[Congressional Record Volume 141, Number 163 (Friday, October 20, 1995)]
[House]
[Pages H10520-H10636]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               AMENDMENTS

  Under clause 6 of rule XXIII, proposed amendments were submitted as 
follows:

                               H.R. 2491

                         Offered By: Mr. Orton

                Amendment in the nature of a substitute

       Amendment No. 7: Strike all after the enacting clause and 
     insert the following:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS

       (a) Short Title.--This Act may be cited as the ``Common 
     Sense Balanced Budget Act of 1995''.
       (b) Table of Contents.--

           TITLE I--ENERGY, NATURAL RESOURCES AND ENVIRONMENT

                           Subtitle A--Energy

Sec. 1101. Privatization of uranium enrichment charges.
Sec. 1103. Cogeneration.
Sec. 1104. FEMA radiological emergency preparedness fees.

                        Subtitle B--Central Utah

Sec. 1121. Prepayment of certain repayment contracts between the United 
              States and the Central Utah Water Conservancy District.

                  Subtitle C--Army Corps of Engineers

Sec. 1131. Regulatory program fund.

                       Subtitle D--Helium Reserve

Sec. 1141. Sale of helium processing and storage facility.

                        Subtitle E--Territories

Sec. 1151. Termination of annual direct assistance to Northern Mariana 
              Islands.

                    TITLE II--AGRICULTURAL PROGRAMS

Sec. 2001. Short title and table of contents.

  Subtitle A--Extension and Modification of Various Commodity Programs

Sec. 2101. Extension of loans, payments, and acreage reduction programs 
              for wheat through 2002.
Sec. 2102. Extension of loans, payments, and acreage reduction programs 
              for feed grains through 2002.
Sec. 2103. Extension of loans, payments, and acreage reduction programs 
              for cotton through 2002.
Sec. 2104. Extension of loans, payments, and acreage reduction programs 
              for rice through 2002.
Sec. 2105. Extension of loans and payments for oilseeds through 2002.
Sec. 2106. Increase in flex acres.
Sec. 2107. Reduction in 50/85 and 0/85 programs.

                           Subtitle B--Sugar

Sec. 2201. Extension and modification of sugar program.

                          Subtitle C--Peanuts

Sec. 2301. Extension of price support program for peanuts and related 
              programs.
Sec. 2302. National poundage quotas and acreage allotments.
Sec. 2303. Sale, lease, or transfer of farm poundage quota.
Sec. 2304. Penalty for reentry of exported peanut products.
Sec. 2305. Price support program for peanuts.
Sec. 2306. Referendum regarding poundage quotas.
Sec. 2307. Regulations.

                          Subtitle D--Tobacco

Sec. 2401. Elimination of Federal budgetary outlays for tobacco 
              programs.
Sec. 2402. Establishment of farm yield for flue-cured tobacco based on 
              individual farm production history.
Sec. 2403. Removal of farm reconstitution exception for burley tobacco.
Sec. 2404. Reduction in percentage threshold for transfer of flue-cured 
              tobacco quota in cases of disaster.
Sec. 2405. Expansion of types of tobacco subject to no net cost 
              assessment.
Sec. 2406. Repeal of reporting requirements relating to export of 
              tobacco.
Sec. 2407. Repeal of limitation on reducing national marketing quota 
              for flue-cured and burley tobacco.
Sec. 2408. Application of civil penalties under Tobacco Inspection Act.
Sec. 2409. Transfers of quota or allotment across county lines in a 
              State.
Sec. 2410. Calculation of national marketing quota.
Sec. 2411. Clarification of authority to access civil money penalties.

[[Page H10521]]

Sec. 2412. Lease and transfer of farm marketing quotas for burley 
              tobacco.
Sec. 2413. Limitation on transfer of acreage allotments of other 
              tobacco.
Sec. 2414. Good faith reliance on actions or advice of department 
              representatives.
Sec. 2415. Uniform forfeiture dates for flue-cured and burley tobacco.
Sec. 2416. Sale of burley and flue-cured tobacco marketing quotas for a 
              farm by recent purchasers.

                    Subtitle E--Planting Flexibility

Sec. 2501. Definitions.
Sec. 2502. Crop and total acreage bases.
Sec. 2503. Planting flexibility.
Sec. 2504. Farm program payment yields.
Sec. 2505. Application of provisions.

                  Subtitle F--Miscellaneous Provisions

Sec. 2601. Limitations on amount of deficiency payments and land 
              diversion payments.
Sec. 2602. Sense of Congress regarding certain Canadian trade 
              practices.

                          TITLE III--COMMERCE

Sec. 3101. Spectrum auctions.
Sec. 3102. Federal Communications Commission fee collections
Sec. 3103. Auction of recaptured analog licenses.
Sec. 3104. Patent and trademark fees.
Sec. 3105. Repeal of authorization of transitional appropriations for 
              the United States Postal Service.

                        TITLE IV--TRANSPORTATION

Sec. 4101. Extension of railroad safety fees.
Sec. 4102. Permanent extension of vessel tonnage duties.
Sec. 4103. Sale of Governors Island, New York.
Sec. 4104. Sale of air rights.

