this subsection,
the Secretary shall consider an appropriate unit of
service and the number, type, and duration of visits
provided within that unit, potential changes in the mix
of services provided within that unit and their cost,
and a general system design that provides for continued
access to quality services.
``(3) Payment basis.--
``(A) Initial basis.--
``(i) In general.--Under such system
the Secretary shall provide for
computation of a standard prospective
payment amount (or amounts). Such
amount (or amounts) shall initially be
based on the most current audited cost
report data available to the Secretary
and shall be computed in a manner so
that the total amounts payable under
the system for fiscal year 2000 shall
be equal to the total amount that would
have been made if the system had not
been in effect but if the reduction in
limits described in clause (ii) had
been in effect. Such amount shall be
standardized in a manner that
eliminates the effect of variations in
relative case mix and wage levels among
different home health agencies in a
budget neutral manner consistent with
the case mix and wage level
adjustmentsprovided under paragraph (4)(A). Under the system, the
Secretary may recognize regional differences or differences based upon
whether or not the services or agency are in an urbanized area.
``(ii) Reduction.--The reduction
described in this clause is a reduction
by 15 percent in the cost limits and
per beneficiary limits described in
section 1861(v)(1)(L), as those limits
are in effect on September 30, 1999.
``(B) Annual update.--
``(i) In general.--The standard
prospective payment amount (or amounts)
shall be adjusted for each fiscal year
(beginning with fiscal year 2001) in a
prospective manner specified by the
Secretary by the home health market
basket percentage increase applicable
to the fiscal year involved.
``(ii) Home health market basket
percentage increase.--For purposes of
this subsection, the term `home health
market basket percentage increase'
means, with respect to a fiscal year, a
percentage (estimated by the Secretary
before the beginning of the fiscal
year) determined and applied with
respect to the mix of goods and
services included in home health
services in the same manner as the
market basket percentage increase under
section 1886(b)(3)(B)(iii) is
determined and applied to the mix of
goods and services comprising inpatient
hospital services for the fiscal year.
``(C) Adjustment for outliers.--The Secretary
shall reduce the standard prospective payment
amount (or amounts) under this paragraph
applicable to home health services furnished
during a period by such proportion as will
result in an aggregate reduction in payments
for the period equal to the aggregate increase
in payments resulting from the application of
paragraph (5) (relating to outliers).
``(4) Payment computation.--
``(A) In general.--The payment amount for a
unit of home health services shall be the
applicable standard prospective payment amount
adjusted as follows:
``(i) Case mix adjustment.--The
amount shall be adjusted by an
appropriate case mix adjustment factor
(established under subparagraph (B)).
``(ii) Area wage adjustment.--The
portion of such amount that the
Secretary estimates to be attributable
to wages and wage-related costs shall
be adjusted for geographic differences
in such costs by an area wage
adjustment factor (established under
subparagraph (C)) for the area in which
the services are furnished or such
other area as the Secretary may
specify.
``(B) Establishment of case mix adjustment
factors.--The Secretary shall establish
appropriate case mix adjustment factors for
home health services in a manner that explains
a significant amount of the variation in cost
among different units of services.
``(C) Establishment of area wage adjustment
factors.--The Secretary shall establish area
wage adjustment factors that reflect the
relative level of wages and wage-related costs
applicable to the furnishing of home health
services in a geographic area compared to the
national average applicable level. Such factors
may be the factors used by the Secretary for
purposes of section 1886(d)(3)(E).
``(5) Outliers.--The Secretary may provide for an
addition or adjustment to the payment amount otherwise
made in the case of outliers because of unusual
variations in the type or amount of medically necessary
care. The total amount of the additional payments or
payment adjustments made under this paragraph with
respect to a fiscal year may not exceed 5 percent of
the total payments projected or estimated to be made
based on the prospective payment system under this
subsection in that year.
``(6) Proration of prospective payment amounts.--If a
beneficiary elects to transfer to, or receive services
from, another home health agency within the period
covered by the prospective payment amount, the payment
shall be prorated between the home health agencies
involved.
``(c) Requirements for Payment Information.--With respect to
home health services furnished on or after October 1, 1998, no
claim for such a service may be paid under this title unless--
``(1) the claim has the unique identifier (provided
under section 1842(r)) for the physician who prescribed
the services or made the certification described in
section 1814(a)(2) or 1835(a)(2)(A); and
``(2) in the case of a service visit described in
paragraph (1), (2), (3), or (4) of section 1861(m), the
claim has information (coded in an appropriate manner)
on the length of time of the service visit, as measured
in 15 minute increments.
``(d) Limitation on Review.--There shall be no administrative
or judicial review under section 1869, 1878, or otherwise of--
``(1) the establishment of a transition period under
subsection (b)(1);
``(2) the definition and application of payment units
under subsection (b)(2);
``(3) the computation of initial standard prospective
payment amounts under subsection (b)(3)(A) (including
the reduction described in clause (ii) of such
subsection);
``(4) the adjustment for outliers under subsection
(b)(3)(C);
``(5) case mix and area wage adjustments under
``(6) any adjustments for outliers under subsection
(b)(5); and
``(7) the amounts or types of exceptions or
adjustments under subsection (b)(7).''.
(b) Elimination of Periodic Interim Payments for Home Health
Agencies.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) is
(1) by inserting ``and'' at the end of subparagraph
(C),
(2) by striking subparagraph (D), and
(3) by redesignating subparagraph (E) as subparagraph
(D).
(c) Conforming Amendments.--
(1) Payments under part a.--Section 1814(b) (42
U.S.C. 1395f(b)) is amended in the matter preceding
paragraph (1) by striking ``and 1886'' and inserting
``1886, and 1895''.
(2) Treatment of items and services paid under part
b.--
(A) Payments under part b.--Section
1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amended--
(i) by amending subparagraph (A) to
read as follows:
``(A) with respect to home health services
(other than a covered osteoporosis drug) (as
defined in section 1861(kk)), the amount
determined under the prospective payment system
under section 1895;'';
of subparagraph (E);
(iii) by adding ``and'' at the end of
subparagraph (F); and
``(G) with respect to items and services
described in section 1861(s)(10)(A), the lesser
``(i) the reasonable cost of such
services, as determined under section
1861(v), or
``(ii) the customary charges with
respect to such services,
or, if such services are furnished by a public
provider of services, or by another provider
which demonstrates to the satisfaction of the
Secretary that a significant portion of its
patients are low-income (and requests that
payment be made under this provision), free of
charge or at nominal charges to the public, the
amount determined in accordance with section
1814(b)(2);''.
(B) Requiring payment for all items and
services to be made to agency.--
(i) In general.--The first sentence
of section 1842(b)(6) (42 U.S.C.
1395u(b)(6)), as amended by section
4401(b)(2), is amended--
(I) by striking ``and (E)''
and inserting ``(E)''; and
(II) by striking the period
at the end and inserting the
following: ``, and (F) in the
case of home health services
furnished to an individual who
(at the time the item or
service is furnished) is under
a plan of care of a home health
agency, payment shall be made
to the agency (without regard
to whether or not the item or
service was furnished by the
agency, by others under
arrangement with them made by
the agency, or when any other
contracting or consulting
arrangement, or otherwise).''.
(ii) Conforming amendment.--Section
1832(a)(1) (42 U.S.C. 1395k(a)(1)), as
amended by section 4401(b), is amended
by striking ``and section
1842(b)(6)(E)'' and inserting ``,
section 1842(b)(6)(E), and section
1842(b)(6)(F)''.
(C) Exclusions from coverage.--Section
1862(a) (42 U.S.C. 1395y(a)), as amended by
sections 4401(b) and 4421(b), is amended--
(i) by striking ``or'' at the end of
(ii) by striking the period at the
end of paragraph (18) and inserting ``;
or''; and
(iii) inserting after paragraph (18)
``(19) where such expenses are for home health
services furnished to an individual who is under a plan
of care of the home health agency if the claim for
payment for such services is not submitted by the
agency.''.
(d) Effective Date.--Except as otherwise provided, the
amendments made by this section shall apply to cost reporting
periods beginning on or after October 1, 1999.
(a) In General.--Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(1))
(1) by redesignating subparagraph (C) as subparagraph
(D), and
(2) by inserting after subparagraph (B) the
``(C) Special rules for 1998.--The single
conversion factor for 1998 under this
subsection shall be the conversion factor for
primary care services for 1997, increased by
the Secretary's estimate of the weighted
average of the three separate updates that
would otherwise occur were it not for the
enactment of chapter 1 of subtitle G of title X
of the Balanced Budget Act of 1997.''.
(b) Conforming Amendments.--Section 1848 (42 U.S.C. 1395w-4)
(1) by striking ``(or factors)'' each place it
appears in subsection (d)(1)(A) and (d)(1)(D)(ii) (as
redesignated by subsection (a)(1)),
(2) in subsection (d)(1)(A), by striking ``or
updates'',
(3) in subsection (d)(1)(D) (as redesignated by
subsection (a)(1)), by striking ``(or updates)'' each
place it appears, and
(4) in subsection (i)(1)(C), by striking ``conversion
factors'' and inserting ``the conversion factor''.
(a) Update.--
(1) In general.--Section 1848(d)(3) (42 U.S.C. 1395w-
4(d)(3)) is amended to read as follows:
``(3) Update.--
``(A) In general.--Unless otherwise provided
by law, subject to subparagraph (D) and the
budget-neutrality factor determined by the
Secretary under subsection (c)(2)(B)(ii), the
update to the single conversion factor
established in paragraph (1)(C) for a year
beginning with 1999 is equal to the product
``(i) 1 plus the Secretary's estimate
of the percentage increase in the MEI
(as defined in section 1842(i)(3)) for
the year (divided by 100), and
``(ii) 1 plus the Secretary's
estimate of the update adjustment
factor for the year (divided by 100),
minus 1 and multiplied by 100.
``(B) Update adjustment factor.--For purposes
of subparagraph (A)(ii), the `update adjustment
factor' for a year is equal to the quotient (as
estimated by the Secretary) of--
``(i) the difference between (I) the
sum of the allowed expenditures for
physicians' services (as determined
under subparagraph (C)) during the
period beginning July 1, 1997, and
ending on June 30 of the year involved,
and (II) the sum of the amount of
actual expenditures for physicians'
services furnished during the period
beginning July 1, 1997, and ending on
June 30 of the preceding year; divided
``(ii) the actual expenditures for
physicians' services for the 12-month
period ending on June 30 of the
preceding year, increased by the
sustainable growth rate under
subsection (f) for the fiscal year
which begins during such 12-month
``(C) Determination of allowed
expenditures.--For purposes of this paragraph,
the allowed expenditures for physicians'
services for the 12-month period ending with
June 30 of--
``(i) 1997 is equal to the actual
expenditures for physicians' services
furnished during such 12-month period,
as estimated by the Secretary; or
``(ii) a subsequent year is equal to
the allowed expenditures for
physicians' services for the previous
year, increased by the sustainable
growth rate under subsection (f) for
the fiscal year which begins during
such 12-month period.
``(D) Restriction on variation from medicare
economic index.--Notwithstanding the amount of
the update adjustment factor determined under
subparagraph (B) for a year, the update in the
conversion factor under this paragraph for the
year may not be--
``(i) greater than 100 times the
following amount: (1.03 + (MEI
percentage/100)) -1; or
``(ii) less than 100 times the
percentage/100)) -1,
where `MEI percentage' means the Secretary's
estimate of the percentage increase in the MEI
(as defined in section 1842(i)(3)) for the year
involved.''.
(1) shall apply to the update for years beginning with
(b) Elimination of Report.--Section 1848(d) (42 U.S.C. 1395w-
4(d)) is amended by striking paragraph (2).
(a) In General.--Section 1848(f) (42 U.S.C. 1395w-4(f)) is
amended by striking paragraphs (2) through (5) and inserting
``(2) Specification of growth rate.--The sustainable
growth rate for all physicians' services for a fiscal
year (beginning with fiscal year 1998) shall be equal
``(A) 1 plus the Secretary's estimate of the
weighted average percentage increase (divided
by 100) in the fees for all physicians'
services in the fiscal year involved,
``(B) 1 plus the Secretary's estimate of the
percentage change (divided by 100) in the
average number of individuals enrolled under
this part (other than MedicarePlus plan
enrollees) from the previous fiscal year to the
fiscal year involved,
``(C) 1 plus the Secretary's estimate of the
projected percentage growth in real gross
domestic product per capita (divided by 100)
from the previous fiscal year to the fiscal
year involved, and
``(D) 1 plus the Secretary's estimate of the
percentage change (divided by 100) in
expenditures for all physicians' services in
the fiscal year (compared with the previous
fiscal year) which will result from changes in
law and regulations, determined without taking
into account estimated changes in expenditures
due to changes in the volume and intensity of
physicians' services resulting from changes in
the update to the conversion factor under
subsection (d)(3),
``(3) Definitions.--In this subsection:
``(A) Services included in physicians'
services.--The term `physicians' services'
includes other items and services (such as
clinical diagnostic laboratory tests and
radiology services), specified by the
Secretary, that are commonly performed or
furnished by a physician or in a physician's
office, but does not include services furnished
to a MedicarePlus plan enrollee.
``(B) MedicarePlus plan enrollee.--The term
`MedicarePlus plan enrollee' means, with
respect to a fiscal year, an individual
enrolled under this part who has elected to
receive benefits under this title for the
fiscal year through a MedicarePlus plan offered
under part C, and also includes an individual
who is receiving benefits under this part
through enrollment with an eligible
organization with a risk-sharing contract under
section 1876.''.
(b) Conforming Amendments.--Section 1848(f) (42 U.S.C. 1395w-
4(f)) is amended--
(1) in the heading, by striking ``Volume Performance
Standard Rates of Increase'' and inserting
``Sustainable Growth Rate''; and
(A) in the heading, by striking ``volume
performance standard rates of increase'' and
inserting ``sustainable growth rate'',
(B) by striking subparagraphs (A) and (B);
(C) in paragraph (1)(C)--
(i) in the heading, by striking
``performance standard rates of
increase'' and inserting ``sustainable
growth rate'';
(ii) in the first sentence, by
striking ``with 1991), the performance
standard rates of increase'' and all
that follows through the first period
and inserting ``with 1999), the
sustainable growth rate for the fiscal
year beginning in that year.''; and
(iii) in the second sentence, by
striking ``January 1, 1990, the
performance standard rate of increase
under subparagraph (D) for fiscal year
1990'' and inserting ``January 1, 1999,
the sustainable growth rate for fiscal
year 1999''.
(a) In General.--Section 1848(d)(1) (42 U.S.C. 1395w-
4(d)(1)), as amended by section 4601, is amended--
(A) in subparagraph (C), striking ``The
single'' and inserting ``Except as provided in
subparagraph (D), the single'';
(B) by redesignating subparagraph (D) as
subparagraph (E); and
(C) by inserting after subparagraph (C) the
``(D) Special rules for anesthesia
services.--The separate conversion factor for
anesthesia services for a year shall be equal
to 46 percent of the single conversion factor
established for other physicians' services,
except as adjusted for changes in work,
practice expense, or malpractice relative value
units. ''.
(b) Classification of Anesthesia Services.--The first
sentence of section 1848(j)(1) (42 U.S.C. 1395w-4(j)(1)) is
(1) by striking ``and including anesthesia
services''; and
(2) by inserting before the period the following:
``(including anesthesia services)''.
shall apply to services furnished on or after January 1, 1998.
(a) 1-Year Delay in Implementation.--Section 1848(c) (42
U.S.C. 1395w-4(c)) is amended--
(1) in paragraph (2)(C)(ii), in the matter before
subclause (I) and after subclause (II), by striking
``1998'' and inserting ``1999'' each place it appears;
(2) in paragraph (3)(C)(ii), by striking ``1998'' and
(b) Phased-in Implementation.--
(1) In general.--Section 1848(c)(2)(C)(ii) (42 U.S.C.
1395w-4(c)(2)(C)(ii)) is further amended--
(A) by striking the comma at the end of
clause (ii) and inserting a period and the
``For 1999, such number of units shall
be determined based 75 percent on such
product and based 25 percent on the
relative practice expense resources
involved in furnishing the service. For
2000, such number of units shall be
determined based 50 percent on such
product and based 50 percent on such
relative practice expense resources.
For 2001, such number of units shall be
For a subsequent year, such number of
units shall be determined based
entirely on such relative practice
expense resources.''.
(2) Conforming amendment.--Section 1848(c)(3)(C)(ii)
(42 U.S.C. 1395w-4(c)(3)(C)(ii)), as amended by
subsection (a)(2), is amended by striking ``1999'' and
(c) Requirements for Developing New Resource-Based Practice
Expense Relative Value Units.--
(1) Development.--For purposes of section
1848(c)(2)(C) of the Social Security Act, the Secretary
of Health and Human Services shall develop new
resource-based relative value units. In developing such
units the Secretary shall--
(A) utilize, to the maximum extent
practicable, generally accepted accounting
principles and standards which (i) recognize
all staff, equipment, supplies, and expenses,
not just those which can be tied to specific
procedures, and (ii) use actual data on
equipment utilization and other key
assumptions, such as the proportion of costs
which are direct versus indirect;
(B) study whether hospital cost reduction
efforts and changing practice patterns may have
increased physician practice costs under part B
of the medicare program;
(C) consider potential adverse effects on
patient access under the medicare program; and
(D) consult with organizations representing
physicians regarding methodology and data to be
used, including data for impact projections, in
order to ensure that sufficient input has been
received by the affected physician community.
(2) Report.--The Secretary shall transmit a report by
March 1, 1998, on the development of resource-based
relative value units under paragraph (1) to the
Committee on Ways and Means and the Committee on
Commerce of the House of Representatives and the
Committee on Finance of the Senate. The report shall
include a presentation of data to be used in developing
the value units and an explanation of the methodology.
(3) Notice of proposed rulemaking.--The Secretary
shall publish a notice of proposed rulemaking with the
new resource-based relative value units on or before
May 1, 1998, and shall allow for a 90-day public
comment period.
(4) Items included.--The proposed new rule shall
(A) Detailed impact projections which compare
new proposed payment amounts on data on actual
physician practice expenses.
(B) Impact projections for specialties and
subspecialties, geographic payment localities,
urban versus rural localities, and academic
versus nonacademic medical staffs.
(C) Impact projections on access to care for
medicare patients and physician employment of
clinical and administrative staff.
SEC. 4606. DISSEMINATION OF INFORMATION ON HIGH PER DISCHARGE RELATIVE
(a) Determination and Notice Concerning Hospital-Specific Per
Discharge Relative Values.--
(1) In general.--For 1999 and 2001 the Secretary of
Health and Human Services shall determine for each
hospital--
(A) the hospital-specific per discharge
relative value under subsection (b); and
(B) whether the hospital-specific relative
value is projected to be excessive (as
determined based on such value represented as a
percentage of the median of hospital-specific
per discharge relative values determined under
subsection (b)).
(2) Notice to medical staffs and carriers.--The
Secretary shall notify the medical executive committee
of each hospital identifies under paragraph (1)(B) as
having an excessive hospital-specific relative value,
of the determinations made with respect to the medical
staff under paragraph (1).
(b) Determination of Hospital-Specific Per Discharge Relative
Values.--
(1) In general.--For purposes of this section, the
hospital-specific per discharge relative value for the
medical staff of a hospital (other than a teaching
hospital) for a year, shall be equal to the average per
discharge relative value (as determined under section
1848(c)(2) of the Social Security Act) for physicians'
services furnished to inpatients of the hospital by the
hospital's medical staff (excluding interns and
residents) during the second year preceding that
calendar year, adjusted for variations in case-mix and
disproportionate share status among hospitals (as
determined by the Secretary under paragraph (3)).
(2) Special rule for teaching hospitals.--The
hospital-specific relative value projected for a
teaching hospital in a year shall be equal to the sum
(A) the average per discharge relative value
(as determined under section 1848(c)(2) of such
Act) for physicians' services furnished to
inpatients of the hospital by the hospital's
medical staff (excluding interns and residents)
during the second year preceding that calendar
(B) the equivalent per discharge relative
value (as determined under such section) for
physicians' services furnished to inpatients of
the hospital by interns and residents of the
hospital during the second year preceding that
calendar year, adjusted for variations in case-
mix, disproportionate share status, and
teaching status among hospitals (as determined
by the Secretary under paragraph (3)).
The Secretary shall determine the equivalent relative
value unit per discharge for interns and residents
based on the best available data and may make such
adjustment in the aggregate.
(3) Adjustment for teaching and disproportionate
share hospitals.--The Secretary shall adjust the
allowable per discharge relative values otherwise
determined under this subsection to take into account
the needs of teaching hospitals and hospitals receiving
additional payments under subparagraphs (F) and (G) of
section 1886(d)(5) of the Social Security Act. The
adjustment for teaching status or disproportionate
share shall not be less than zero.
(c) Definitions.--For purposes of this section:
(1) Hospital.--The term ``hospital'' means a
subsection (d) hospital as defined in section 1886(d)
of the Social Security Act (42 U.S.C. 1395ww(d)) .
(2) Medical staff.--An individual furnishing a
physician's service is considered to be on the medical
staff of a hospital--
(A) if (in accordance with requirements for
hospitals established by the Joint Commission
on Accreditation of Health Organizations)--
(i) the individual is subject to
bylaws, rules, and regulations
established by the hospital to provide
a framework for the self-governance of
medical staff activities,
(ii) subject to the bylaws, rules,
and regulations, the individual has
clinical privileges granted by the
hospital's governing body, and
(iii) under the clinical privileges,
the individual may provide physicians''
services independently within the scope
of the individual's clinical
privileges, or
(B) if the physician provides at least one
service to an individual entitled to benefits
under this title in that hospital.
(3) Physicians' services.--The term ``physicians''
services'' means the services described in section
1848(j)(3) of the Social Security Act (42 U.S.C. 1395w-
4(j)(3)).
(4) Rural area; urban area.--The terms ``rural area''
and ``urban area'' have the meaning given those terms
under section 1886(d)(2)(D) of such Act (42 U.S.C.
1395ww(d)(2)(D)).
(5) Secretary.--The term ``Secretary'' means the
Secretary of Health and Human Services .
(6) Teaching hospital.--The term ``teaching
hospital'' means a hospital which has a teaching
program approved as specified in section 1861(b)(6) of
the Social Security Act (42 U.S.C. 1395x(b)(6)).
(a) In General.--Section 1861(r)(5) (42 U.S.C. 1395x(r)(5))
is amended by striking ``demonstrated by X-ray to exist''.
applies to services furnished on or after January 1, 1998.
(c) Utilization Guidelines.--The Secretary of Health and
Human Services shall develop and implement utilization
guidelines relating to the coverage of chiropractic services
under part B of title XVIII of the Social Security Act in cases
in which a subluxation has not been demonstrated by X-ray to
exist.
SEC. 4608. TEMPORARY COVERAGE RESTORATION FOR PORTABLE
ELECTROCARDIOGRAM TRANSPORTATION.
(a) In General.--Effective for electrocardiogram tests
performed during 1998, the Secretary of Health and Human
Services shall restore separate payment, under part B of title
XVIII of the Social Security Act, for the transportation of
electrocardiogram equipment (HCPCS code R0076) based upon the
status code and relative value units established for such
service as of December 31, 1996.
(b) Report.--By not later than July 1, 1998, the Comptroller
General shall submit to Congress a report on the
appropriateness of continuing such payment.
(a) Reduction in Payment Amounts for Items of Durable Medical
Equipment.--
(1) Freeze in update for covered items.--Section
1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended--
subparagraph (A);
(B) in subparagraph (B)--
(i) by striking ``a subsequent year''
and inserting ``1993, 1994, 1995, 1996,
and 1997'', and
end and inserting a semicolon; and
(C) by adding at the end the following:
``(C) for each of the years 1998 through
2002, 0 percentage points; and
``(D) for a subsequent year, the percentage
increase in the consumer price index for all
urban consumers (U.S. urban average) for the
12-month period ending with June of the
previous year.''.
(2) Update for orthotics and prosthetics.--Section
1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A)) is amended--
(A) by striking ``, and'' at the end of
clause (iii) and inserting a semicolon;
(B) in clause (iv), by striking ``a
subsequent year'' and inserting ``1996 and
1997'', and
``(v) for each of the years 1998
through 2002, 1 percent, and
``(vi) for a subsequent year, the
percentage increase in the consumer
price index for all urban consumers
(United States city average) for the
previous year;''.
(b) Payment Freeze for Parenteral and Enteral Nutrients,
Supplies, and Equipment.--In determining the amount of payment
under part B of title XVIII of the Social Security Act with
respect to parenteral and enteral nutrients, supplies, and
equipment during each of the years 1998 through 2002, the
charges determined to be reasonable with respect to such
nutrients, supplies, and equipment may not exceed the charges
determined to be reasonable with respect to such nutrients,
supplies, and equipment during 1995.
Section 1834(a)(9)(C) (42 U.S.C. 1395m(a)(9)(C)) is amended--
(1) by striking ``and'' at the end of clause (iii);
(2) in clause (iv)--
(A) by striking ``a subsequent year'' and
inserting ``1993, 1994, 1995, 1996, and 1997'',
(B) by striking the period at the end and
(3) by adding at the end the following new clauses:
``(v) in each of the years 1998
through 2002, is 80 percent of the
national limited monthly payment rate
computed under subparagraph (B) for the
item for the year; and
``(vi) in a subsequent year, is the
item for the year.''.
(a) Change in Update.--Section 1833(h)(2)(A)(ii)(IV) (42
U.S.C. 1395l(h)(2)(A)(ii)(IV)) is amended by inserting ``and
1998 through 2002'' after ``1995''.
(b) Lowering Cap on Payment Amounts.--Section 1833(h)(4)(B)
(42 U.S.C. 1395l(h)(4)(B)) is amended--
(1) in clause (vi), by striking ``and'' at the end;
(2) in clause (vii)--
(A) by inserting ``and before January 1,
1998,'' after ``1995,'', and
inserting ``, and''; and
``(viii) after December 31, 1997, is equal to 72
percent of such median.''.
SEC. 4614. SIMPLIFICATION IN ADMINISTRATION OF LABORATORY TESTS.
(a) Selection of Regional Carriers.--
Services (in this section referred to as the
``Secretary'') shall--
(A) divide the United States into no more
than 5 regions, and
(B) designate a single carrier for each such
for the purpose of payment of claims under part B of
title XVIII of the Social Security Act with respect to
clinical diagnostic laboratory tests (other than for
tests performed in physician offices) furnished on or
after such date (not later than January 1, 1999) as the
(2) Designation.--In designating such carriers, the
Secretary shall consider, among other criteria--
(A) a carrier's timeliness, quality, and
experience in claims processing, and
(B) a carrier's capacity to conduct
electronic data interchange with laboratories
and data matches with other carriers.
(3) Single data resource.--The Secretary may select
one of the designated carriers to serve as a central
statistical resource for all claims information
relating to such clinical diagnostic laboratory tests
handled by all the designated carriers under such part.
(4) Allocation of claims.--The allocation of claims
for clinical diagnostic laboratory tests to particular
designated carriers shall be based on whether a carrier
serves the geographic area where the laboratory
specimen was collected or other method specified by the
(b) Adoption of Uniform Policies for Clinical Laboratory
Tests.--
(1) In general.--Not later than July 1, 1998, the
Secretary shall first adopt, consistent with paragraph
(2), uniform coverage, administration, and payment
policies for clinical diagnostic laboratory tests under
part B of title XVIII of the Social Security Act, using
a negotiated rulemaking process under subchapter III of
chapter 5 of title 5, United States Code.
(2) Considerations in design of uniform policies.--
The policies under paragraph (1) shall be designed to
promote uniformity and program integrity and reduce
administrative burdens with respect to clinical
diagnostic laboratory tests payable under such part in
connection with the following:
(A) Beneficiary information required to be
submitted with each claim or order for
laboratory tests.
(B) Physicians' obligations regarding
documentation requirements and recordkeeping.
(C) Procedures for filing claims and for
providing remittances by electronic media.
(D) The documentation of medical necessity.
(E) Limitation on frequency of coverage for
the same tests performed on the same
(3) Changes in carrier requirements pending adoption
of uniform policy.--During the period that begins on
the date of the enactment of this Act and ends on the
date the Secretary first implements uniform policies
pursuant to regulations promulgated under this
subsection, a carrier under such part may implement
changes relating to requirements for the submission of
a claim for clinical diagnostic laboratory tests.
(4) Use of interim regional policies.--After the date
the Secretary first implements such uniform policies,
the Secretary shall permit any carrier to develop and
implement interim policies of the type described in
paragraph (1), in accordance with guidelines
established by the Secretary, in cases in which a
uniform national policy has not been established under
this subsection and there is a demonstrated need for a
policy to respond to aberrant utilization or provision
of unnecessary services. Except as the Secretary
specifically permits, no policy shall be implemented
under this paragraph for a period of longer than 2
(5) Interim national policies.--After the date the
Secretary first designates regional carriers under
subsection (a), the Secretary shall establish a process
under which designated carriers can collectively
develop and implement interim national standards of the
type described in paragraph (1). No such policy shall
be implemented under this paragraph for a period of
longer than 2 years.
(6) Biennial review process.--Not less often than
once every 2 years, the Secretary shall solicit and
review comments regarding changes in the uniform
policies established under this subsection. As part of
such biennial review process, the Secretary shall
specifically review and consider whether to incorporate
or supersede interim, regional, or national policies
developed under paragraph (4) or (5). Based upon such
review, the Secretary may provide for appropriate
changes in the uniform policies previously adopted
(7) Notice.-- Before a carrier implements a change or
policy under paragraph (3), (4), or (5), the carrier
shall provide for advance notice to interested parties
and a 45-day period in which such parties may submit
comments on the proposed change.
(c) Inclusion of Laboratory Representative on Carrier
Advisory Committees.--The Secretary shall direct that any
advisory committee established by such a carrier, to advise
with respect to coverage, administration or payment policies
under part B of title XVIII of the Social Security Act, shall
include an individual to represent the interest and views of
independent clinical laboratories and such other laboratories
as the Secretary deems appropriate. Such individual shall be
selected by such committee from among nominations submitted by
national and local organizations that represent independent
clinical laboratories.
Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is amended
by striking all that follows ``shall be increased'' and
inserting the following: ``as follows:
``(i) For fiscal years 1996 and 1997, by the
percentage increase in the consumer price index for all
urban consumers (U.S. city average) as estimated by the
Secretary for the 12-month period ending with the
midpoint of the year involved.
``(ii) For each of fiscal years 1998 through 2002 by
such percentage increase minus 2.0 percentage points.
``(iii) For each succeeding fiscal year by such
percentage increase.''.
(a) In General.--Section 1842 (42 U.S.C. 1395u) is amended by
inserting after subsection (n) the following new subsection:
``(o) If a physician's, supplier's, or any other person's
bill or request for payment for services includes a charge for
a drug or biological for which payment may be made under this
part and the drug or biological is not paid on a cost or
prospective payment basis as otherwise provided in this part,
the amountpayable for the drug or biological is equal to 95
percent of the average wholesale price.''.
apply to drugs and biologicals furnished on or after January 1,
(a) In General.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)),
as amended, is amended by inserting after subparagraph (S) the
``(T) an oral drug (which is approved by the Federal
Food and Drug Administration) prescribed for use as an
acute anti-emetic used as part of an anticancer
chemotherapeutic regimen if the drug is administered by
a physician (or as prescribed by a physician)--
``(i) for use immediately before, immediately
after, or at the time of the administration of
the anticancer chemotherapeutic agent; and
``(ii) as a full replacement for the anti-
emetic therapy which would otherwise be
administered intravenously.''.
(b) Payment Levels.--Section 1834 (42 U.S.C. 1395m), as
amended by sections 4421(a)(2) and 4431(b)(2), is amended by
``(m) Special Rules for Payment for Oral Anti-Nausea Drugs.--
``(1) Limitation on per dose payment basis.--Subject
to paragraph (2), the per dose payment basis under this
part for oral anti-nausea drugs (as defined in
paragraph (3)) administered during a year shall not
exceed 90 percent of the average per dose payment basis
for the equivalent intravenous anti-emetics
administered during the year, as computed based on the
payment basis applied during 1996.
``(2) Aggregate limit.--The Secretary shall make such
adjustment in the coverage of, or payment basis for,
oral anti-nausea drugs so that coverage of such drugs
under this part does not result in any increase in
aggregate payments per capita under this part above the
levels of such payments per capita that would otherwise
have been made if there were no coverage for such drugs
``(3) Oral anti-nausea drugs defined.--For purposes
of this subsection, the term `oral anti-nausea drugs'
means drugs for which coverage is provided under this
part pursuant to section 1861(s)(2)(P).''.
(a) Per-Visit Payment Limits for Provider-Based Clinics.--
(1) Extension of limit.--
(A) In general.--The matter in section
1833(f) (42 U.S.C. 1395l(f)) preceding
paragraph (1) is amended by striking
``independent rural health clinics'' and
inserting ``rural health clinics (other than
such clinics in rural hospitals with less than
50 beds)''.
(B) Effective date.--The amendment made by
subparagraph (A) applies to services furnished
after 1997.
(2) Technical clarification.--Section 1833(f)(1) (42
U.S.C. 1395l(f)(1)) is amended by inserting ``per
visit'' after ``$46''.
(b) Assurance of Quality Services.--
(1) In general.--Subparagraph (I) of the first
sentence of section 1861(aa)(2) (42 U.S.C.
1395x(aa)(2)) is amended to read as follows:
``(I) has a quality assessment and
performance improvement program, and
appropriate procedures for review of
utilization of clinic services, as the
Secretary may specify,''.
(1) shall take effect on January 1, 1998.
(c) Waiver of Certain Staffing Requirements Limited to
Clinics in Program.--
(1) In general.--Section 1861(aa)(7)(B) (42 U.S.C.
1395x(aa)(7)(B)) is amended by inserting before the
period at the end the following: ``, or if the facility
has not yet been determined to meet the requirements
(including subparagraph (J) of the first sentence of
paragraph (2)) of a rural health clinic''.
(1) applies to waiver requests made after 1997.