                      TITLE V--HOUSING PROVISIONS

Sec. 5101. Reduction of section 8 annual adjustment factors for units 
              without tenant turnover.
Sec. 5102. Maximum mortgage amount floor for single family mortgage 
              insurance.
Sec. 5103. Foreclosure avoidance and borrower assistance.

 TITLE VI--INDEXATION AND MISCELLANEOUS ENTITLEMENT-RELATED PROVISIONS

Sec. 6101. Consumer Price Index.
Sec. 6102. Repeal of entitlement funding for family preservation and 
              support services.
Sec. 6103. Matching rate requirement for title XX block grants to 
              States for social services.
Sec. 6104. Denial of unemployment insurance to certain high-income 
              individuals.
Sec. 6105. Denial of unemployment insurance to individuals who 
              voluntarily leave military service.

                       TITLE VII--MEDICAID REFORM

                 Subtitle A--Per Capita Spending Limit

Sec. 7001. Limitation on expenditures recognized for purposes of 
              Federal financial participation.
Sec. 7002. Transitional reduction in amount of Federal financial 
              participation during the last 3 quarters of fiscal year 
              1996.

                   Subtitle B--Medicaid Managed Care

Sec. 7101. Permitting greater flexibility for States to enroll 
              beneficiaries in managed care arrangements.
Sec. 7102. Removal of barriers to provision of medicaid services 
              through managed care.
Sec. 7103. Additional requirements for medicaid managed care plans.
Sec. 7104. Preventing fraud in medicaid managed care.
Sec. 7105. Assuring adequacy of payments to medicaid managed care plans 
              and providers.
Sec. 7106. Sanctions for noncompliance by eligible managed care 
              providers.
Sec. 7107. Report on public health services.
Sec. 7108. Report on payments to hospitals.
Sec. 7109. Conforming amendments.
Sec. 7110. Effective date; status of waivers.

     Subtitle C--Additional Reforms of Medicaid Acute Care Program

Sec. 7201. Permitting increased flexibility in medicaid cost-sharing.
Sec. 7202. Limits on required coverage of additional treatment services 
              under EPSDT.
       Sec. 7203. Delay in application of new requirements.
       Sec. 7204. Deadline on action on waivers.

       Subtitle D--National Commission on Medicaid Restructuring

       Sec. 7301. Establishment of commission.
       Sec. 7302. Duties of commission.
       Sec. 7303. Administration.
       Sec. 7304. Authorization of appropriations.
       Sec. 7305. Termination.

      Subtitle E--Restrictions on Disproportionate Share Payments

       Sec. 7401. Reforming disproportionate share payments under 
           State medicaid programs.

                      Subtitle F--Fraud Reduction

       Sec. 7501. Monitoring payments for dual eligibles.
       Sec. 7502. Improved identification systems.

                          TITLE VIII--MEDICARE

       Sec. 8000. Short title; references in title; table of 
           contents.

                  Subtitle A--Medicare Choice Program

          Part 1--Increasing Choice Under the Medicare Program

       Sec. 8001. Increasing choice under medicare.
       Sec. 8002. Medicare Choice program.

            ``Part C--Provisions Relating to Medicare Choice

         ``Sec. 1851. Requirements for Medicare Choice 
           organizations.
         ``Sec. 1852. Requirements relating to benefits, provision 
           of services, enrollment, and premiums.
         ``Sec. 1853. Patient protection standards.
         ``Sec. 1854. Provider-sponsored organizations.
         ``Sec. 1855. Payments to Medicare Choice organizations.
         ``Sec. 1856. Establishment of standards for Medicare 
           Choice organizations and products.
         ``Sec. 1857. Medicare Choice certification.
         ``Sec. 1858. Contracts with Medicare Choice 
           organizations.
         ``Sec. 1859. Demonstration project for high deductible/
           medisave products.
       Sec. 8003. Reports.
       Sec. 8004. Transitional rules for current medicare HMO 
           program.

   Part 2--Special Rules for Medicare Choice Medical Savings Accounts

       Sec. 8011. Medicare choice MSA's.
       Sec. 8012. Certain rebates excluded from gross income.

      Part 3--Special Antitrust Rule for Provider Service Networks

       Sec. 8021. Application of antitrust rule of reason to 
           provider service networks.

                          Part 4--Commissions

       Sec. 8031. Medicare Payment Review Commission.
       Sec. 8032. Commission on the Effect of the Baby Boom 
           Generation on the Medicare Program.

           Part 5--Preemption of State Anti-Managed Care Laws

       Sec. 8041. Preemption of State law restrictions on managed 
           care arrangements.
       Sec. 8042. Preemption of State laws restricting utilization 
           review programs.

          Subtitle B--Provisions Relating to Regulatory Relief

    Part 1--Provisions Relating to Physician Financial Relationships

       Sec. 8101. Repeal of prohibitions based on compensation 
           arrangements.
       Sec. 8102. Revision of designated health services subject 
           to prohibition.
       Sec. 8103. Delay in implementation until promulgation of 
           regulations.
       Sec. 8104. Exceptions to prohibition.
       Sec. 8105. Repeal of reporting requirements.
       Sec. 8106. Preemption of State law.
       Sec. 8107. Effective date.