(d) Refinement of Shortage Area Requirements.--
(1) Designation reviewed triennially.--Section
1861(aa)(2) (42 U.S.C. 1395x(aa)(2)) is amended in the
second sentence, in the matter in clause (i) preceding
subclause (I)--
(A) by striking ``and that is designated''
and inserting ``and that, within the previous
three-year period, has been designated''; and
(B) by striking ``or that is designated'' and
inserting ``or designated''.
(2) Area must have shortage of health care
practitioners.--Section 1861(aa)(2) (42 U.S.C.
1395x(aa)(2)), as amended by paragraph (1), is further
amended in the second sentence, in the matter in clause
(i) preceding subclause (I)--
(A) by striking the comma after ``personal
health services''; and
(B) by inserting ``and in which there are
insufficient numbers of needed health care
practitioners (as determined by the
Secretary),'' after ``Bureau of the Census)''.
(3) Previously qualifying clinics grandfathered only
to prevent shortage.--Section 1861(aa)(2) (42 U.S.C.
1395x(aa)(2)) is amended in thethird sentence by
inserting before the period ``if it is determined, in accordance with
criteria established by the Secretary in regulations, to be essential
to the delivery of primary care services that would otherwise be
unavailable in the geographic area served by the clinic''.
(4) Effective dates; implementing regulations.--
(A) In general.--Except as otherwise
provided, the amendments made by the preceding
paragraphs take effect on January 1 of the
first calendar year beginning at least one
month after enactment of this Act.
(B) Current rural health clinics.--The
amendments made by the preceding paragraphs
take effect, with respect to entities that are
rural health clinics under title XVIII of the
Social Security Act on the date of enactment of
this Act, on January 1 of the second calendar
year following the calendar year specified in
(C) Grandfathered clinics.--
(i) In general.--The amendment made
by paragraph (3) shall take effect on
the effective date of regulations
issued by the Secretary under clause
(ii).
(ii) Regulations.--The Secretary
shall issue final regulations
implementing paragraph (3) that shall
take effect no later than January 1 of
the third calendar year beginning at
least one month after enactment of this
(a) Removal of Restrictions on Settings.--
(1) In general.--Clause (ii) of section 1861(s)(2)(K)
(42 U.S.C. 1395x(s)(2)(K)) is amended to read as
``(ii) services which would be physicians' services
if furnished by a physician (as defined in subsection
(r)(1)) and which are performed by a nurse practitioner
or clinical nurse specialist (as defined in subsection
(aa)(5)) working in collaboration (as defined in
subsection (aa)(6)) with a physician (as defined in
subsection (r)(1)) which the nurse practitioner or
clinical nurse specialist is legally authorized to
perform by the State in which the services are
performed, and such services and supplies furnished as
an incident to such services as would be covered under
subparagraph (A) if furnished incident to a physician's
professional service, but only if no facility or other
provider charges or is paid any amounts with respect to
the furnishing of such services;''.
(2) Conforming amendments.--(A) Section 1861(s)(2)(K)
of such Act (42 U.S.C. 1395x(s)(2)(K)) is further
(i) in clause (i), by inserting ``and such
services and supplies furnished as incident to
such services as would be covered under
subparagraph (A) if furnished incident to a
physician's professional service; and'' after
``are performed,''; and
(ii) by striking clauses (iii) and (iv).
(B) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4)) is
amended by striking ``clauses (i) or (iii) of
subsection (s)(2)(K)'' and inserting ``subsection
(s)(2)(K)''.
(C) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is
amended by striking ``section 1861(s)(2)(K)(i) or
1861(s)(2)(K)(iii)'' and inserting ``section
1861(s)(2)(K)''.
(D) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H))
is amended by striking ``section 1861(s)(2)(K)(i) or
(E) Section 1888(e)(2)(A)(ii) (42 U.S.C.
1395yy(e)(2)(A)(ii)), as added by section 10401(a), is
amended by striking ``through (iii)'' and inserting
``and (ii)''.
(b) Increased Payment.--
(1) Fee schedule amount.--Clause (O) of section
1833(a)(1) (42 U.S.C. 1395l(a)(1)) is amended to read
as follows: ``(O) with respect to services described in
section 1861(s)(2)(K)(ii) (relating to nurse
practitioner or clinical nurse specialist services),
the amounts paid shall be equal to 80 percent of (i)
the lesser of the actual charge or 85 percent of the
fee schedule amount provided under section 1848, or
(ii) in the case of services as an assistant at
surgery, the lesser of the actual charge or 85 percent
of the amount that would otherwise be recognized if
performed by a physician who is serving as an assistant
at surgery; and''.
(2) Conforming amendments.--(A) Section 1833(r) (42
U.S.C. 1395l(r)) is amended--
(i) in paragraph (1), by striking ``section
1861(s)(2)(K)(iii) (relating to nurse
practitioner or clinical nurse specialist
services provided in a rural area)'' and
inserting ``section 1861(s)(2)(K)(ii) (relating
to nurse practitioner or clinical nurse
specialist services)'';
(ii) by striking paragraph (2);
(iii) in paragraph (3), by striking ``section
1861(s)(2)(K)(ii)''; and
(iv) by redesignating paragraph (3) as
(B) Section 1842(b)(12)(A) (42 U.S.C.
1395u(b)(12)(A)) is amended, in the matter preceding
clause (i), by striking ``clauses (i), (ii), or (iv) of
section 1861(s)(2)(K) (relating to physician assistants
and nurse practitioners)'' and inserting ``section
1861(s)(2)(K)(i) (relating to physician assistants)''.
(c) Direct Payment for Nurse Practitioners and Clinical Nurse
Specialists.--
(1) In general.--Section 1832(a)(2)(B)(iv) (42 U.S.C.
1395k(a)(2)(B)(iv)) is amended by striking ``provided
in a rural area (as defined in section1886(d)(2)(D))''
and inserting ``but only if no facility or other provider charges or is
paid any amounts with respect to the furnishing of such services''.
(2) Conforming amendment.--Section 1842(b)(6)(C) (42
U.S.C. 1395u(b)(6)(C)) is amended--
(A) by striking ``clauses (i), (ii), or
(iv)'' and inserting ``clause (i)''; and
(B) by striking ``or nurse practitioner''.
(d) Definition of Clinical Nurse Specialist Clarified.--
Section 1861(aa)(5) (42 U.S.C. 1395x(aa)(5)) is amended--
(1) by inserting ``(A)'' after ``(5)'';
(2) by striking ``The term `physician assistant' ''
and all that follows through ``who performs'' and
inserting ``The term `physician assistant' and the term
`nurse practitioner' mean, for purposes of this title,
a physician assistant or nurse practitioner who
performs''; and
``(B) The term `clinical nurse specialist' means, for
purposes of this title, an individual who--
``(i) is a registered nurse and is licensed to
practice nursing in the State in which the clinical
nurse specialist services are performed; and
``(ii) holds a master's degree in a defined clinical
area of nursing from an accredited educational
institution.''.
shall apply with respect to services furnished and supplies
provided on and after January 1, 1998.
(a) Removal of Restriction on Settings.--Section
1861(s)(2)(K)(i) (42 U.S.C. 1395x(s)(2)(K)(i)) is amended--
(1) by striking ``(I) in a hospital'' and all that
follows through ``shortage area,'', and
(2) by adding at the end the following: ``but only if
no facility or other provider charges or is paid any
amounts with respect to the furnishing of such
services,''.
(b) Increased Payment.--Paragraph (12) of section 1842(b) (42
U.S.C. 1395u(b)), as amended by section 4619(b)(2)(B), is
amended to read as follows:
``(12) With respect to services described in section
1861(s)(2)(K)(i)--
``(A) payment under this part may only be made on an
assignment-related basis; and
``(B) the amounts paid under this part shall be equal
to 80 percent of (i) the lesser of the actual charge or
85 percent of the fee schedule amount provided under
section 1848 for the same service provided by a
physician who is not a specialist; or (ii) in the case
of services as an assistant at surgery, the lesser of
the actual charge or 85 percent of the amount that
would otherwise be recognized if performed by a
physician who is serving as an assistant at surgery.''.
(c) Removal of Restriction on Employment Relationship.--
Section 1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended by adding
at the end the following new sentence: ``For purposes of clause
(C) of the first sentence of this paragraph, an employment
relationship may include any independent contractor
arrangement, and employer status shall be determined in
accordance with the law of the State in which the services
described in such clause are performed.''.
(a) Auditing of Cost Reports.--The Secretary shall audit a
sample of cost reports of renal dialysis providers for 1995 and
for each third year thereafter.
(b) Implementation of Quality Standards.--The Secretary of
Health and Human Services shall develop and implement, by not
later than January 1, 1999, a method to measure and report
quality of renal dialysis services provided under the medicare
program under title XVIII of the Social Security Act in order
to reduce payments for inappropriate or low quality care.
(a) In General.--Section 1834(h)(1)(E) (42 U.S.C.
1395m(h)(1)(E)) is amended by adding at the end the following:
``Payment for cochlear implants shall be made in accordance
with subsection (a)(4), and, in applying such subsection to
cochlear implants, carriers shall take into consideration
technological innovations and data on charges to the extent
that such charges reflect such innovations.''.
applies to implants implanted on or after January 1, 1998.
(a) In General.--The first, second and third sentences of
section 1839(a)(3) (42 U.S.C. 1395r(a)(3)) are amended to read
as follows: ``The Secretary, during September of each year,
shall determine and promulgate a monthly premium rate for the
succeeding calendar year. That monthly premium rate shall be
equal to 50 percent of the monthly actuarial rate for enrollees
age 65 and over, determined according to paragraph (1), for
that succeeding calendar year.''.
(b) Conforming and Technical Amendments.--
(1) Section 1839.--Section 1839 (42 U.S.C. 1395r) is
(A) in subsection (a)(2), by striking ``(b)
and (e)'' and inserting ``(b), (c), and (f)'',
(B) in the last sentence of subsection
(a)(3)--
(i) by inserting ``rate'' after
``premium'', and
(ii) by striking ``and the derivation
of the dollar amounts specified in this
paragraph'',
(C) by striking subsection (e), and
(D) by redesignating subsection (g) as
subsection (e) and inserting that subsection
after subsection (d).
(2) Section 1844.--Subparagraphs (A)(i) and (B)(i) of
section 1844(a)(1) (42 U.S.C. 1395w(a)(1)) are each
amended by striking ``or 1839(e), as the case may be''.
(a) Application to Disabled Individuals in Large Group Health
(1) In general.--Section 1862(b)(1)(B) (42 U.S.C.
1395y(b)(1)(B)) is amended--
(A) in clause (i), by striking ``clause
(iv)'' and inserting ``clause (iii)'',
(B) by striking clause (iii), and
(C) by redesignating clause (iv) as clause
(iii).
(2) Conforming amendments.--Paragraphs (1) through
(3) of section 1837(i) (42 U.S.C. 1395p(i)) and the
second sentence of section 1839(b) (42 U.S.C. 1395r(b))
are each amended by striking ``1862(b)(1)(B)(iv)'' each
place it appears and inserting ``1862(b)(1)(B)(iii)''.
(b) Individuals With End Stage Renal Disease.--
(1) In general.--Section 1862(b)(1)(C) (42 U.S.C.
1395y(b)(1)(C)) is amended--
(A) in the first sentence, by striking ``12-
month'' each place it appears and inserting
``30-month'', and
(B) by striking the second sentence.
(1) shall apply to items and services furnished on or
after the date of the enactment of this Act and with
respect to periods beginning on or after the date that
is 18 months prior to such date.
(c) IRS-SSA-HCFA Data Match.--
(1) Social security act.--Section 1862(b)(5)(C) (42
U.S.C. 1395y(b)(5)(C)) is amended by striking clause
(2) Internal revenue code.--Section 6103(l)(12) of
the Internal Revenue Code of 1986 is amended by
striking subparagraph (F).
(a) Extension of Claims Filing Period.--Section 1862(b)(2)(B)
(42 U.S.C. 1395y(b)(2)(B)) is amended by adding at the end the
``(v) Claims-filing period.--
Notwithstanding any other time limits
that may exist for filing a claim under
an employer group health plan, the
United States may seek to recover
conditional payments in accordance with
this subparagraph where the request for
payment is submitted to the entity
required or responsible under this
subsection to pay with respect to the
item or service (or any portion
thereof) under a primary plan within
the 3-year period beginning on the date
on which the item or service was
furnished.''.
applies to items and services furnished after 1990. The
previous sentence shall not be construed as permitting any
waiver of the 3-year-period requirement (imposed by such
amendment) in the case of items and services furnished more
than 3 years before the date of the enactment of this Act.
(a) Permitting Recovery Against Third Party Administrators of
Primary Plans.--Section 1862(b)(2)(B)(ii) (42 U.S.C.
1395y(b)(2)(B)(ii)) is amended--
(1) by striking ``under this subsection to pay'' and
inserting ``(directly, as a third-party administrator,
or otherwise) to make payment'', and
(2) by adding at the end the following: ``The United
States may not recover from a third-party administrator
under this clause in cases where the third-party
administrator would not be able to recover the amount
at issue from the employer or group health plan for
whom it provides administrative services due to the
insolvency or bankruptcy of the employer or plan.''.
(b) Clarification of Beneficiary Liability.--Section
1862(b)(1) (42 U.S.C. 1395y(b)(1)) is amended by adding at the
end the following new subparagraph:
``(F) Limitation on beneficiary liability.--
An individual who is entitled to benefits under
this title and is furnished an item or service
for which such benefits are incorrectly paid is
not liable for repayment of such benefits under
this paragraph unless payment of such benefits
was made to the individual.''.
apply to items and services furnished on or after the date of
(a) Basing Updates to Per Visit Cost Limits on Limits for
Fiscal Year 1993.--Section 1861(v)(1)(L) (42 U.S.C.
1395x(v)(1)(L)) is amended by adding at the end the following:
``(iv) In establishing limits under this subparagraph for
cost reporting periods beginning after September 30, 1997, the
Secretary shall not take into account any changes in the home
health market basket, as determined by the Secretary, with
respect to cost reporting periods which began on or after July
1, 1994, and before July 1, 1996.''.
(b) No Exceptions Permitted Based on Amendment.--The
Secretary of Health and Human Services shall not consider the
amendment made by subsection (a) in making any exemptions and
exceptions pursuant to section 1861(v)(1)(L)(ii) of the Social
Security Act (42 U.S.C. 1395x(v)(1)(L)(ii)).
(a) Reductions in Cost Limits.--Section 1861(v)(1)(L)(i) (42
U.S.C. 1395x(v)(1)(L)(i)) is amended--
(1) by moving the indentation of subclauses (I)
through (III) 2-ems to the left;
(2) in subclause (I), by inserting ``of the mean of
the labor-related and nonlabor per visit costs for
freestanding home health agencies'' before the comma at
(3) in subclause (II), by striking ``, or'' and
inserting ``of such mean,'';
(4) in subclause (III)--
(A) by inserting ``and before October 1,
1997,'' after ``July 1, 1987,'', and
(B) by striking the comma at the end and
inserting ``of such mean, or''; and
(5) by striking the matter following subclause (III)
``(IV) October 1, 1997, 105 percent of the median of
freestanding home health agencies.''.
(b) Delay In Updates.--Section 1861(v)(1)(L)(iii) (42 U.S.C.
1395x(v)(1)(L)(iii)) is amended by inserting ``, or on or after
July 1, 1997, and before October 1, 1997'' after ``July 1,
(c) Additions to Cost Limits.--Section 1861(v)(1)(L) (42
U.S.C. 1395x(v)(1)(L)), as amended by section 4711(a), is
amended by inserting adding at the end the following new
``(v) For services furnished by home health agencies for cost
reporting periods beginning on or after October 1, 1997, the
Secretary shall provide for an interim system of limits.
Payment shall not exceed the costs determined under the
preceding provisions of this subparagraph or, if lower, the
``(I) an agency-specific per beneficiary annual
limitation calculated based 75 percent on the
reasonable costs (including nonroutine medical
supplies) for the agency's 12-month cost reporting
period ending during 1994, and based 25 percent on the
standardized regional average of such costs for the
agency's region for cost reporting periods ending
during 1994, such costs updated by the home health
market basket index; and
``(II) the agency's unduplicated census count of
patients (entitled to benefits under this title) for
the cost reporting period subject to the limitation.
``(vi) For services furnished by home health agencies for
cost reporting periods beginning on or after October 1, 1997,
the following rules apply:
``(I) For new providers and those providers without a
12-month cost reporting period ending in calendar year
1994, the per beneficiary limitation shall be equal to
the median of these limits (or the Secretary's best
estimates thereof) applied to other home health
agencies as determined by the Secretary. A home health
agency that has altered its corporate structure or name
shall not be considered a new provider for this
``(II) For beneficiaries who use services furnished
by more than one home health agency, the per
beneficiary limitations shall be prorated among the
agencies.''.
(d) Development of Case Mix System.--The Secretary of Health
and Human Services shall expand research on a prospective
payment system for home health agencies under the medicare
program that ties prospective payments to a unit of service,
including an intensive effort to develop a reliable case mix
adjuster that explains a significant amount of the variances in
(e) Submission of Data for Case Mix System.--Effective for
the Secretary of Health and Human Services may require all home
health agencies to submit additional information that the
Secretary considers necessary for the development of a reliable
case mix system.