                        Part 2--Antitrust Reform

       Sec. 8111. Publication of antitrust guidelines on 
           activities of health plans.
       Sec. 8112. Issuance of health care certificates of public 
           advantage.
       Sec. 8113. Study of impact on competition.
       Sec. 8114. Antitrust exemption.
       Sec. 8115. Requirements.
       Sec. 8116. Definition.

                       Part 3--Malpractice Reform


          SUBPART A--UNIFORM STANDARDS FOR MALPRACTICE CLAIMS

       Sec. 8121. Applicability.
Sec. 8122. Requirement for initial resolution of action through 
              alternative dispute resolution.
Sec. 8123. Optional application of practice guidelines.
Sec. 8124. Treatment of noneconomic and punitive damages.
Sec. 8125. Periodic payments for future losses.
Sec. 8126. Treatment of attorney's fees and other costs.
Sec. 8127. Uniform statute of limitations.
Sec. 8128. Special provision for certain obstetric services.
Sec. 8129. Jurisdiction of Federal courts.
Sec. 8130. Preemption.


   SUBPART B--REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION 
                             SYSTEMS (ADR)

Sec. 8131. Basic requirements.
Sec. 8132. Certification of State systems; applicability of alternative 
              Federal system.
Sec. 8133. Reports on implementation and effectiveness of alternative 
              dispute resolution systems.


                         SUBPART C--DEFINITIONS

Sec. 8141. Definitions.

     Part 4--Payment Areas for Physicians' Services Under Medicare

Sec. 8151. Modification of payment areas used to determine payments for 
              physicians' services under medicare.

[[Page H10522]]


         Subtitle C--Medicare Payments to Health Care Providers

               Part 1--Provisions Affecting All Providers

Sec. 8201. One-year freeze in payments to providers.

                  Part 2--Provisions Affecting Doctors

Sec. 8211. Updating fees for physicians' services.
Sec. 8212. Use of real GDP to adjust for volume and intensity.

                 Part 3--Provisions Affecting Hospitals

Sec. 8221. Reduction in update for inpatient hospital services.
Sec. 8222. Elimination of formula-driven overpayments for certain 
              outpatient hospital services.
Sec. 8223. Establishment of prospective payment system for outpatient 
              services.
Sec. 8224. Reduction in medicare payments to hospitals for inpatient 
              capital-related costs.
Sec. 8225. Moratorium on PPS exemption for long-term care hospitals.
Sec. 8226. Elimination of certain additional payments for outlier 
              cases.

              Part 4--Provisions Affecting Other Providers

Sec. 8231. Revision of payment methodology for home health services.
Sec. 8232. Limitation of home health coverage under part A.
Sec. 8233. Reduction in fee schedule for durable medical equipment.
Sec. 8234. Nursing home billing.
Sec. 8235. Freeze in payments for clinical diagnostic laboratory tests.

       Part 5--Graduate Medical Education and Teaching Hospitals

Sec. 8241. Teaching hospital and graduate medical education trust fund.
Sec. 8242. Reduction in payment adjustments for indirect medical 
              education.

       Subtitle D--Provisions Relating to Medicare Beneficiaries

Sec. 8301. Part B premium.
Sec. 8302. Full cost of medicare part B coverage payable by high-income 
              individuals.
Sec. 8303. Expanded coverage of preventive benefits.

                  Subtitle E--Medicare Fraud Reduction

Sec. 8401. Increasing beneficiary awareness of fraud and abuse.
Sec. 8402. Beneficiary incentives to report fraud and abuse.
Sec. 8403. Elimination of home health overpayments.
Sec. 8404. Skilled nursing facilities.
Sec. 8405. Direct spending for anti-fraud activities under medicare.
Sec. 8406. Fraud reduction demonstration project.
Sec. 8407. Report on competitive pricing.

              Subtitle F--Improving Access to Health Care

                 Part 1--Assistance for Rural Providers


                       SUBPART A--RURAL HOSPITALS

Sec. 8501. Sole community hospitals.
Sec. 8502. Clarification of treatment of EAC and RPC hospitals.
Sec. 8503. Establishment of rural emergency access care hospitals.
Sec. 8504. Classification of rural referral centers.
Sec. 8505. Floor on area wage index.
Sec. 8506. Medical education.


            SUBPART B--RURAL PHYSICIANS AND OTHER PROVIDERS

Sec. 8511. Provider incentives.
Sec. 8512. National Health Service Corps loan repayments excluded from 
              gross income.
Sec. 8513. Telemedicine payment methodology.
Sec. 8514. Demonstration project to increase choice in rural areas.

                      Part 2--Medicare Subvention

Sec. 8521. Medicare program payments for health care services provided 
              in the military health services system.