(a) In General.--Section 1861(m) (42 U.S.C. 1395x(m)) is
amended by adding at the end the following: ``For purposes of
paragraphs (1) and (4), the term `part-time or intermittent
services' means skilled nursing and home health aide services
furnished any number of days per week as long as they are
furnished (combined) less than 8 hours each day and 28 or fewer
hours each week (or, subject to review on a case-by-case basis
as to the need for care, less than 8 hours each day and 35 or
fewer hours per week). For purposes of sections 1814(a)(2)(C)
and 1835(a)(2)(A), `intermittent' means skilled nursing care
that is either provided or needed on fewer than 7 days each
week, or less than 8 hours of each day for periods of 21 days
or less (with extensions in exceptional circumstances when the
need for additional care is finite and predictable).''.
applies to services furnished on or after October 1, 1997.
SEC. 4714. STUDY ON DEFINITION OF HOMEBOUND.
conduct a study of the criteria that should be applied, and the
method of applying such criteria, in the determination of
whether an individual is homebound for purposes of qualifying
for receipt of benefits for home health services under the
medicare program. Such criteria shall include the extent and
circumstances under which a person may be absent from the home
but nonetheless qualify.
(b) Report.--Not later than October 1, 1998, the Secretary
shall submit a report to the Congress on the study conducted
under subsection (a). The report shall include specific
recommendations on such criteria and methods.
(a) Conditions of Participation.--Section 1891 (42 U.S.C.
1395bbb) is amended by adding at the end the following:
``(g) Payment on Basis of Location of Service.--A home health
agency shall submit claims for payment for home health services
under this title only on the basis of the geographic location
at which the service is furnished, as determined by the
(b) Wage Adjustment.--Section 1861(v)(1)(L)(iii) (42 U.S.C.
1395x(v)(1)(L)(iii)) is amended by striking ``agency is
located'' and inserting ``service is furnished''.
apply to cost reporting periods beginning on or after October
(a) In General.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)),
as amended by section 4103(c), is amended--
(G),
(2) by striking the semicolon at the end of
subparagraph (H) and inserting ``, and'', and
(3) by inserting after subparagraph (H) the following
``(I) the frequency and duration of home health
services which are in excess of normative guidelines
that the Secretary shall establish by regulation;''.
(b) Notification.--The Secretary of Health and Human Services
may establish a process for notifying a physician in cases in
which the number of home health service visits furnished under
the medicare program pursuant to a prescription or
certification of the physician significantly exceeds such
threshold (or thresholds) as the Secretary specifies. The
Secretary may adjust such threshold to reflect demonstrated
differences in the need for home health services among
different beneficiaries.
(a) In General.--Sections 1814(a)(2)(C) and 1835(a)(2)(A) (42
U.S.C. 1395f(a)(2)(C), 1395n(a)(2)(A)) are each amended by
inserting ``(other than solely venipuncture for the purpose of
obtaining a blood sample)'' after ``skilled nursing care''.
apply to home health services furnished after the 6-month
period beginning after the date of enactment of this Act.
SEC. 4718. MAKING PART B PRIMARY PAYOR FOR CERTAIN HOME HEALTH
(a) In General.--Section 1833(d) (42 U.S.C. 1395l(d)) is
(1) by striking ``(d) No'' and inserting ``(d)(1)
Subject to paragraph (2), no'', and
``(2) Payment shall be made under this part (rather than
under part A), for an individual entitled to benefits under
part A, for home health services, other than the first 100
visits of post-hospital home health services furnished to an
individual.''.
(b) Post-hospital Home Health Services.--Section 1861 (42
U.S.C. 1395x) is amended by adding at the end the following:
``(ss) Post-Hospital Home Health Services.--The term `post-
hospital home health services' means home health services
furnished to an individual under a plan of treatment
established when the individual was an inpatient of a hospital
or rural primary care hospital for not less than 3 consecutive
days before discharge, or during a covered post-hospital
extended care stay, if home health services are initiated for
the individual within 30 days after discharge from the
hospital, rural primary care hospital or extended care
facility.''.
(c) Payments Under Part B.--Subparagraph (A) of section
1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amended to read as
(other than a covered osteoporosis drug (as
defined in section 1861(kk)), and to items and
services described in section 1861(s)(10)(A),
the amounts determined under section
1861(v)(1)(L) or section 1893, or, if the
services are furnished by a public provider of
services, or by another provider which
demonstrates to the satisfaction of the
charge, or at nominal charges to the public,
the amount determined in accordance with
section 1814(b)(2);''.
(d) Phase-In of Additional Part B Costs In Determination of
Part B Monthly Premium.--Section 1839(a) (42 U.S.C. 1395r(a))
(1) in paragraph (3) in last the sentence inserted by
section 4631(a) of this title, by inserting ``(except
as provided in paragraph (5)(B))'' before the period,
(2) by adding after paragraph (4) the following:
``(5)(A) The Secretary shall, at the time of determining the
monthly actuarial rate under paragraph (1) for 1998 through
2003, shall determine a transitional monthly actuarial rate for
enrollees age 65 and over in the same manner as such rate is
determined under paragraph (1), except that there shall be
excluded from such determination an estimate of any benefits
and administrative costs attributable to home health services
for which payment would have been made under part A during the
year but for paragraph (2) of section 1833(d).
``(B) The monthly premium for each individual enrolled under
this part for each month for a year (beginning with 1998 and
ending with 2003) shall be equal to 50 percent of the monthly
actuarial rate determined under subparagraph (A) increased by
the following proportion of the difference between such premium
and the monthly premium otherwise determined under paragraph
(3) (without regard to this paragraph):
``(i) For a month in 1998, \1/7\.
``(ii) For a month in 1999, \2/7\.
``(iii) For a month in 2000, \3/7\.
``(iv) For a month in 2001, \4/7\.
``(v) For a month in 2002, \5/7\.
``(vi) For a month in 2003, \6/7\.''.
(e) Maintaining Appeal Rights for Home Health Services.--
Section 1869(b)(2)(B) (42 U.S.C. 1395ff(b)(2)(B)) is amended by
inserting ``(or $100 in the case of home health services)''
after ``$500''.
(f) Report.--Not later than October 1, 1999, the Secretary of
Health and Human Services shall submit a report to the
Committees on Commerce and Ways and Means of the House of
Representatives and the Committee on Finance of the Senate on
the impact on home health utilization and admissions to
hospitals and skilled nursing facilities of the amendment made
by subsection (b). The Secretary shall further reexamine and
submit a report to such Committees on this impact 1 year after
the full implementation of the prospective payment system for
home health services into the medicare program, effected under
the amendments made by section 4441.
(g) Effective Date.--The amendments made by this section
(a) Establishment.--There is established a commission to be
known as the Bipartisan Commission on the Effect of the Baby
Boom Generation on the Medicare Program (in this section
referred to as the ``Commission'').
(b) Duties.--
(1) In general.--The Commission shall--
(A) examine the financial impact on the
medicare program of the significant increase in
the number of medicare eligible individuals
which will occur beginning approximately during
2010 and lasting for approximately 25 years,
(B) make specific recommendations to the
Congress respecting a comprehensive approach to
preserve the medicare program for the period
during which such individuals are eligible for
medicare.
(2) Considerations in making recommendations.--In
making its recommendations, the Commission shall
(A) The amount and sources of Federal funds
to finance the medicare program, including the
potential use of innovative financing methods.
(B) Methods used by other nations to respond
to comparable demographic patterns in
eligibility for health care benefits for
elderly and disabled individuals.
(C) Modifying age-based eligibility to
correspond to changes in age-based eligibility
under the OASDI program.
(D) Trends in employment-related health care
for retirees, including the use of medical
savings accounts and similar financing devices.
(E) The role medicare should play in
addressing the needs of persons with chronic
illness.
(c) Membership.--
(1) Appointment.--The Commission shall be composed of
15 voting members as follows:
(A) The Majority Leader of the Senate shall
appoint, after consultation with the minority
leader of the Senate, 6 members, of whom not
more than 4 may be of the same political party.
(B) The Speaker of the House of
Representatives shall appoint, after
consultation with the minority leader of the
House of Representatives, 6 members, of whom
not more than 4 may be of the same political
(C) The 3 ex officio members of the Board of
Trustees of the Federal Hospital Insurance
Trust Fund and of the Federal Supplementary
Medical Insurance Trust Fund who are Cabinet
level officials.
(2) Chairman and vice chairman.--As the first item of
business at the Commission's first meeting (described
in paragraph (5)(B)), the Commission shall elect a
Chairman and Vice Chairman from among its members. The
individuals elected as Chairman and Vice Chairman may
not be of the same political party and may not have
been appointed to the Commission by the same appointing
(3) Vacancies.--Any vacancy in the membership of the
Commission shall be filled in the manner in which the
original appointment was made and shall not affect the
power of the remaining members to execute the duties of
the Commission.
(4) Quorum.--A quorum shall consist of 8 members of
the Commission, except that 4 members may conduct a
hearing under subsection (f).
(5) Meetings.--
(A) The Commission shall meet at the call of
its Chairman or a majority of its members.
(B) The Commission shall hold its first
meeting not later than February 1, 1998.
(6) Compensation and reimbursement of expenses.--
Members of the Commission are not entitled to receive
compensation for service on the Commission. Members may
be reimbursed for travel, subsistence, and other
necessary expenses incurred in carrying out the duties
of the Commission.
(d) Advisory Panel.--
(1) In general.--The Chairman, in consultation with
the Vice Chairman, may establish a panel (in this
section referred to as the ``Advisory Panel'')
consisting of health care experts, consumers,
providers, and others to advise and assist the members
of the Commission in carrying out the duties described
in subsection (b). The panel shall have only those
powers that the Chairman, in consultation with the Vice
Chairman, determines are necessary and appropriate to
assist the Commission in carrying out such duties.
(2) Compensation.--Members of the Advisory Panel are
not entitled to receive compensation for service on the
Advisory Panel. Subject to the approval of the chairman
of the Commission, members may be reimbursed for
travel, subsistence, and other necessary expenses
incurred in carrying out the duties of the Advisory
Panel.
(e) Staff and Consultants.--
(1) Staff.--The Commission may appoint and determine
the compensation of such staff as may be necessary to
carry out the duties of the Commission. Such
appointments and compensation may be made without
regard to the provisions of title 5, United States
Code, that govern appointments in the competitive
services, and the provisions of chapter 51 and
subchapter III of chapter 53 of such title that relate
to classifications and the General Schedule pay rates.
(2) Consultants.--The Commission may procure such
temporary and intermittent services of consultants
under section 3109(b) of title 5, United States Code,
as the Commission determines to be necessary to carry
out the duties of the Commission.
(f) Powers.--
(1) Hearings and other activities.--For the purpose
of carrying out its duties, the Commission may hold
such hearings and undertake such other activities as
the Commission determines to be necessary to carry out
its duties.
(2) Studies by gao.--Upon the request of the
Commission, the Comptroller General shall conduct such
studies or investigations as the Commission determines
to be necessary to carry out its duties.
(3) Cost estimates by congressional budget office.--
(A) Upon the request of the Commission, the
Director of the Congressional Budget Office
shall provide to the Commission such cost
estimates as the Commission determines to be
necessary to carry out its duties.
(B) The Commission shall reimburse the
Director of the Congressional Budget Office for
expenses relating to the employment in the
office of the Director of such additional staff
as may be necessary for the Director to comply
with requests by the Commission under
(4) Detail of federal employees.--Upon the request of
the Commission, the head of any Federal agency is
authorized to detail, without reimbursement, any of the
personnel of such agency to the Commission to assist
the Commission in carrying out its duties. Any such
detail shall not interrupt or otherwise affect the
civil service status or privileges of the Federal
employee.
(5) Technical assistance.--Upon the request of the
Commission, the head of a Federal agency shall
providesuch technical assistance to the Commission as the Commission
determines to be necessary to carry out its duties.
(6) Use of mails.--The Commission may use the United
States mails in the same manner and under the same
conditions as Federal agencies and shall, for purposes
of the frank, be considered a commission of Congress as
described in section 3215 of title 39, United States
(7) Obtaining information.--The Commission may secure
directly from any Federal agency information necessary
to enable it to carry out its duties, if the
information may be disclosed under section 552 of title
5, United States Code. Upon request of the Chairman of
the Commission, the head of such agency shall furnish
such information to the Commission.
(8) Administrative support services.--Upon the
request of the Commission, the Administrator of General
Services shall provide to the Commission on a
reimbursable basis such administrative support services
as the Commission may request.
(9) Printing.--For purposes of costs relating to
printing and binding, including the cost of personnel
detailed from the Government Printing Office, the
Commission shall be deemed to be a committee of the
Congress.
(g) Report.--Not later than May 1, 1999, the Commission shall
submit to Congress a report containing its findings and
recommendations regarding how to protect and preserve the
medicare program in a financially solvent manner until 2030
(or, if later, throughout the period of projected solvency of
the Federal Old-Age and Survivors Insurance Trust Fund). The
report shall include detailed recommendations for appropriate
legislative initiatives respecting how to accomplish this
(h) Termination.--The Commission shall terminate 30 days
after the date of submission of the report required in
subsection (g).
(i) Authorization of Appropriations.--There are authorized to
be appropriated $1,500,000 to carry out this section. 60
percent of such appropriation shall be payable from the Federal
appropriation shall be payable from the Federal Supplementary
Medical Insurance Trust Fund under title XVIII of the Social
Security Act (42 U.S.C. 1395i, 1395t).
Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is amended by
adding after subparagraph (E) the following:
``(F) Limitation on number of residents for
certain fiscal years.--Such rules shall provide
that for purposes of a cost reporting period
beginning on or after October 1, 1997, the
total number of full-time equivalent residents
before application of weighting factors (as
determined under this paragraph) with respect
to a hospital's approved medical residency
training program may not exceed the number of
full-time equivalent residents with respect to
the hospital's most recent cost reporting
period ending on or before December 31, 1996.
``(G) Counting interns and residents for fy
1998 and subsequent years.--
``(i) FY 1998.--For the hospital's
first cost reporting period beginning
during fiscal year 1998, subject to the
limit described in subparagraph (F),
the total number of full-time
equivalent residents, for determining
the hospital's graduate medical
education payment, shall equal the
average of the full-time equivalent
resident counts for the cost reporting
period and the preceding cost reporting
``(ii) Subsequent years.--For each
subsequent cost reporting period,
subject to the limit described in
subparagraph (F), the total number of
full-time equivalent residents, for
determining the hospital's graduate
medical education payment, shall equal
the average of the actual full-time
equivalent resident counts for the cost
reporting period and preceding two cost
reporting periods.
``(iii) Adjustment for short
periods.--If a hospital's cost
reporting period beginning on or after
October 1, 1997, is not equal to twelve
months, the Secretary shall make
appropriate modifications to ensure
that the average full-time equivalent
resident counts pursuant to clause (ii)
are based on the equivalent of full 12-
month cost reporting periods.
``(iv) Exclusion of residents in
dentistry.--Residents in an approved
medical residency training program in
dentistry shall not be counted for
purposes of this subparagraph and
subparagraph (F).''.
PHYSICIAN COMPONENT OF DIRECT MEDICAL EDUCATION
(a) In General.--Section 1886(h)(3) (42 U.S.C. 1395ww(h)(3))
(1) in subparagraph (B), by inserting ``subject to
subparagraph (D),'' after ``subparagraph (A)'', and
``(D) Phased-in limitation on hospital
overhead and supervisory physician component.--
``(i) In general.--In the case of a
hospital for which the overhead GME
amount (as defined in clause (ii)) for
the base period exceeds an amount equal
to the 75th percentile of the overhead
GME amounts in such period for all
hospitals (weightedto reflect the full-
time equivalent resident counts for all approved medical residency
training programs), subject to clause (iv), the hospital's approved FTE
resident amount (for periods beginning on or after October 1, 1997)
shall be reduced from the amount otherwise applicable (as previously
reduced under this subparagraph) by an overhead reduction amount. The
overhead reduction amount is equal to the lesser of--
``(I) 20 percent of the
reference reduction amount
(described in clause (iii)) for
the period, or
``(II) 15 percent of the
hospital's overhead GME amount
for the period (as otherwise
determined before the reduction
provided under this
subparagraph for the period
involved).
``(ii) Overhead gme amount.--For
purposes of this subparagraph, the term
`overhead GME amount' means, for a
hospital for a period, the product of--
``(I) the percentage of the
hospital's approved FTE
resident amount for the base
period that is not attributable
to resident salaries and fringe
benefits, and
``(II) the hospital's
approved FTE resident amount
for the period involved.
``(iii) Reference reduction amount.--
hospital for a cost reporting
period is the base difference
(described in subclause (II))
updated, in a compounded manner
for each period from the base
period to the period involved,
by the update applied for such
period to the hospital's
approved FTE resident amount.
``(II) Base difference.--The
base difference described in
this subclause for a hospital
is the amount by which the
in the base period exceeded the
75th percentile of such amounts
(as described in clause (i)).
``(iv) Maximum reduction to 75th
percentile.--In no case shall the
reduction under this subparagraph
effected for a hospital for a period
(below the amount that would otherwise
apply for the period if this
subparagraph did not apply for any
period) exceed the reference reduction
amount for the hospital for the period.