                      Subtitle G--Other Provisions

Sec. 8601. Extension and expansion of existing secondary payer 
              requirements.
Sec. 8602. Repeal of medicare and medicaid coverage data bank.
Sec. 8603. Clarification of medicare coverage of items and services 
              associated with certain medical devices approved for 
              investigational use.
Sec. 8604. Additional exclusion from coverage.
Sec. 8605. Extending medicare coverage of, and application of hospital 
              insurance tax to, all State and local government 
              employees.

      Subtitle H--Monitoring Achievement of Medicare Reform Goals

Sec. 8701. Establishment of budgetary and program goals.
Sec. 8702. Medicare Reform Commission.

Subtitle I--Lock-Box Provisions for Medicare Part B Savings From Growth 
                               Reductions

Sec. 8801. Establishment of Medicare Growth Reduction Trust Fund for 
              part B savings.

                   Subtitle J--Clinical Laboratories

Sec. 8901. Exemption of physician office laboratories.

                        TITLE IX--WELFARE REFORM

Sec. 9000. Amendment of the Social Security Act.

              Subtitle A--Temporary Employment Assistance

Sec. 9101. State plan.

                       Subtitle B--Make Work Pay

Sec. 9201. Transitional medicaid benefits.
Sec. 9202. Notice of availability required to be provided to applicants 
              and former recipients of temporary family assistance, 
              food stamps, and medicaid.
Sec. 9203. Notice of availability of earned income tax credit and 
              dependent care tax credit to be included on W-4 form.
Sec. 9204. Advance payment of earned income tax credit through State 
              demonstration programs.
Sec. 9205. Funding of child care services.
Sec. 9206. Certain Federal assistance includible in gross income.
Sec. 9207. Dependent care credit to be refundable; high-income 
              taxpayers ineligible for credit.

                         Subtitle C--Work First

Sec. 9301. Work first program.
Sec. 9302. Regulations.
Sec. 9303. Applicability to States.

     Subtitle D--Family Responsibility And Improved Child Support 
                              Enforcement

Chapter 1--Eligibility And Other Matters Concerning Title IV-D Program 
                                Clients

Sec. 9401. State obligation to provide paternity establishment and 
              child support enforcement services.
Sec. 9402. Distribution of payments.
Sec. 9403. Due process rights.
Sec. 9404. Privacy safeguards.

             Chapter 2--Program Administration and Funding

Sec. 9411. Federal matching payments.
Sec. 9412. Performance-based incentives and penalties.
Sec. 9413. Federal and State reviews and audits.
Sec. 9414. Required reporting procedures.
Sec. 9415. Automated data processing requirements.
Sec. 9416. Director of CSE program; staffing study.
Sec. 9417. Funding for secretarial assistance to State programs.
Sec. 9418. Reports and data collection by the Secretary.

                  Chapter 3--Locate And Case Tracking

Sec. 9421. Central State and case registry.
Sec. 9422. Centralized collection and disbursement of support payments.
Sec. 9423. Amendments concerning income withholding.
Sec. 9424. Locator information from interstate networks.
Sec. 9425. Expanded Federal parent locator service.
Sec. 9426. Use of social security numbers.

          Chapter 4--Streamlining And Uniformity of Procedures

Sec. 9431. Adoption of uniform State laws.
Sec. 9432. Improvements to full faith and credit for child support 
              orders.
Sec. 9433. State laws providing expedited procedures.

                   Chapter 5--Paternity Establishment

Sec. 9441. Sense of the Congress.
Sec. 9442. Availability of parenting social services for new fathers.
Sec. 9443. Cooperation requirement and good cause exception.
Sec. 9444. Federal matching payments.
Sec. 9445. State laws concerning paternity establishment.
Sec. 9446. Outreach for voluntary paternity establishment.

      Chapter 6--Establishment And Modification of Support Orders

Sec. 9451. National Child Support Guidelines Commission.
Sec. 9452. Simplified process for review and adjustment of child 
              support orders.

                Chapter 7--Enforcement Of Support Orders

Sec. 9461. Federal income tax refund offset.
Sec. 9462. Internal Revenue Service collection of arrears.
Sec. 9463. Authority to collect support from Federal employees.
Sec. 9464. Enforcement of child support obligations of members of the 
              Armed Forces.
Sec. 9465. Motor vehicle liens.
Sec. 9466. Voiding of fraudulent transfers.
Sec. 9467. State law authorizing suspension of licenses.
Sec. 9468. Reporting arrearages to credit bureaus.
Sec. 9469. Extended statute of limitation for collection of arrearages.
Sec. 9470. Charges for arrearages.
Sec. 9471. Denial of passports for nonpayment of child support.
Sec. 9472. International child support enforcement.
Sec. 9473. Seizure of lottery winnings, settlements, payouts, awards, 
              and bequests, and sale of forfeited property, to pay 
              child support arrearages.
Sec. 9474. Liability of grandparents for financial support of children 
              of their minor children.
Sec. 9475. Sense of the Congress regarding programs for noncustodial 
              parents unable to meet child support obligations.

[[Page H10523]]


                       Chapter 8--Medical Support

Sec. 9481. Technical correction to ERISA definition of medical child 
              support order.

               Chapter 9--Food Stamp Program Requirements

Sec. 9491. Cooperation with child support agencies.
Sec. 9492. Disqualification for child support arrears.

                    Chapter 10--Effect Of Enactment

Sec. 9498. Effective dates.
Sec. 9499. Severability.

            Subtitle E--Teen Pregnancy And Family Stability

Sec. 9501. State option to deny temporary employment assistance for 
              additional children.
Sec. 9502. Supervised living arrangements for minors.
Sec. 9503. National Clearinghouse on Adolescent Pregnancy.
Sec. 9504. Required completion of high school or other training for 
              teenage parents.
Sec. 9505. Denial of Federal housing benefits to minors who bear 
              children out-of-wedlock.
Sec. 9506. State option to deny temporary employment assistance to 
              minor parents.

                         Subtitle F--SSI Reform

Sec. 9601. Definition and eligibility rules.
Sec. 9602. Eligibility redeterminations and continuing disability 
              reviews.
Sec. 9603. Additional accountability requirements.
Sec. 9604. Denial of SSI benefits by reason of disability to drug 
              addicts and alcoholics.
Sec. 9605. Denial of SSI benefits for 10 years to individuals found to 
              have fraudulently misrepresented residence in order to 
              obtain benefits simultaneously in 2 or more States.
Sec. 9606. Denial of SSI benefits for fugitive felons and probation and 
              parole violators.
Sec. 9607. Reapplication requirements for adults receiving SSI benefits 
              by reason of disability.
Sec. 9608. Narrowing of SSI eligibility on basis of mental impairments.
Sec. 9609. Reduction in unearned income exclusion.

                      Subtitle G--Food Assistance

                     Chapter 1--Food Stamp Program

Sec. 9701. Application of amendments.
Sec. 9702. Amendments to the Food Stamp Act of 1977.
Sec. 9703. Authority to establish authorization periods.
Sec. 9704. Specific period for prohibiting participation of stores 
              based on lack of business integrity.
Sec. 9705. Information for verifying eligibility for authorization.
Sec. 9706. Waiting period for stores that initially fail to meet 
              authorization criteria.
Sec. 9707. Bases for suspensions and disqualifications.
Sec. 9708. Authority to suspend stores violating program requirements 
              pending administrative and judicial review.
Sec. 9709. Disqualification of retailers who are disqualified from the 
              WIC program.
Sec. 9710. Permanent debarment of retailers who intentionally submit 
              falsified applications.
Sec. 9711. Expanded civil and criminal forfeiture for violations of the 
              Food Stamp Act.
Sec. 9712. Expanded authority for sharing information provided by 
              retailers.
Sec. 9713. Expanded definition of ``coupon''.
Sec. 9714. Doubled penalties for violating food stamp program 
              requirements.
Sec. 9715. Mandatory claims collection methods.
Sec. 9716. Promoting expansion of electronic benefits transfer.
Sec. 9717. Reduction of basic benefit level.
Sec. 9718. 2-year freeze of standard deduction.
Sec. 9719. Pro-rating benefits after interruptions in participation.
Sec. 9720. Disqualification for participating in 2 or more States.
Sec. 9721. Disqualification relating to child support arrears.
Sec. 9722. State authorization to assist law enforcement officers in 
              locating fugitive felons.
Sec. 9723. Work requirement for able-bodied recipients.
Sec. 9724. Coordination of employment and training programs.
Sec. 9725. Extending current claims retention rates.
Sec. 9726. Nutrition assistance for Puerto Rico.
Sec. 9727. Treatment of children living at home.

                   Chapter 2--Commodity Distribution

Sec. 9751. Short title.
Sec. 9752. Availability of commodities.
Sec. 9753. State, local and private supplementation of commodities.
Sec. 9754. State plan.
Sec. 9755. Allocation of commodities to States.
Sec. 9756. Priority system for State distribution of commodities.
Sec. 9757. Initial processing costs.
Sec. 9758. Assurances; anticipated use.
Sec. 9759. Authorization of appropriations.
Sec. 9760. Commodity supplemental food program.
Sec. 9761. Commodities not income.
Sec. 9762. Prohibition against certain State charges.
Sec. 9763. Definitions.
Sec. 9764. Regulations.
Sec. 9765. Finality of determinations.
Sec. 9766. Relationship to other programs.
Sec. 9767. Settlement and adjustment of claims.
Sec. 9768. Repealers; amendments.

                       Chapter 3--Other Programs

Sec. 9781. Child and Adult Care Food Program.
Sec. 9782. Resumption of discretionary funding for nutrition education 
              and training program.

                    Subtitle H--Treatment of Aliens

       Chapter 1--Sponsorship, Deeming, and Affidavits of Support

Sec. 9801. Extension of deeming of income and resources under tea, SSI, 
              and food stamp programs.
Sec. 9802. Requirements for sponsor's affidavits of support.
Sec. 9803. Extending requirement for affidavits of support to family-
              related and diversity immigrants.

 Chapter 2--Ineligibility Of Certain Aliens for Certain Social Services

Sec. 9851. Certain aliens ineligible for temporary employment 
              assistance.