``(v) Base period.--For purposes of
this subparagraph, the term `base
period' means the cost reporting period
beginning in fiscal year 1984 or the
period used to establish the hospital's
approved FTE resident amount for
hospitals that did not have approved
residency training programs in fiscal
``(vi) Rules for hospitals initiating
residency training programs.--The
Secretary shall establish rules for the
application of this subparagraph in the
case of a hospital that initiates
medical residency training programs
during or after the base period.''.
shall apply to per resident payment amounts attributable to
(a) In General.--Section 1886 (42 U.S.C. 1395ww) is amended
``(k) Payment to Non-Hospital Providers.--
``(1) Report.--The Secretary shall submit to
Congress, not later than 18 months after the date of
the enactment of this subsection, a proposal for
payment to qualified non-hospital providers for their
direct costs of medical education, if those costs are
incurred in the operation of an approved medical
residency training program described in subsection (h).
Such proposal shall specify the amounts, form, and
manner in which such payments will be made and the
portion of such payments that will be made from each of
the trust funds under this title.
``(2) Effectiveness.--Except as otherwise provided in
law, the Secretary may implement such proposal for
residency years beginning not earlier than 6 months
after the date of submittal of the report under
``(3) Qualified non-hospital providers.--For purposes
of this subsection, the term `qualified non-hospital
provider' means--
``(A) a Federally qualified health center, as
defined in section 1861(aa)(4);
``(B) a rural health clinic, as defined in
section 1861(aa)(2); and
``(C) such other providers (other than
hospitals) as the Secretary determines to be
(b) Prohibition on Double Payments; Budget Neutrality
Adjustment.--Section 1886(h)(3)(B) (42 U.S.C. 1395ww(h)(3)(B))
``The Secretary shall reduce the aggregate
approved amount to the extent payment is made
under subsection (k) for residents included in
the hospital's count of full-time equivalent
residents and, in the case of residents not
included in any such count, the Secretary shall
provide for such a reduction in aggregate
approved amounts under this subsection as will
assure that the application of subsection (k)
does not result in any increase in expenditures
under this title in excess of those that would
have occurred if subsection (k) were not
applicable.''.
Section 1886(h) (42 U.S.C. 1395ww(h)) is further amended by
``(6) Incentive payment under plans for voluntary
reduction in number of residents.--
``(A) In general.--In the case of a voluntary
residency reduction plan for which an
application is approved under subparagraph (B),
the qualifying entity submitting the plan shall
be paid an applicable hold harmless percentage
(as specified in subparagraph (E)) of the sum
``(i) amount (if any) by which--
``(I) the amount of payment
which would have been made
under this subsection if there
had been a 5 percent reduction
in the number of full-time
equivalent residents in the
approved medical education
training programs of the
qualifying entity as of June
30, 1997, exceeds
``(II) the amount of payment
which is made under this
subsection, taking into account
the reduction in such number
effected under the reduction
plan; and
``(ii) the amount of the reduction in
payment under 1886(d)(5)(B) (for
hospitals participating in the
qualifying entity) that is attributable
to the reduction in number of residents
effected under the plan below 95
percent of the number of full-time
equivalent residents in such programs
of such entity as of June 30, 1997.
``(B) Approval of plan applications.--The
Secretary may not approve the application of a
qualifying entity unless--
``(i) the application is submitted in
a form and manner specified by the
Secretary and by not later than March
1, 2000,
``(ii) the application provides for
the operation of a plan for the
reduction in the number of full-time
equivalent residents in the approved
medical residency training programs of
the entity consistent with the
requirements of subparagraph (D);
``(iii) the entity elects in the
application whether such reduction will
occur over--
``(I) a period of not longer
than 5 residency training
years, or
``(II) a period of 6
residency training years,
except that a qualifying entity
described in subparagraph (C)(i)(III)
may not make the election described in
subclause (II); and
``(iv) the Secretary determines that
the application and the entity and such
plan meet such other requirements as
the Secretary specifies in regulations.
``(C) Qualifying entity.--
this paragraph, any of the following
may be a qualifying entity:
``(I) Individual hospitals
operating one or more approved
medical residency training
programs.
``(II) Subject to clause
(ii), two or more hospitals
that operate such programs and
apply for treatment under this
paragraph as a single
qualifying entity.
``(III) Subject to clause
(iii), a qualifying consortium
(as described in section 4735
of the Balanced Budget Act of
``(ii) Additional requirement for
joint programs.--In the case of an
application by a qualifying entity
described in clause (i)(II), the
Secretary may not approve the
application unless the application
represents that the qualifying entity
either--
``(I) in the case of an
entity that meets the
requirements of clause (v) of
subparagraph (D) will not
reduce the number of full-time
equivalent residents in primary
care during the period of the
``(II) in the case of another
entity will not reduce the
proportion of its residents in
primary care (to the total
number of residents) below such
proportion as in effect as of
the applicable time described
in subparagraph (D)(vi).
``(iii) Additional requirement for
consortia.--In the case of an
described in clause (i)(III), the
will not reduce the proportion of its
residents in primary care (to the total
proportion as in effect as of the
applicable time described in
subparagraph (D)(vi).
``(D) Residency reduction requirements.--
``(i) Individual hospital
applicants.--In the case of a
qualifying entity described in
subparagraph (C)(i)(I), the number of
full-time equivalent residents in all
the approved medical residency training
programs operated by or through the
entity shall be reduced as follows:
``(I) If base number of
residents exceeds 750
residents, by a number equal to
at least 20 percent of such
base number.
``(II) Subject to subclause
(IV), if base number of
residents exceeds 500, but is
less than 750 residents, by 150
residents.
``(III) Subject to subclause
residents does not exceed 500
``(IV) In the case of a
qualifying entity which is
described in clause (v) and
which elects treatment under
this subclause, by a number
equal to at least 20 percent of
such base number.
``(ii) Joint applicants.--In the case
of a qualifying entity described in
subparagraph (C)(i)(II), the number of
``(I) Subject to subclause
(II), by a number equal to at
least 25 percent of such base
``(iii) Consortia.--In the case of a
subparagraph (C)(i)(III), the number of
entity shall be reduced by a number
equal to at least 20 percent of such
``(iv) Manner of reduction.--The
reductions specified under the
preceding provisions of this
subparagraph for a qualifying entity
shall be below the base number of
residents for that entity and shall be
fully effective not later than--
``(I) the 5th residency
training year in which the
application under subparagraph
(B) is effective, in the case
of an entity making the
election described in
subparagraph (B)(iii)(I), or
``(II) the 6th such residency
training year, in the case of
an entity making the election
described in subparagraph
(B)(iii)(II).
``(v) Entities providing assurance of
maintenance of primary care
residents.--An entity is described in
this clause if--
``(I) the base number of
residents for the entity is
less than 750;
``(II) the number of full-
time equivalent residents in
primary care included in the
base number of residents for
the entity is at least 10
percent of such base number;
``(III) the entity represents
in its application under
subparagraph (B) that there
will be no reduction under the
plan in the number of full-time
If a qualifying entity fails to comply
with the representation described in
subclause (III), the entity shall be
subject to repayment of all amounts
paid under this paragraph, in
accordance with procedures established
to carry out subparagraph (F).
``(vi) Base number of residents
defined.--For purposes of this
paragraph, the term `base number of
residents' means, with respect to a
qualifying entity operating approved
medical residency training programs,
the number of full-time equivalent
residents in such programs (before
application of weighting factors) of
the entity as of the most recent cost
reporting period ending before June 30,
1997, or, if less, for anysubsequent
cost reporting period that ends before the date the entity makes
application under this paragraph.
``(E) Applicable hold harmless percentage.--
subparagraph (A), the `applicable hold
harmless percentage' is the percentages
specified in clause (ii) or clause
(iii), as elected by the qualifying
entity in the application submitted
under subparagraph (B).
``(ii) 5-year reduction plan.--In the
case of an entity making the election
described in subparagraph (B)(iii)(I),
the percentages specified in this
clause are, for the--
``(I) first and second
residency training years in
which the reduction plan is in
effect, 100 percent,
``(II) third such year, 75
``(III) fourth such year, 50
``(IV) fifth such year, 25
``(iii) 6-year reduction plan.--In
the case of an entity making the
election described in subparagraph
(B)(iii)(II), the percentages specified
in this clause are, for the--
``(I) first residency
reduction plan is in effect,
100 percent,
``(II) second such year, 95
``(III) third such year, 85
``(IV) fourth such year, 70
``(V) fifth such year, 50
``(VI) sixth such year, 25
``(F) Penalty for increase in number of
residents in subsequent years.--If payments are
made under this paragraph to a qualifying
entity, if the entity (or any hospital
operating as part of the entity) increases the
number of full-time equivalent residents above
the number of such residents permitted under
the reduction plan as of the completion of the
plan, then, as specified by the Secretary, the
entity is liable for repayment to the Secretary
of the total amounts paid under this paragraph
to the entity.
``(G) Treatment of rotating residents.--In
applying this paragraph, the Secretary shall
establish rules regarding the counting of
residents who are assigned to institutions the
medical residency training programs in which
are not covered under approved applications
under this paragraph.''.
(b) Relation to Demonstration Projects and Authority.--
(1) Section 1886(h)(6) of the Social Security Act,
added by subsection (a), shall not apply to any
residency training program with respect to which a
demonstration project described in paragraph (3) has
been approved by the Health Care Financing
Administration as of May 27, 1997. The Secretary of
Health and Human Services shall take such actions as
may be necessary to assure that (in the manner
described in subparagraph (A) of such section) in no
case shall payments be made under such a project with
respect to the first 5 percent reduction in the base
number of full-time equivalent residents otherwise used
under the project.
(2) Effective May 27, 1997, the Secretary of Health
and Human Services is not authorized to approve any
demonstration project described in paragraph (3) for
any residency training year beginning before July 1,
(3) A demonstration project described in this
paragraph is a project that provides for additional
payments under title XVIII of the Social Security Act
in connection with reduction in the number of residents
in a medical residency training program.
(c) Interim, Final Regulations.--In order to carry out the
amendment made by subsection (a) in a timely manner, the
Secretary of Health and Human Services may first promulgate
regulations, that take effect on an interim basis, after notice
and pending opportunity for public comment, by not later than 6
months after the date of the enactment of this Act.
(a) In General.--The Secretary of Health and Human Services
(in this section referred to as the Secretary) shall establish
a demonstration project under which, instead of making payments
to teaching hospitals pursuant to section 1886(h) of the Social
Security Act, the Secretary shall make payments under this
section to each consortium that meets the requirements of
subsection (b).
(b) Qualifying Consortia.--For purposes of subsection (a), a
consortium meets the requirements of this subsection if the
consortium is in compliance with the following:
(1) The consortium consists of an approved medical
residency training program in a teaching hospital and
one or more of the following entities:
(A) A school of allopathic medicine or
osteopathic medicine.
(B) Another teaching hospital, which may be a
children's hospital.
(C) Another approved medical residency
(D) A Federally qualified health center.
(E) A medical group practice.
(F) A managed care entity.
(G) An entity furnishing outpatient services.
(I) Such other entity as the Secretary
determines to be appropriate.
(2) The members of the consortium have agreed to
participate in the programs of graduate medical
education that are operated by the entities in the
consortium.
(3) With respect to the receipt by the consortium of
payments made pursuant to this section, the members of
the consortium have agreed on a method for allocating
the payments among the members.
(4) The consortium meets such additional requirements
as the Secretary may establish.
(c) Amount and Source of Payment.--The total of payments to a
qualifying consortium for a fiscal year pursuant to subsection
(a) shall not exceed the amount that would have been paid under
section 1886(h) of the Social Security Act for the teaching
hospital (or hospitals) in the consortium. Such payments shall
be made in such proportion from each of the trust funds
established under title XVIII of such Act as the Secretary
specifies.
FINANCING TEACHING HOSPITALS AND GRADUATE MEDICAL
(a) In General.--The Medicare Payment Advisory Commission
(established under section 1805 of the Social Security Act and
in this section referred to as the ``Commission'') shall
examine and develop recommendations on whether and to what
extent medicare payment policies and other Federal policies
regarding teaching hospitals and graduate medical education
should be reformed. Such recommendations shall include
recommendations regarding each of the following:
(1) The financing of graduate medical education,
including consideration of alternative broad-based
sources of funding for such education and models for
the distribution of payments under any all-payer
financing mechanism.
(2) The financing of teaching hospitals, including
consideration of the difficulties encountered by such
hospitals as competition among health care entities
increases. Matters considered under this paragraph
shall include consideration of the effects on teaching
hospitals of the method of financing used for the
MedicarePlus program under part C of title XVIII of the
(3) Possible methodologies for making payments for
graduate medical education and the selection of
entities to receive such payments. Matters considered
under this paragraph shall include--
(A) issues regarding children's hospitals and
approved medical residency training programs in
pediatrics, and
(B) whether and to what extent payments are
being made (or should be made) for training in
the various nonphysician health professions,
including social workers and psychologists.
(4) Federal policies regarding international medical
graduates.
(5) The dependence of schools of medicine on service-
generated income.
(6) Whether and to what extent the needs of the
United States regarding the supply of physicians, in
the aggregate and in different specialties, will change
during the 10-year period beginning on October 1, 1997,
and whether and to what extent any such changes will
have significant financial effects on teaching
hospitals.
(7) Methods for promoting an appropriate number, mix,
and geographical distribution of health professionals.
(c) Consultation.--In conducting the study under subsection
(a), the Commission shall consult with the Council on Graduate
Medical Education and individuals with expertise in the area of
graduate medical education, including--
(1) deans from allopathic and osteopathic schools of
medicine;
(2) chief executive officers (or equivalent
administrative heads) from academic health centers,
integrated health care systems, approved medical
residency training programs, and teaching hospitals
that sponsor approved medical residency training
programs;
(3) chairs of departments or divisions from
allopathic and osteopathic schools of medicine, schools
of dentistry, and approved medical residency training
programs in oral surgery;
(4) individuals with leadership experience from
representative fields of non-physician health
professionals;
(5) individuals with substantial experience in the
study of issues regarding the composition of the health
care workforce of the United States; and
(6) individuals with expertise on the financing of
health care.
(d) Report.--Not later than 2 years after the date of the
enactment of this Act, the Commission shall submit to the
Congress a report providing its recommendations under this
section and the reasons and justifications for such
(a) In General.--Section 1886(h)(5)(G) (42 U.S.C.
1395ww(h)(5)(G)) is amended--
(1) in clause (i), by striking ``and (iii)'' and
inserting ``, (iii), and (iv)''; and
``(iv) Special rule for certain
combined residency programs.--(I) In
the case of a resident enrolled in a
combined medical residency training
program in which all of the individual
programs (that are combined) are for
training a primary care resident (as
defined in subparagraph (H)), the
period of board eligibility shall be
the minimum number of years of formal
training required to satisfy the
requirements for initial board
eligibility in the longest of the
individual programs plus one additional
``(II) A resident enrolled in a
program that includes an obstetrics and
gynecology program shall qualify for
the period of board eligibility under
subclause (I) if the other programs
such resident combines withsuch
obstetrics and gynecology program are for training a primary care
resident.''.
apply to combined medical residency programs for residency
years beginning on or after July 1, 1998.
section 1888 the following:
``centers of excellence
``Sec. 1889. (a) In General.--The Secretary shall use a
competitive process to contract with specific hospitals or
other entities for furnishing services related to surgical
procedures, and for furnishing services (unrelated to surgical
procedures) to hospital inpatients that the Secretary
determines to be appropriate. The services may include any
services covered under this title that the Secretary determines
to be appropriate, including post-hospital services.
``(b) Quality Standards.--
``(1) In general.--Only entities that meet quality
standards established by the Secretary shall be
eligible to contract under this section. Contracting
entities shall implement a quality improvement plan
approved by the Secretary.
``(2) Participation decision based on quality.--
Subject to subsection (c), the Secretary shall consider
quality as the primary factor in selecting hospitals or
other entities to enter into contracts under this
``(c) Payment.--Payment under this section shall be made on
the basis of negotiated all-inclusive rates. The amount of
payment made by the Secretary to an entity under this title for
services covered under a contract shall not exceed the
aggregate amount of the payments that the Secretary would have
otherwise made for the services.
``(d) Contract Period.--A contract period shall be 3 years
(subject to renewal), so long as the entity continues to meet
quality and other contractual standards.
``(e) Incentives for Use of Centers.--Entities under a
contract under this section may furnish additional services (at
no cost to an individual entitled to benefits under this title)
or waive cost-sharing, subject to the approval of the
``(f) Limit on Number of Centers.--The Secretary shall limit
the number of centers in a geographic area to the number needed
to meet projected demand for contracted services.''.
B LATE ENROLLMENT PENALTY AND MEDIGAP SPECIAL OPEN
ENROLLMENT PERIOD FOR CERTAIN MILITARY RETIREES AND
DEPENDENTS.
(a) Medicare Part B Special Enrollment Period; Waiver of Part
B Penalty for Late Enrollment.--
(1) In general.--In the case of any eligible
individual (as defined in subsection (c)), the
Secretary of Health and Human Services shall provide
for a special enrollment period during which the
individual may enroll under part B of title XVIII of
the Social Security Act. Such period shall be for a
period of 6 months and shall begin with the first month
that begins at least 45 days after the date of the
(2) Coverage period.--In the case of an eligible
individual who enrolls during the special enrollment
period provided under paragraph (1), the coverage
period under part B of title XVIII of the Social
Security Act shall begin on the first day of the month
following the month in which the individual enrolls.
(3) Waiver of part b late enrollment penalty.--In the
case of an eligible individual who enrolls during the
special enrollment period provided under paragraph (1),
there shall be no increase pursuant to section 1839(b)
of the Social Security Act in the monthly premium under
part B of title XVIII of such Act.
(b) Medigap Special Open Enrollment Period.--Notwithstanding
any other provision of law, an issuer of a medicare
supplemental policy (as defined in section 1882(g) of the
Social Security Act)--
(1) may not deny or condition the issuance or
effectiveness of a medicare supplemental policy that
has a benefit package classified as ``A'', ``B'',
``C'', or ``F'' under the standards established under
section 1882(p)(2) of the Social Security Act (42
U.S.C. 1395rr(p)(2)); and
(2) may not discriminate in the pricing of the policy
on the basis of the individual's health status, medical
condition (including both physical and mental
illnesses), claims experience, receipt of health care,
medical history, genetic information, evidence of
insurability (including conditions arising out of acts
of domestic violence), or disability;
in the case of an eligible individual who seeks to enroll (and
is enrolled) during the 6-month period described in subsection
(c) Eligible Individual Defined.--In this section, the term
``eligible individual'' means an individual--
(1) who, as of the date of the enactment of this Act,
has attained 65 years of age and was eligible to enroll
under part B of title XVIII of the Social Security Act,
(2) who at the time the individual first satisfied
paragraph (1) or (2) of section 1836 of the Social
Security Act--
(A) was a covered beneficiary (as defined in
section 1072(5) of title 10, United States
Code), and
(B) did not elect to enroll (or to be deemed
enrolled) under section 1837 of the Social
Security Act during the individual's initial
enrollment period.
The Secretary of Health and Human Services shall consult with
the Secretary of Defense in the identification of eligible
(a) Establishment of Demonstration.--Not later than 1 year
after the date of the enactment of this Act, the Secretary of
Health and Human Services shall establish and operate over a 2-
year period a demonstration project in 2 geographic regions
selected by the Secretary under which (notwithstanding any
provision of title XVIII of the Social Security Act to the
contrary) the amount of payment made under the medicare program
for a selected item or service furnished in the region shall be
equal to the price determined pursuant to a competitive bidding
process which meets the requirements of subsection (b).
(b) Requirements for Competitive Bidding Process.--The
competitive bidding process used under the demonstration
project under this section shall meet such requirements as the
Secretary may impose to ensure the cost-effective delivery to
medicare beneficiaries in the project region of items and
services of high quality.
(c) Determination of Selected Items or Services.--The
Secretary shall select items and services to be subject to the
demonstration project under this section if the Secretary
determines that the use of competitive bidding with respect to
the item or service under the project will be appropriate and
cost-effective. In determining the items or services to be
selected, the Secretary shall consult with an advisory
taskforce which includes representatives of providers and
suppliers of items and services (including small business
providers and suppliers) in each geographic region in which the
project will be effective.
(a) Applicability.--This subtitle governs any health care
liability action brought in any State or Federal court, except
that this subtitle shall not apply to an action for damages
arising from a vaccine-related injury or death to the extent
that title XXI of the Public Health Service Act applies to the
(b) Preemption.--This subtitle shall preempt any State or
applicable Federal law to the extent such law is inconsistent
with the limitations contained in this subtitle. This subtitle
shall not preempt any State or applicable Federal law that
provides for defenses or places limitations on a person's
liability in addition to those contained in this subtitle or
otherwise imposes greater restrictions than those provided in
this subtitle.
(c) Effect on Sovereign Immunity and Choice of Law or
Venue.--Nothing in subsection (b) shall be construed to--
(1) waive or affect any defense of sovereign immunity
asserted by any State under any provision of law;
asserted by the United States;
(3) affect the applicability of any provision of
chapter 97 of title 28, United States Code;
(4) preempt State choice-of-law rules with respect to
claims brought by a foreign nation or a citizen of a
foreign nation; or
(5) affect the right of any court to transfer venue
or to apply the law of a foreign nation or to dismiss a
claim of a foreign nation or of a citizen of a foreign
nation on the ground of inconvenient forum.
(d) Amount in Controversy.--In an action to which this
subtitle applies and which is brought under section 1332 of
title 28, United States Code, the amount of noneconomic damages
or punitive damages, and attorneys' fees or costs, shall not be
included in determining whether the matter in controversy
exceeds the sum or value of $50,000.
(e) Federal Court Jurisdiction Not Established on Federal
Question Grounds.--Nothing in this subtitle shall be construed
to establish any jurisdiction in the district courts of the
United States over health care liability actions on the basis
of section 1331 or 1337 of title 28, United States Code.
As used in this subtitle:
(1) Actual damages.--The term ``actual damages''
means damages awarded to pay for economic loss.
(2) Alternative dispute resolution system; adr.--The
term ``alternative dispute resolution system'' or
``ADR'' means a system established under Federal or
State law that provides for the resolution of health
care liability claims in a manner other than through
health care liability actions.
(3) Claimant.--The term ``claimant'' means any person
who brings a health care liability action and any
person on whose behalf such an action is brought. If
such action is brought through or on behalf of an
estate, the term includes the claimant's decedent. If
such action is brought through or on behalf of a minor
or incompetent, the term includes the claimant's legal
guardian.
(4) Clear and convincing evidence.--The term ``clear
and convincing evidence'' is that measure or degree of
proof that will produce in the mind of the trier of
fact a firm belief or conviction as to the truth of the
allegations sought to be established, except that such
measure or degree of proof is more than that required
under preponderance of the evidence but less than that
required for proof beyond a reasonable doubt.
(5) Collateral source payments.--The term
``collateral source payments'' means any amount paid or
reasonably likely to be paid in the future to or on
behalf of a claimant, or any service, product, or other
benefit provided or reasonably likely to be provided in
the future to or on behalf of a claimant, as a result
of an injury or wrongful death, pursuant to--
(A) any State or Federal health, sickness,
income-disability, accident or workers'
compensation Act;
(B) any health, sickness, income-disability,
or accident insurance that provides health
benefits or income-disability coverage;
(C) any contract or agreement of any group,
organization, partnership, or corporation to
provide, pay for, or reimburse the cost of
medical, hospital, dental, or income disability
benefits; and
(D) any other publicly or privately funded
(6) Device.--The term ``device'' has the same meaning
given such term in section 201(h) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 321(h)).
(7) Drug.--The term ``drug'' has the same meaning
given such term in section 201(g)(1) of the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)).
(8) Economic loss.--The term ``economic loss'' means
any pecuniary loss resulting from harm (including the
loss of earnings or other benefits related to
employment, medical expense loss, replacement services
loss, loss due to death, burial costs, and loss of
business or employment opportunities), to the extent
recovery for such loss is allowed under applicable
State or Federal law.
(9) Harm.--The term ``harm'' means--
(A) any physical injury, illness, or death of
the claimant, or
(B) any mental anguish or emotional injury to
the claimant caused by or causing the claimant
physical injury or illness.
(10) Health care liability action.--The term ``health
care liability action'' means a civil action brought in
a State or Federal court against a health care
provider, an entity which is obligated to provide or
pay for health benefits under any health plan
(including any person or entity acting under a contract
or arrangement to provide or administer any health
benefit), or the manufacturer, distributor, supplier,
marketer, promoter, or seller of a medical product, in
which the claimant alleges a health care liability
(11) Health care liability claim.--The term ``health
care liability claim'' means a claim in which the
claimant alleges that harm was caused by the provision
of (or the failure to provide) health care services or
the use of a medical product, regardless of the theory
of liability on which the claim is based.
(12) Health care provider.--The term ``health care
provider'' means any individual, organization, or
institution that is engaged in the delivery of health
care services in a State and that is required by the
laws or regulations of the State to be licensed or
certified by the State to engage in the delivery of
such services in the State.
(13) Manufacturer.--The term ``manufacturer'' means--
(A) any person who is engaged in a business
to produce, create, make, or construct any
product (or component part of a product) and
who (i) designs or formulates the product (or
component part of the product), or (ii) has
engaged another person to design or formulate
the product (or component part of the product);
(B) a product seller, but only with respect
to those aspects of a product (or component
part of a product) which are created or
affected when, before placing the product in
the stream of commerce, the product seller
produces, creates, makes or constructs and
designs, or formulates, or has engaged another
person to design or formulate, an aspect of the
product (or component part of the product) made
by another person; or
(C) any product seller not described in
subparagraph (B) which holds itself out as a
manufacturer to the user of the product.
(14) Noneconomic damages.--The term ``noneconomic
damages'' means damages paid to an individual for pain
and suffering, inconvenience, emotional distress,
mental anguish, loss of society and companionship,
injury to reputation, humiliation, and other
subjective, nonpecuniary losses.
(15) Person.--The term ``person'' means any
individual, corporation, company, association, firm,
partnership, society, joint stock company, or any other
entity, including any governmental entity.
(16) Product seller.--
(A) In general.--The term ``product seller''
means a person who in the course of a business
conducted for that purpose--
(i) sells, distributes, rents,
leases, prepares, blends, packages,
labels, or otherwise is involved in
placing a product in the stream of
commerce; or
(ii) installs, repairs, refurbishes,
reconditions, or maintains the harm-
causing aspect of the product.
(B) Exclusion.--The term ``product seller''
does not include--
(i) a seller or lessor of real
(ii) a provider of professional
services in any case in which the sale
or use of a product is incidental to
the transaction and the essence of the
transaction is the furnishing of
judgment, skill, or services; or
(iii) any person who--
(I) acts in only a financial
capacity with respect to the
sale of a product; or
(II) leases a product under a
lease arrangement in which the
lessor does not initially
select the leased product and
does not during the lease term
ordinarily control the daily
operations and maintenance of
the product.
(17) Punitive damages.--The term ``punitive damages''
means damages awarded against any person not to
compensate for actual injury suffered, but to punish or
deter such person or others from engaging in similar
behavior in the future.
(18) State.--The term ``State'' means each of the
several States, the District of Columbia, the
Commonwealth of Puerto Rico, the Virgin Islands, Guam,
American Samoa, the Northern Mariana Islands, the Trust
Territories of the Pacific Islands, and any other
territory or possession of the United States or any
political subdivision of any of the foregoing.
This subtitle will apply to any health care liability action
brought in a Federal or State court and to any health care
liability claim subject to an alternative dispute resolution
system, that is initiated on or after the date of enactment of
(a) General Rule.--Except as provided in subsection (b), a
health care liability action may be filed not later than 2
years after the date on which the claimant discovered or, in
the exercise of reasonable care, should have discovered--
(1) the harm that is the subject of the action; and
(2) the cause of the harm.
(b) Exception.--A person with a legal disability (as
determined under applicable law) may file a health care
liability action not later than 2 years after the date on which
the person ceases to have the legal disability.
(c) Transitional Provision Relating to Extension of Period
for Bringing Certain Actions.--If any provision of subsection
(a) or (b) shortens the period during which a health care
liability action could be otherwise brought pursuant to another
provision of law, the claimant may, notwithstanding subsections
(a) and (b), bring the health care liability action not later
than 2 years after the date of enactment of this Act.
(a) Treatment of Noneconomic Damages.--
(1) Limitation on noneconomic damages.--The total
amount of noneconomic damages that may be awarded to a
claimant for harm which is the subject of a health care
liability action may not exceed $250,000, regardless of
the number of parties against whom the action is
brought or the number of actions brought with respect
to the injury.
(2) Fair share rule for noneconomic damages.--
(A) General rule.--In a health care liability
action, the liability of each defendant for
noneconomic damages shall be several only and
shall not be joint.
(B) Amount of liability.--
(i) In general.--Each defendant shall
be liable only for the amount of
noneconomic damages attributable to the
defendant in direct proportion to the
percentage of responsibility of the
defendant (determined in accordance
with paragraph (2)) for the harm to the
claimant with respect to which the
defendant is liable. The court shall
render a separate judgment against each
defendant in an amount determined
pursuant to the preceding sentence.
(ii) Percentage of responsibility.--
For purposes of determining the amount
of noneconomic damages attributable to
a defendantunder this section, the
trier of fact shall determine the percentage of responsibility of each
person responsible for the claimant's harm, whether or not such person
is a party to the action.
(b) Treatment of Punitive Damages.--
(1) General rule.--Punitive damages may, to the
extent permitted by applicable law, be awarded in a
health care liability action against a defendant if the
claimant establishes by clear and convincing evidence
that the harm suffered was result of conduct
manifesting a conscious, flagrant indifference to the
rights or safety of others.
(2) Required proportionality.--The amount of punitive
damages that may be awarded in a health care liability
action shall not exceed 3 times the amount of damages
awarded to the claimant for economic loss, or $250,000,
whichever is greater. This subsection shall be applied
by the court, and application of this subsection shall
not be disclosed to the jury.
(c) Bifurcation at Request of Any Party.--
(1) In general.--At the request of any party the
trier of fact in any action that is subject to this
section shall consider in a separate proceeding, held
subsequent to the determination of the amount of
compensatory damages, whether punitive damages are to
be awarded for the harm that is the subject of the
action and the amount of the award.
(2) Inadmissibility of evidence relative only to a
claim of punitive damages in a proceeding concerning
compensatory damages.--If any party requests a separate
proceeding under paragraph (1), in a proceeding to
determine whether the claimant may be awarded
compensatory damages, any evidence, argument, or
contention that is relevant only to the claim of
punitive damages, as determined by applicable law,
shall be inadmissible.
(d) Drugs and Devices.--
(1)(A) Punitive damages shall not be awarded against
a manufacturer or product seller of a drug or device
which caused the claimant's harm where--
(i) such drug or device was subject to
premarket approval by the Food and Drug
Administration with respect to the safety of
the formulation or performance of the aspect of
such drug or device which caused the claimant's
harm or the adequacy of the packaging or
labeling of such drug or device, and such drug
or device was approved by the Food and Drug
Administration; or
(ii) the drug or device is generally
recognized as safe and effective pursuant to
conditions established by the Food and Drug
Administration and applicable regulations,
including packaging and labeling regulations.
(B) Subparagraph (A) shall not apply in any case in
which the defendant, before or after premarket approval
of a drug or device--
(i) intentionally and wrongfully withheld
from or misrepresented to the Food and Drug
Administration information concerning such drug
or device required to be submitted under the
Federal Food, Drug, and Cosmetic Act (21 U.S.C.
301 et seq.) or section 351 of the Public
Health Service Act (42 U.S.C. 262) that is
material and relevant to the harm suffered by
(ii) made an illegal payment to an official
or employee of the Food and Drug Administration
for the purpose of securing or maintaining
approval of such drug or device.
(2) Packaging.--In a health care liability action
which is alleged to relate to the adequacy of the
packaging (or labeling relating to such packaging) of a
drug which is required to have tamper-resistant
packaging under regulations of the Secretary of Health
and Human Services (including labeling regulations
related to such packaging), the manufacturer of the
drug shall not be held liable for punitive damages
unless the drug is found by the court by clear and
convincing evidence to be substantially out of
compliance with such regulations.
(e) Periodic Payments for Future Losses.--
(1) General rule.--In any health care liability
action in which the damages awarded for future economic
and noneconomic loss exceed $50,000, a person shall not
be required to pay such damages in a single, lump-sum
payment, but shall be permitted to make such payments
periodically based on when the damages are found likely
to occur, with the amount and schedule of such payments
determined by the court.
(2) Finality of judgment.--The judgment of the court
awarding periodic payments under this subsection may
not, in the absence of fraud, be reopened at any time
to contest, amend, or modify the schedule or amount of
the payments.
(3) Lump-sum settlements.--This subsection shall not
be construed to preclude a settlement providing for a
single, lump-sum payment.
(f) Treatment of Collateral Source Payments.--
(1) Introduction into evidence.--In any health care
liability action, any defendant may introduce evidence
of collateral source payments. If a defendant elects to
introduce such evidence, the claimant may introduce
evidence of any amount paid or contributed or
reasonably likely to be paid or contributed in the
future by or on behalf of the claimant to secure the
right to such collateral source payments.
(2) No subrogation.--No provider of collateral source
payments shall recover any amount against the claimant
or receive any lien or credit against the claimant's
recovery or be equitably or legally subrogated the
right of the claimant in a health care liability
action. This subsection shall apply to an action that
is settled as well as an action that is resolved by a
fact finder.
Any ADR used to resolve a health care liability action or
claim shall contain provisions relating to statute of
limitations, non-economic damages, joint and several liability,
punitive damages, collateral source rule, and periodic payments
which are identical to the provisions relating to such matters
in this subtitle.
TITLE V--COMMITTEE ON EDUCATION AND THE WORKFORCE
Subtitle A--TANF Block Grant
SEC. 5001. WELFARE-TO-WORK GRANTS.