                  Subtitle I--Earned Income Tax Credit

Sec. 9901. Earned income tax credit denied to individuals not 
              authorized to be employed in the United States.

    TITLE X--REDUCTIONS IN CORPORATE TAX SUBSIDIES AND OTHER REFORMS

Sec. 10001. Short title; table of contents.

               Subtitle A--Tax Treatment of Expatriation

Sec. 10101. Revision of tax rules on expatriation.
Sec. 10102. Basis of assets of nonresident alien individuals becoming 
              citizens or residents.

            Subtitle B--Modification to Earned Income Credit

Sec. 10201. Earned income tax credit denied to individuals with 
              substantial capital gain net income.

Subtitle C--Alternative Minimum Tax on Corporations Importing Products 
         into the United States at Artificially Inflated Prices

Sec. 10301. Alternative minimum tax on corporations importing products 
              into the United States at artificially inflated prices.

      Subtitle D--Tax Treatment of Certain Extraordinary Dividends

Sec. 10401. Tax treatment of certain extraordinary dividends.

                Subtitle E--Foreign Trust Tax Compliance

Sec. 10501. Improved information reporting on foreign trusts.
Sec. 10502. Modifications of rules relating to foreign trusts having 
              one or more United States beneficiaries.
Sec. 10503. Foreign persons not to be treated as owners under grantor 
              trust rules.
Sec. 10504. Information reporting regarding foreign gifts.
Sec. 10505. Modification of rules relating to foreign trusts which are 
              not grantor trusts.
Sec. 10506. Residence of estates and trusts, etc.

              Subtitle F--Limitation on Section 936 Credit

Sec. 10601. Limitation on section 936 credit.

                      TITLE XI--VETERANS' AFFAIRS

Sec. 11001. Short title; table of contents.

        Subtitle A--Permanent Extension of Temporary Authorities

Sec. 11011. Authority to require that certain veterans agree to make 
              copayments in exchange for receiving health-care 
              benefits.
Sec. 11012. Medical care cost recovery authority.
Sec. 11013. Income verification authority.
Sec. 11014. Limitation on pension for certain recipients of medicaid-
              covered nursing home care.
Sec. 11015. Home loan fees.
Sec. 11016. Procedures applicable to liquidation sales on defaulted 
              home loans guaranteed by the Department of Veterans 
              Affairs.

                       Subtitle B--Other Matters

Sec. 11021. Revised standard for liability for injuries resulting from 
              Department of Veterans Affairs treatment.
Sec. 11022. Enhanced loan asset sale authority.
Sec. 11023. Withholding of payments and benefits.

               Subtitle C--Health Care Eligibility Reform

Sec. 11031. Hospital care and medical services.
Sec. 11032. Extension of authority to priority health care for Persian 
              Gulf veterans.
Sec. 11033. Prosthetics.
Sec. 11034. Management of health care.
Sec. 11035. Improved efficiency in health care resource management.
Sec. 11036. Sharing agreements for specialized medical resources.
Sec. 11037. Personnel furnishing shared resources.

[[Page H10524]]


                     TITLE XII--LEGISLATIVE BRANCH

Sec. 12101. Requirement that excess funds provided for official 
              allowances of Members of the House of Representatives be 
              dedicated to deficit reduction.

                  TITLE XIII--MISCELLANEOUS PROVISIONS

Sec. 13101. Elimination of disparity between effective dates for 
              military and civilian retiree cost-of-living adjustments 
              for fiscal years 1996, 1997, and 1998.
Sec. 13102. Disposal of certain materials in National Defense Stockpile 
              for deficit reduction.
Sec. 13103. Requirement that certain agencies prefund government health 
              benefits contributions for their annuitants.
Sec. 13104. Application of OMB Circular a-129.
Sec. 13105. 7-year extension of Hazardous Substance Superfund Excise 
              Taxes.

                  TITLE XIV--BUDGET PROCESS PROVISIONS

                    Chapter 1--Short Title; Purpose

Sec. 14001. Short title.
Sec. 14002. Purpose.

                      Chapter 2--Budget Estimates

Sec. 14051. Board of Estimates.

               Subtitle B--Discretionary Spending Limits

Sec. 14101. Discretionary spending limits.
Sec. 14102. Technical and conforming changes.
Sec. 14103. Elimination of certain adjustments to discretionary 
              spending limits.

                  Subtitle C--Pay-As-You-Go Procedures

Sec. 14201. Permanent extension of pay-as-you-go procedures; ten-year 
              scorekeeping.
Sec. 14202. Elimination of emergency exception.

                       Subtitle D--Miscellaneous

Sec. 14301. Reports and orders.
Sec. 14302. Technical correction.
Sec. 14303. Repeal of expiration date.

                      Subtitle E--Deficit Control

Sec. 14401. Deficit control.
Sec. 14402. Sequestration process.

                       Subtitle F--Line Item Veto

Sec. 14501. Line item veto authority.
Sec. 14502. Line item veto effective unless disapproved.
Sec. 14503. Definitions.
Sec. 14504. Congressional consideration of line item vetoes.
Sec. 14505. Report of the General Accounting Office.
Sec. 14506. Judicial review.