(a) Grants to States.--Section 403(a) of the Social Security
Act (42 U.S.C. 603(a)) is amended by adding at the end the
``(5) Welfare-to-work grants.--
``(A) Formula grants.--
``(i) Entitlement.--A State shall be
entitled to receive from the Secretary
a grant for each fiscal year specified
in subparagraph (H) of this paragraph
for which the State is a welfare-to-
work State, in an amount that does not
exceed the lesser of--
``(I) 2 times the total of
the expenditures by the State
(excluding qualified State
expenditures (as defined in
section 409(a)(7)(B)(i)) and
expenditures described in
section 409(a)(7)(B)(iv))
during the fiscal year for
activities described in
subparagraph (C)(i) of this
paragraph; or
``(II) the allotment of the
State under clause (iii) of
this subparagraph for the
fiscal year.
``(ii) Welfare-to-work state.--A
State shall be considered a welfare-to-
work State for a fiscal year for
purposes of this subparagraph if the
Secretary, after consultation (and the
sharing of any plan or amendment
thereto submitted under this clause)
with the Secretary of Health and Human
Services and the Secretary of Housing
and Urban Development, determines that
the State meets the following
``(I) The State has submitted
to the Secretary (in the form
of an addendum to the State
plan submitted under section
402) a plan which--
``(aa) describes how,
consistent with this
subparagraph, the State
will use any funds
subparagraph during the
fiscal year;
``(bb) specifies the
formula to be used
pursuant to clause (vi)
to distribute funds in
the State, and
describes the process
by which the formula
was developed; and
``(cc) contains
evidence that the plan
was developed through a
that, at a minimum,
included sub-State
``(II) The State has provided
the Secretary with an estimate
of the amount that the State
intends to expend during the
fiscal year (excluding
section 409(a)(7)(B)(iv)) for
``(III) The State has agreed
to negotiate in good faith with
the Secretary of Health and
Human Services with respect to
the substance of any evaluation
under section 413(j), and to
cooperate with the conduct of
any such evaluation.
``(IV) The State is an
eligible State for the fiscal
``(iii) Allotments to welfare-to-work
states.--The allotment of a welfare-to-
work State for a fiscal year shall be
the available amount for the fiscal
year multiplied by the State percentage
for the fiscal year.
``(iv) Available amount.--As used in
clause (iii), the term `available
amount' means, for a fiscal year, 95
percent of--
``(I) the amount specified in
subparagraph (H) for the fiscal
year; minus
``(II) the total of the
amounts reserved pursuant to
subparagraphs (F) and (G) for
the fiscal year.
``(v) State percentage.--As used in
clause (iii), the term `State
percentage' means, with respect to a
fiscal year, \1/2\ of the sum of--
``(I) the percentage
represented by the
number of individuals
in the State whose
income is less than the
poverty line divided by
the number of such
individuals in the
United States; and
``(II) the percentage
who are adult
recipients of
assistance under the
State program funded
under this part divided
by the number of
United States who are
adult recipients of
assistance under any
``(vi) Distribution of funds within
states.--
``(I) In general.--A State to
which a grant is made under
this subparagraph shall
distribute not less than 85
percent of the grant funds
among the service delivery
areas in the State, in
accordance with a formula
which--
``(aa) determines the
amount to be
distributed for the
benefit of a service
delivery area in
proportion to the
number (if any) by
which the number of
individuals residing in
the service delivery
area with an income
that is less than the
poverty line exceeds 5
percent of the
population of the
service delivery area,
relative to such number
for the other service
delivery areas in the
State, and accords a
weight of not less than
50 percent to this
factor;
``(bb) may determine
the amount to be
residing in the service
delivery area who are
under this part
(whether in effect
before or after the
amendments made by
section 103(a) of the
and Work Opportunity
Reconciliation Act
first applied tothe
State) for at least 30 months (whether or not consecutive) relative to
the number of such adults residing in the other service delivery areas
in the State; and
``(cc) may determine
number of unemployed
area relative to the
number of such
the other service
``(II) Special rule.--
Notwithstanding subclause (I),
if the formula used pursuant to
subclause (I) would result in
the distribution of less than
$100,000 during a fiscal year
for the benefit of a service
delivery area, then in lieu of
distributing such sum in
accordance with the formula,
such sum shall be available for
distribution under subclause
(III) during the fiscal year.
``(III) Projects to help
long-term recipients of
assistance into the work
force.--The Governor of a State
to which a grant is made under
this subparagraph may
distribute not more than 15
(plus any amount required to be
distributed under this
subclause by reason of
subclause (II)) to projects
that appear likely to help
assistance under the State
program funded under this part
(whether in effect before or
after the amendments made by
section 103(a) of the Personal
Responsibility and Work
Opportunity Reconciliation Act
first applied to the State)
enter the work force.
``(vii) Administration.--
``(I) In general.--A grant
made under this subparagraph to
a State shall be administered
by the State agency that is
administering, or supervising
the administration of, the
State program funded under this
part, or by another State
agency designated by the
Governor of the State.
``(II) Spending by private
industry councils.--The private
industry council for a service
delivery area shall have sole
authority, in coordination with
the chief elected official (as
described in section 103(c) of
the Job Training Partnership
Act) of the service delivery
area, to expend the amounts
provided for a service delivery
area under subparagraph
(vi)(I).
``(B) Demonstration projects.--
``(i) In general.--The Secretary, in
consultation with the Secretary of
Health and Human Services and the
Secretary of Housing and Urban
Development, shall make grants in
accordance with this subparagraph among
eligible applicants based on the
likelihood that the applicant can
successfully make long-term placements
of individuals into the work force.
``(ii) Eligible applicants.--As used
in clause (i), the term `eligible
applicant' means a private industry
council or a political subdivision of a
``(iii) Determination of grant
amount.--In determining the amount of a
grant to be made under this
subparagraph for a demonstration
project proposed by an applicant, the
Secretary shall provide the applicant
with an amount sufficient to ensure
that the project has a reasonable
opportunity to be successful, taking
into account the number of long-term
recipients of assistance under a State
program funded under this part, the
level of unemployment, the job
opportunities and job growth, the
poverty rate, and such other factors as
the Secretary deems appropriate, in the
area to be served by the project.
``(iv) Funding.--For grants under
this subparagraph for each fiscal year
specified in subparagraph (H), there
shall be available to the Secretary an
amount equal to the sum of--
``(I) 5 percent of--
``(aa) the amount
specified in
subparagraph (H) for
the fiscal year; minus
``(bb) the total of
the amounts reserved
pursuant to
subparagraphs (F) and
(G) for the fiscal
year;
``(II) any amount available
for grants under this paragraph
for the immediately preceding
fiscal year that has not been
obligated;
``(III) any amount reserved
pursuant to subparagraph (F)
obligated; and
``(IV) any available amount
(as defined in subparagraph
(A)(iv)) for the immediately
preceding fiscal year that has
not been obligated by a State
or sub-State entity.
Amounts made available pursuant to this
clause are authorized to remain
available until the end of fiscal year
``(C) Limitations on use of funds.--
``(i) Allowable activities.--An
entity to which funds are provided
under this paragraph may use the funds
to move into the work force recipients
of assistance under the program funded
under this part of the State in which
the entity is located, by means of any
of the following:
``(I) Job creation through
public or private sector
employment wage subsidies.
``(II) On-the-job training.
``(III) Contracts with job
placement companies or public
job placement programs.
``(IV) Job vouchers.
``(V) Job retention or
support services if such
services are not otherwise
``(ii) Required beneficiaries.--An
entity that operates a project with
funds provided under this paragraph
shall expend at least 90 percent of all
funds provided to the project for the
benefit of recipients of assistance
under the program funded under this
part of the State in which theentity is
located who meet the requirements of any of the following subclauses:
``(I) The individual has
received assistance under the
part (whether in effect before
or after the amendments made by
section 103 of the Personal
of 1996 first apply to the
State) for at least 30 months
(whether or not consecutive).
``(II) At least 2 of the
following apply to the
``(aa) The individual
has not completed
secondary school or
obtained a certificate
of general equivalency,
and has low skills in
reading and
``(bb) The individual
requires substance
abuse treatment for
employment.
``(cc) The individual
has a poor work
The Secretary shall prescribe
such regulations as may be
necessary to interpret this
subclause.
``(III) Within 12 months, the
individual will become
ineligible for assistance under
the State program funded under
this part by reason of a
durational limit on such
assistance, without regard to
any exemption provided pursuant
to section 408(a)(7)(C) that
may apply to the individual.
``(iii) Limitation on applicability
of section 404.--The rules of section
404, other than subsections (b), (f),
and (h) of section 404, shall not apply
to a grant made under this paragraph.
``(iv) Prohibition against provision
of services by private industry
council.--A private industry council
may not directly provide services using
funds provided under this paragraph.
``(v) Prohibition against use of
grant funds for any other fund matching
requirement.--An entity to which funds
are provided under this paragraph shall
not use any part of the funds to
fulfill any obligation of any State,
political subdivision, or private
industry council to contribute funds
under other Federal law.
``(vi) Deadline for expenditure.--An
under this paragraph shall remit to the
Secretary any part of the funds that
are not expended within 3 years after
the date the funds are so provided.
``(D) Individuals with income less than the
poverty line.--For purposes of this paragraph,
the number of individuals with an income that
is less than the poverty line shall be
determined based on the methodology used by the
Bureau of the Census to produce and publish
intercensal poverty data for 1993 for States
and counties.
``(i) Private industry council.--The
term `private industry council' means,
with respect to a service delivery
area, the private industry council (or
successor entity) established for the
service delivery area pursuant to the
Job Training Partnership Act.
``(ii) Secretary.--The term
`Secretary' means the Secretary of
Labor, except as otherwise expressly
``(iii) Service delivery area.--The
term `service delivery area' shall have
the meaning given such term for
purposes of the Job Training
Partnership Act (or successor area).
``(F) Funding for indian tribes.--1 percent
of the amount specified in subparagraph (H) for
each fiscal year shall be reserved for grants
to Indian tribes under section 412(a)(3).
``(G) Evaluations.--0.5 percent of the amount
specified in subparagraph (H) for each fiscal
year shall be reserved for use by the Secretary
of Health and Human Services to carry out
section 413(j).
``(H) Funding.--The amount specified in this
subparagraph is--
``(i) $750,000,000 for fiscal year
``(ii) $1,250,000,000 for fiscal year
``(iii) $1,000,000,000 for fiscal
``(I) Budget scoring.--Notwithstanding
section 457(b)(2) of the Balanced Budget and
Emergency Deficit Control Act of 1985, the
baseline shall assume that no grant shall be
made under this paragraph or under section
412(a)(3) after fiscal year 2001.''.
(b) Grants to Territories.--Section 1108(a) of such Act (42
U.S.C. 1308(a)) is amended by inserting ``(except section
403(a)(5))'' after ``title IV''.
(c) Grants to Indian Tribes.--Section 412(a) of such Act (42
U.S.C. 612(a)) is amended by adding at the end the following:
``(A) In general.--The Secretary shall make a
grant in accordance with this paragraph to an
Indian tribe for each fiscal year specified in
section 403(a)(5)(H) for which the Indian tribe
is a welfare-to-work tribe, in such amount as
the Secretary deems appropriate, subject to
subparagraph (B) of this paragraph.
``(B) Welfare-to-work tribe.--An Indian tribe
shall be considered a welfare-to-work tribe for
a fiscal year for purposes of this paragraph if
the Indian tribe meets the following
``(i) The Indian tribe has submitted
to the Secretary (in the form of an
addendum to the tribal family
assistance plan, if any, of the Indian
tribe) a plan which describes how,
consistent with section 403(a)(5), the
Indian tribe will use any funds
provided under this paragraph during
``(ii) The Indian tribe has provided
the Secretary with an estimate of the
amount that the Indian tribe intends to
expend during the fiscal year
(excluding tribal expenditures
described in section 409(a)(7)(B)(iv))
for activities described in section
403(a)(5)(C)(i).
``(iii) The Indian tribe has agreed
to negotiate in good faith with the
Secretary of Health and Human Services
with respect to the substance of any
evaluation under section 413(j), and to
cooperate with the conduct of any such
``(C) Limitations on use of funds.--Section
403(a)(5)(C) shall apply to funds provided to
Indian tribes under this paragraph in the same
manner in which such section applies to funds
provided under section 403(a)(5).''.
(d) Funds Received From Grants To Be Disregarded in Applying
Durational Limit on Assistance.--Section 408(a)(7) of such Act
(42 U.S.C. 608(a)(7)) is amended by adding at the end the
``(G) Inapplicability to welfare-to-work
grants and assistance.--For purposes of
subparagraph (A) of this paragraph, a grant
made under section 403(a)(5) shall not be
considered a grant made under section 403, and
assistance from funds provided under section
403(a)(5) shall not be considered
assistance.''.
(e) Evaluations.--Section 413 of such Act (42 U.S.C. 613) is
``(j) Evaluation of Welfare-To-Work Programs.--The
Secretary--
``(1) shall, in consultation with the Secretary of
Labor, develop a plan to evaluate how grants made under
sections 403(a)(5) and 412(a)(3) have been used; and
``(2) may evaluate the use of such grants by such
grantees as the Secretary deems appropriate, in
accordance with an agreement entered into with the
grantees after good-faith negotiations.''.
SEC. 5002. NONDISPLACEMENT.
Section 407(f) of the Social Security Act (42 U.S.C. 607(f))
is amended to read as follows:
``(f) Nondisplacement in Work Activities.--
``(1) Prohibitions.--
``(A) General prohibition.--A participant in
a work activity pursuant to section 403(a)(5)
or this section shall not displace (including a
partial displacement, such as a reduction in
the hours of nonovertime work, wages, or
employment benefits) any individual who, as of
the date of the participation, is an employee.
``(B) Prohibition on impairment of
contracts.--A work activity shall not impair an
existing contract for services or collective
bargaining agreement, and a work activity that
would be inconsistent with the terms of a
collective bargaining agreement shall not be
undertaken without the written concurrence of
the labor organization and employer concerned.
``(C) Other prohibitions.--A participant in a
work activity shall not be employed in a job--
``(i) when any other individual is on
layoff from the same or any
substantially equivalent job;
``(ii) when the employer has
terminated the employment of any
regular employee or otherwise reduced
the workforce of the employer with the
intention of filling the vacancy so
created with the participant; or
``(iii) which is created in a
promotional line that will infringe in
any way upon the promotional
opportunities of employed individuals.
``(2) Health and safety.--Health and safety standards
established under Federal and State law otherwise
applicable to working conditions of employees shall be
equally applicable to working conditions of
participants engaged in a work activity. To the extent
that a State workers' compensation law applies,
workers' compensation shall be provided to participants
on the same basis as the compensation is provided to
other individuals in the State in similar employment.
``(3) Nondiscrimination.--In addition to the
protections provided under the provisions of law
specified in section 408(c), an individual may not be
discriminated against with respect to participation in
work activities by reason of gender.
``(4) Grievance procedure.--
``(A) In general.--Each State to which a
grant is made under section 403 shall establish
and maintain a procedure for grievances or
complaints alleging violations of paragraph
(1), (2), or (3) from participants and other
interested or affected parties. The procedure
shall include an opportunity for a hearing and
be completed within 60 days after the grievance
or complaint is filed.
``(B) Investigation.--
``(i) In general.--The Secretary of
Labor shall investigate an allegation
of a violation of paragraph (1), (2),
or (3) if--
``(I) a decision relating to
the violation is not reached
within 60 days after the date
of the filing of the grievance
or complaint, and either party
appeals to the Secretary of
Labor; or
``(II) a decision relating to
the violation is reached within
the 60-day period, and the
party to which the decision is
adverse appeals the decision to
the Secretary of Labor.
``(ii) Additional requirement.--The
Secretary of Labor shall make a final
determination relating to an appeal
made under clause (i) no later than 120
days after receiving the appeal.
``(C) Remedies.--Remedies for violation of
paragraph (1), (2), or (3) shall be limited
to--
``(i) suspension or termination of
payments under section 403;
``(ii) prohibition of placement of a
participant with an employer that has
violated paragraph (1), (2), or (3);
``(iii) where applicable,
reinstatement of an employee, payment
of lost wages and benefits, and
reestablishment of other relevant
terms, conditions and privileges of
employment; and
``(iv) where appropriate, other
equitable relief.''.
SEC. 5003. CLARIFICATION OF LIMITATION ON NUMBER OF PERSONS WHO MAY BE
TREATED AS ENGAGED IN WORK BY REASON OF
PARTICIPATION IN EDUCATIONAL ACTIVITIES.
(a) In General.--Section 407(c)(2)(D) of the Social Security
Act (42 U.S.C. 607(c)(2)(D)) is amended to read as follows:
``(D) Limitation on number of persons who may
be treated as engaged in work by reason of
participation in educational activities.--For
purposes of determining monthly participation
rates under paragraphs (1)(B)(i) and (2)(B) of
subsection (b), not more than 20 percent of the
number of individuals in all families and in 2-
parent families, respectively, in a State who
are treated as engaged in work for a month may
consist of individuals who are determined to be
engaged in work for the month by reason of
participation in vocational educational
training, or deemed to be engaged in work for
the month by reason of subparagraph (C) of this
paragraph.''.
(b) Retroactivity.--The amendment made by subsection (a) of
this section shall take effect as if included in the enactment
of section 103(a) of the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996.
SEC. 5004. COMPENSATION; MAXIMUM REQUIRED HOURS OF WORK ACTIVITIES.
(a) In General.--Section 407 of the Social Security Act (42
U.S.C. 607) is amended by adding at the end the following:
``(j) Compensation.--A State to which a grant is made under
section 403 may not require a recipient of assistance under the
State program funded under this part to participate in a work
activity described in paragraph (1), (2), or (3) of subsection
(d) unless the recipient is compensated at the same rates,
including periodic increases, as trainees or employees who are
similarly situated in similar occupations by the same employer
and who have similar training, experience and skills, and such
rates shall be in accordance with applicable law.
``(k) Limitation on Number of Hours Per Month That a
Recipient of Assistance May Be Required To Participate in On-
the-Job Training, andwith a Public Agency or Nonprofit
Organization.--
``(1) In general.--A State to which a grant is made
under section 403 may not require a recipient of
assistance under the State program funded under this
part to be assigned to on-the-job training, and to a
work experience or community service position with a
public agency or nonprofit organization during a month
for more than the allowable number of hours determined
for the month under paragraph (2).
``(2) Allowable number of hours.--
(B), the allowable number of hours determined
for a month under this paragraph is--
``(i) the value of the includible
benefits provided by the State to the
recipient during the month; divided by
``(ii) the minimum wage rate in
effect during the month under section 6
of the Fair Labor Standards Act of
``(B) State option to take account of certain
work activities.--
allowable number of hours for a month
for a sufficiently employed recipient,
the State may subtract from the
allowable number of hours calculated
under subparagraph (A) the number of
hours during the month for which the
recipient participates in a work
activity described in paragraph (6),
(8), (9), or (11) of subsection (d).
``(ii) Sufficiently employed
recipient.--As used in clause (i), the
term `sufficiently employed recipient'
means, with respect to a month, a
recipient who is employed during the
month for a number of hours that is not
less than--
``(I) the sum of the dollar
value of any assistance
provided to the recipient
during the month under the
part, and the dollar value
equivalent of any benefits
during the month under the food
stamp program under the Food
Stamp Act of 1977; divided by
``(II) the minimum wage rate
in effect during the month
under section 6 of the Fair
Labor Standards Act of 1938.
``(3) Definition of value of the includible
benefits.--As used in paragraph (2)(A), the term `value
of the includible benefits' means, with respect to a
recipient--
``(A) the dollar value of any assistance
under the State program funded under this part;
``(B) the dollar value equivalent of any
benefits under the food stamp program under the
Food Stamp Act of 1977;
``(C) at the option of the State, the dollar
value of benefits under the State plan approved
under title XIX, as determined in accordance
with paragraph (4);
``(D) at the option of the State, the dollar
value of child care assistance; and
``(E) at the option of the State, the dollar
value of housing benefits.
``(4) Valuation of medicaid benefits.--Annually, the
Secretary shall publish a table that specifies the
dollar value of the insurance coverage provided under
title XIX to a family of each size, which may take
account of geographical variations or other factors
identified by the Secretary.
``(5) Treatment of recipients assigned to certain
positions with a public agency or nonprofit
organization.--A recipient of assistance under a State
program funded under this part who is engaged in work
experience or community service with a public agency or
nonprofit organization shall not be considered an
employee of the public agency or the nonprofit
organization.''.
SEC. 5005. PENALTY FOR FAILURE OF STATE TO REDUCE ASSISTANCE FOR
RECIPIENTS REFUSING WITHOUT GOOD CAUSE TO WORK.
(a) In General.--Section 409(a) of the Social Security Act
(42 U.S.C. 609(a)) is amended by adding at the end the
``(13) Penalty for failure to reduce assistance for
recipients refusing without good cause to work.--
``(A) In general.--If the Secretary
determines that a State to which a grant is
made under section 403 in a fiscal year has
violated section 407(e) during the fiscal year,
the Secretary shall reduce the grant payable to
the State under section 403(a)(1) for the
immediately succeeding fiscal year by an amount
equal to not less than 1 percent and not more
than 5 percent of the State family assistance
grant.
``(B) Penalty based on severity of failure.--
The Secretary shall impose reductions under
subparagraph (A) with respect to a fiscal year
based on the degree of noncompliance.''.
Subtitle B--Higher Education Programs
SEC. 5101. MANAGEMENT AND RECOVERY OF RESERVES.
(a) Amendment.--Section 422 of the Higher Education Act of
1965 (20 U.S.C. 1072) is amended by adding after subsection (g)
the following new subsection:
``(h) Recall of Reserves; Limitations on Use of Reserve Funds
and Assets.--(1) Notwithstanding any other provision of law,
the Secretary shall, except as otherwise provided in this
subsection, recall $1,000,000,000 from the reserve funds held
by guaranty agencies on September 1, 2002.
``(2) Funds recalled by the Secretary under this subsection
shall be deposited in the Treasury.
``(3) The Secretary shall require each guaranty agency to
return reserve funds under paragraph (1) based on such agency's
required share of recalled reserve funds held by guaranty
agencies as of September 30, 1996. For purposes of this
paragraph, a guaranty agency's required share of recalled
reserve funds shall be determined as follows:
``(A) The Secretary shall compute each agency's
reserve ratio by dividing (i) the amount held in such
agency's reserve funds as of September 30, 1996 (but
reflecting later accounting or auditing adjustments
approved by the Secretary), by (ii) the original
principal amount of all loans for which such agency has
an outstanding insurance obligation as of such date.
``(B) If the reserve ratio of any agency as computed
under subparagraph (A) exceeds 2.0 percent, the
agency's required share shall include so much of the
amounts held in such agency's reserve fund as exceed a
reserve ratio of 2.0 percent.
``(C) If any additional amount is required to be
recalled under paragraph (1) (after deducting the total
of the required shares calculated under subparagraph
(B)), the agencies' required shares shall include
additional amounts--
``(i) determined by imposing on each such
agency an equal percentage reduction in the
amount of each agency's reserve fund remaining
after deduction of the amount recalled under
subparagraph (B); and
``(ii) the total of which equals the
additional amount that is required to be
recalled under paragraph (1) (after deducting
the total of the required shares calculated
under subparagraph (B)).
``(4) Within 90 days after the beginning of each of fiscal
years 1998 through 2002, each guaranty agency shall transfer a
portion of each agency's required share determined under
paragraph (3) to a restricted account established by the
guaranty agency that is of a type selected by the guaranty
agency with the approval of the Secretary. Funds transferred to
such restricted accounts shall be invested in obligations
issued or guaranteed by the United States or in other similarly
low-risk securities. A guaranty agency shall not use the funds
in such a restricted account for any purpose without the
express written permission of the Secretary, except that a
guaranty agency may use the earnings from such restricted
account to assist in meeting the agency's operational expenses
under this part. In each of fiscal years 1998 through 2002,
each agency shall transfer its required share to such
restricted account in 5 equal annual installments, except
``(A) a guarantee agency that has a reserve ratio (as
computed under subparagraph (3)(A)) equal to or less
than 1.10 percent may transfer its required share to
such account in 4 equal installments beginning in
fiscal year 1999; and
``(B) a guarantee agency may transfer such required
share to such account in accordance with such other
payment schedules as are approved by the Secretary.
``(5) If, on September 1, 2002, the total amount in the
restricted accounts described in paragraph (4) is less than the
amount the Secretary is required to recall under paragraph (1),
the Secretary may require the return of the amount of the
shortage from other reserve funds held by guaranty agencies
under procedures established by the Secretary.
``(6) The Secretary may take such reasonable measures, and
require such information, as may be necessary to ensure that
guaranty agencies comply with the requirements of this
subsection. Notwithstanding any other provision of this part,
if the Secretary determines that a guaranty agency is not in
compliance with the requirements of this subsection, such
agency may not receive any other funds under this part until
the Secretary determines that such agency is in compliance.
``(7) The Secretary shall not have any authority to direct a
guaranty agency to return reserve funds under subsection
(g)(1)(A) during the period from the date of enactment of this
subsection through September 30, 2002, and any reserve funds
otherwise returned under subsection (g)(1) during such period
shall be treated as amounts recalled under this subsection and
shall not be available under subsection (g)(4).
``(8) For purposes of this subsection, the term `reserve
funds' when used with respect to a guaranty agency--
``(A) includes any cash reserve funds held by the
guaranty agency, or held by, or under the control of,
any other entity; and
``(B) does not include buildings, equipment, or other
nonliquid assets.''.
(b) Conforming Amendment.--Section 428(c)(9)(A) of the Higher
Education Act of 1965 (20 U.S.C. 1078(c)(9)(A)) is amended--
(1) in the first sentence, by striking ``for the
fiscal year of the agency that begins in 1993''; and
(2) by striking the third sentence.
SEC. 5102. REPEAL OF DIRECT LOAN ORIGINATION FEES TO INSTITUTIONS OF
Section 452 of the Higher Education Act of 1965 (20 U.S.C.
1087b) is amended--
(1) by striking subsection (b); and
(2) by redesignating subsections (c) and (d) as
subsections (b) and (c), respectively.
SEC. 5103. FUNDS FOR ADMINISTRATIVE EXPENSES.
Subsection (a) of section 458 of the Higher Education Act of
1965 (20 U.S.C. 1087h(a)) is amended to read as follows:
``(a) In General.--(1) Each fiscal year, there shall be
available to the Secretary from funds not otherwise
appropriated, funds to be obligated for--
``(A) administrative costs under this part and part
B, including the costs of the direct student loan
programs under this part, and
``(B) administrative cost allowances payable to
guaranty agencies under part B and calculated in
accordance with paragraph (2),
not to exceed (from such funds not otherwise appropriated)
$532,000,000 in fiscal year 1998, $610,000,000 in fiscal year
1999, $705,000,000 in fiscal year 2000, $750,000,000 in fiscal
year 2001, and $750,000,000 in fiscal year 2002. Administrative
cost allowances under subparagraph (B) of this paragraph shall
be paid quarterly and used in accordance with section 428(f).
The Secretary may carry over funds available under this section
to a subsequent fiscal year.
``(2) Administrative cost allowances payable to guaranty
agencies under paragraph (1)(B) shall be calculated on the
basis of 0.85 percent of the total principal amount of loans
upon which insurance is issued on or after the date of
enactment of the Balanced Budget Act of 1997, except that such
allowances shall not exceed--
``(A) $170,000,000 for each of the fiscal years 1998
and 1999; or
``(B) $150,000,000 for each of the fiscal years 2000,
2001, and 2002.''.
SEC. 5104. SECRETARY'S EQUITABLE SHARE OF COLLECTIONS ON CONSOLIDATED
DEFAULTED LOANS.
Section 428(c)(6)(A) of the Higher Education Act of 1965 (20
U.S.C. 1078(c)(6)(A)) is amended--
(1) in the matter preceding clause (i), by striking
``made by the borrower'' and inserting ``made by or on
behalf of the borrower, including payments made to
discharge loans made under this title to obtain a
consolidation loan pursuant to this part or part D,'';
(2) in clause (ii), by striking ``(ii) an amount
equal to 27 percent of such payments (subject to
subparagraph (D) of this paragraph) for costs related''
``(ii) an amount equal to 27 percent of such payments
for covered costs, except that the amount determined
under this clause for such covered costs shall be (I)
18.5 percent of such payments for defaulted loans
consolidated pursuant to this part or part D on or
after July 1, 1997; and (II) 18.5 percent of such
payments for defaulted loans consolidated pursuant to
this part or part D on or after the date of enactment
of the Higher Education Amendments of 1992 with respect
to any guaranty agency that has, after such date, made
deductions from such payments under this clause (ii) in
an amount equal to 18.5 percent of such payments.
For purposes of clause (ii) of this subparagraph, the term
`covered costs' means costs related''.
SEC. 5105. EXTENSION OF STUDENT AID PROGRAMS.
Title IV of the Higher Education Act of 1965 (20 U.S.C. 1070
et seq.) is amended--
(1) in section 424(a), by striking ``1998.'' and
``2002.'' and inserting ``2002.'' and ``2006.'',
respectively;
(2) in section 428(a)(5), by striking ``1998,'' and
``2002.'' and inserting ``2002,'' and ``2006.'',
respectively; and
(3) in section 428C(e), by striking ``1998.'' and
inserting ``2002.''.
Subtitle C--Repeal of Smith-Hughes Vocational Education Act
SEC. 5201. REPEAL OF SMITH-HUGHES VOCATIONAL EDUCATION ACT.
The Act of February 23, 1917 (39 Stat. 929; 20 U.S.C. 11)
(commonly known as the ``Smith-Hughes Vocational Education
Act'') is repealed.
Subtitle D--Expansion of Portability and Health Insurance Coverage
SEC. 5301. SHORT TITLE OF SUBTITLE.
This subtitle may be cited as the ``Expansion of Portability
and Health Insurance Coverage Act of 1997''.
SEC. 5302. RULES GOVERNING ASSOCIATION HEALTH PLANS.
(a) In General.--Subtitle B of title I of the Employee
Retirement Income Security Act of 1974 is amended by adding
after part 7 the following new part:
``Part 8--Rules Governing Association Health Plans
``SEC. 801. ASSOCIATION HEALTH PLANS.
``(a) In General.--For purposes of this part, the term
`association health plan' means a group health plan--
``(1) whose sponsor is (or is deemed under this part
to be) described in subsection (b), and
``(2) under which at least one option of health
insurance coverage offered by a health insurance issuer
(which may include, among other options, managed care
options, point of service options, and preferred
provider options) is provided to participants and
``(b) Sponsorship.--The sponsor of a group health plan is
described in this subsection if such sponsor--
``(1) is organized and maintained in good faith, with
a constitution and bylaws specifically stating its
purpose and providing for periodic meetings on at least
an annual basis, as a trade association, an industry
association (including a rural electric cooperative
association or a rural telephone cooperative
association), a professional association, or a chamber
of commerce (or similar business group, including a
corporation or similar organization that operates on a
cooperative basis (within the meaning of section 1381
of the Internal Revenue Code of 1986)), for substantial
purposes other than that of obtaining or providing
medical care,
``(2) is established as a permanent entity which
receives the active support of its members and collects
from its members on a periodic basis dues or payments
necessary to maintain eligibility for membership in the
sponsor, and
``(3) does not condition such dues or payments or
coverage under the plan on the basis of health status-
related factors with respect to the employees of its
members (or affiliated members), or the dependents of
such employees, and does not condition such dues or
payments on the basis of group health plan
Any sponsor consisting of an association of entities which meet
the requirements of paragraphs (1) and (2) shall be deemed to
be a sponsor described in this subsection.
``SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS.
``(a) In General.--The Secretary shall prescribe by
regulation a procedure under which, subject to subsection (b),
the Secretary shall certify association health plans which
apply for certification as meeting the requirements of this
``(b) Standards.--Under the procedure prescribed pursuant to
subsection (a), the Secretary shall certify an association
health plan as meeting the requirements of this part only if
the Secretary is satisfied that--
``(1) such certification--
``(A) is administratively feasible,
``(B) is not adverse to the interests of the
individuals covered under the plan, and
``(C) is protective of the rights and
benefits of the individuals covered under the
``(2) the applicable requirements of this part are
met (or, upon the date on which the plan is to commence
operations, will be met) with respect to the plan.
``(c) Requirements Applicable to Certified Plans.--An
association health plan with respect to which certification
under this part is in effect shall meet the applicable
requirements of this part, effective on the date of
certification (or, if later, on the date on which the plan is
to commence operations).
``(d) Requirements for Continued Certification.--The
Secretary may provide by regulation for continued certification
under this part, including requirements relating to any
commencement, by an association health plan which has been
certified under this part, of a benefit option which does not
consist of health insurance coverage.
``(e) Class Certification for Fully-Insured Plans.--The
Secretary shall establish a class certification procedure for
association health plans under which all benefits consist of
health insurance coverage. Under such procedure, the Secretary
shall provide for the granting of certification under this part
to the plans in each class of such association health plans
upon appropriate filing under such procedure in connection with
plans in such class and payment of the prescribed fee under
section 807(a).
``SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF TRUSTEES.
``(a) Sponsor.--The requirements of this subsection are met
with respect to an association health plan if--
``(1) the sponsor (together with its immediate
predecessor, if any) has met (or is deemed under this
part to have met) for a continuous period of not less
than 3 years ending with the date of the application
for certification under this part, the requirements of
paragraphs (1) and (2) of section 801(b), and
``(2) the sponsor meets (or is deemed under this part
to meet) the requirements of section 801(b)(3).
``(b) Board of Trustees.--The requirements of this subsection
are met with respect to an association health plan if the
following requirements are met:
``(1) Fiscal control.--The plan is operated, pursuant
to a trust agreement, by a board of trustees which has
complete fiscal control over the plan and which is
responsible for all operations of the plan.
``(2) Rules of operation and financial controls.--The
board of trustees has in effect rules of operation and
financial controls, based on a 3-year plan of
operation, adequate to carry out the terms of the plan
and to meet all requirements of this title applicable
to the plan.
``(3) Rules governing relationship to participating
employers and to contractors.--
subparagraph (B), the members of the board of
trustees are individuals selected from
individuals who are the owners, officers,
directors, or employees of the participating
employers or who are partners in the
participating employers and actively
participate in the business.
``(B) Limitation.--
``(i) General rule.--Except as
provided in clauses (ii) and (iii), no
such m