                 Subtitle G--Enforcing Points of Order

Sec. 14601. Points of order in the Senate.
Sec. 14602. Points of order in the House of Representatives.

                 Subtitle H--Deficit Reduction Lock-box

Sec. 14701. Deficit reduction lock-box provisions of appropriation 
              measures.
Sec. 14702. Downward adjustments.
Sec. 14703. CBO tracking.

Subtitle I--Emergency Spending; Baseline Reform; Continuing Resolutions 
                                 Reform

                     Chapter 1--Emergency Spending

Sec. 14801. Establishment of budget reserve account.
Sec. 14802. Congressional budget process changes.
Sec. 14803. Reporting.

                       Chapter 2--Baseline Reform

Sec. 14851. The baseline.
Sec. 14852. The President's budget.
Sec. 14853. The congressional budget.
Sec. 14854. Congressional Budget Office reports to committees.

          Chapter 3--Restricted Uses of Continuing Resolutions

Sec. 14871. Restrictions respecting continuing resolutions.

            Subtitle J--Technical and Conforming Amendments

Sec. 14901. Amendments to the Congressional Budget and Impoundment 
              Control Act of 1974.
Sec. 14902. Technical and conforming amendments to the Rules of the 
              House of Representatives.
Sec. 14903. President's budget.

                    Subtitle K--Truth in Legislating

Sec. 14951. Identity, sponsor, and cost of certain provisions required 
              to be reported.
           TITLE I--ENERGY, NATURAL RESOURCES AND ENVIRONMENT
                           Subtitle A--Energy

     SEC. 1101. PRIVATIZATION OF URANIUM ENRICHMENT.

       (a) Reference.--Except as otherwise expressly provided, 
     whenever in this section an amendment or repeal 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 a 
     section or other provision of the Atomic Energy Act of 1954 
     (42 U.S.C. 2011 et seq.).
       (b) Production Facility.--Paragraph v. of section 11 (42 
     U.S.C. 2014 v.) is amended by striking ``or the construction 
     and operation of a uranium enrichment production facility 
     using Atomic Vapor Laser Isotope Separation technology''.
       (c) Definitions.--Section 1201 (42 U.S.C. 2297) is 
     amended--
       (1) in paragraph (4), by inserting before the period the 
     following: ``and any successor corporation established 
     through privatization of the Corporation'';
       (2) by redesignating paragraphs (10) through (13) as 
     paragraphs (14) through (17), respectively, and by inserting 
     after paragraph (9) the following new paragraphs:
       ``(10) The term `low-level radioactive waste' has the 
     meaning given such term in section 102(9) of the Low-Level 
     Radioactive Waste Policy Amendments Act of 1985 (42 U.S.C. 
     2021b(9)).
       ``(11) The term `mixed waste' has the meaning given such 
     term in section 1004(41) of the Solid Waste Disposal Act (42 
     U.S.C. 6903(41)).
       ``(12) The term `privatization' means the transfer of 
     ownership of the Corporation to private investors pursuant to 
     chapter 25.
       ``(13) The term `privatization date' means the date on 
     which 100 percent of ownership of the Corporation has been 
     transferred to private investors.'';
       (3) by inserting after paragraph (17) (as redesignated) the 
     following new paragraph:
       ``(18) The term `transition date' means July 1, 1993.''; 
     and
       (4) by redesignating the unredesignated paragraph (14) as 
     paragraph (19).
       (d) Employees of the Corporation.--
       (1) Paragraph (2).--Paragraphs (1) and (2) of section 
     1305(e) (42 U.S.C. 2297b-4(e)(1)(2)) are amended to read as 
     follows:
       ``(A) In general.--It is the purpose of this subsection to 
     ensure that the privatization of the Corporation shall not 
     result in any adverse effects on the pension benefits of 
     employees at facilities that are operated, directly or under 
     contract, in the performance of the functions vested in the 
     Corporation.
       ``(B) Applicability of existing collective bargaining 
     agreement.--The Corporation shall abide by the terms of the 
     collective bargaining agreement in effect on the 
     privatization date at each individual facility.''.
       (2) Paragraph (4).--Paragraph (4) of section 1305(e) (42 
     U.S.C. 2297b-4(e)(4)) is amended--
       (A) by striking ``and detailees'' in the heading;
       (B) by striking the first sentence;
       (C) in the second sentence, by inserting ``from other 
     Federal employment'' after ``transfer to the Corporation''; 
     and
       (D) by striking the last sentence.
       (e) Marketing and Contracting Authority.--
       (1) Marketing authority.--Section 1401(a) (42 U.S.C. 
     2297c(a)) is amended effective on the privatization date (as 
     defined in section 1201(13) of the Atomic Energy Act of 
     1954)--
       (A) by amending the subsection heading to read ``Marketing 
     Authority.--''; and
       (B) by striking the first sentence.
       (2) Transfer of contracts.--Section 1401(b) (42 U.S.C. 
     2297c(b)) is amended--
       (A) in paragraph (2)(B), by adding at the end the 
     following: ``The privatization of the Corporation shall not 
     affect the terms of, or the rights or obligations of the 
     parties to, any such power purchase contract.''; and
       (B) by adding at the end the following:
       ``(3) Effect of transfer.--
       ``(A) As a result of the transfer pursuant to paragraph 
     (1), all rights, privileges, and benefits under such 
     contracts, agreements, and leases, including the right to 
     amend, modify, extend, revise, or terminate any of such 
     contracts, agreements, or leases were irrevocably assigned to 
     the Corporation for its exclusive benefit.
       ``(B) Notwithstanding the transfer pursuant to paragraph 
     (1), the United States shall remain obligated to the parties 
     to the contracts, agreements, and leases transferred pursuant 
     to paragraph (1) for the performance of the obligations of 
     the United States thereunder during the term thereof. The 
     Corporation shall reimburse the United States for any amount 
     paid by the United States in respect of such obligations 
     arising after the privatization date to the extent such 
     amount is a legal and valid obligation of the Corporation 
     then due.
       ``(C) After the privatization date, upon any material 
     amendment, modification, extension, revision, replacement, or 
     termination of any contract, agreement, or lease transferred 
     under paragraph (1), the United States shall be released from 
     further obligation under such contract, agreement, or lease, 
     except that such action shall not release the United States 
     from obligations arising under such contract, agreement, or 
     lease prior to such time.''.
       (3) Pricing.--Section 1402 (42 U.S.C. 2297c-1) is amended 
     to read as follows:

     ``SEC. 1402. PRICING.

       ``The Corporation shall establish prices for its products, 
     materials, and services provided to customers on a basis that 
     will allow it to attain the normal business objectives of a 
     profitmaking corporation.''.
       (4) Leasing of gaseous diffusion facilities of 
     department.--Effective on the privatization date (as defined 
     in section 1201(13) of the Atomic Energy Act of 1954), 
     section 1403 (42 U.S.C. 2297c-2) is amended by adding at the 
     end the following:
       ``(h) Low-Level Radioactive Waste and Mixed Waste.--
       ``(1) Responsibility of the department; costs.--
       ``(A) With respect to low-level radioactive waste and mixed 
     waste generated by the Corporation as a result of the 
     operation of the facilities and related property leased by 
     the Corporation pursuant to subsection (a) or as a result of 
     treatment of such wastes at a location other than the 
     facilities and related property leased by the Corporation 
     pursuant 

[[Page H10525]]

     to subsection (a) the Department, at the request of the 
     Corporation, shall--
       ``(i) accept for treatment or disposal of all such wastes 
     for which treatment or disposal technologies and capacities 
     exist, whether within the Department or elsewhere; and
       ``(ii) accept for storage (or ultimately treatment or 
     disposal) all such wastes for which treatment and disposal 
     technologies or capacities do not exist, pending development 
     of such technologies or availability of such capacities for 
     such wastes.
       ``(B) All low-level wastes and mixed wastes that the 
     Department accepts for treatment, storage, or disposal 
     pursuant to subparagraph (A) shall, for the purpose of any 
     permits, licenses, authorizations, agreements, or orders 
     involving the Department and other Federal agencies or State 
     or local governments, be deemed to be generated by the 
     Department and the Department shall handle such wastes in 
     accordance with any such permits, licenses, authorizations, 
     agreements, or orders. The Department shall obtain any 
     additional permits, licenses, or authorizations necessary to 
     handle such wastes, shall amend any such agreements or orders 
     as necessary to handle such wastes, and shall handle such 
     wastes in accordance therewith.
       ``(C) The Corporation shall reimburse the Department for 
     the treatment, storage, or disposal of low-level radioactive 
     waste or mixed waste pursuant to subparagraph (A) in an 
     amount equal to the Department's costs but in no event 
     greater than an amount equal to that which would be charged 
     by commercial, State, regional, or interstate compact 
     entities for treatment, storage, or disposal of such waste.
       ``(2) Agreements with other persons.--The Corporation may 
     also enter into agreements for the treatment, storage, or 
     disposal of low-level radioactive waste and mixed waste 
     generated by the Corporation as a result of the operation of 
     the facilities and related property leased by the Corporation 
     pursuant to subsection (a) with any person other than the 
     Department that is authorized by applicable laws and 
     regulations to treat, store, or dispose of such wastes.''.
       (5) Liabilities.--
       (A) Subsection (a) of section 1406 (42 U.S.C. 2297c-5(a)) 
     is amended--
       (i) by inserting ``and Privatization'' after ``Transition'' 
     in the heading; and
       (ii) by adding at the end the following: ``As of the 
     privatization date, all liabilities attributable to the 
     operation of the Corporation from the transition date to the 
     privatization date shall be direct liabilities of the United 
     States.''.
       (B) Subsection (b) of section 1406 (42 U.S.C. 2297c-5(b)) 
     is amended--
       (i) by inserting ``and Privatization'' after ``Transition'' 
     in the heading; and
       (ii) by adding at the end the following: ``As of the 
     privatization date, any judgment entered against the 
     Corporation imposing liability arising out of the operation 
     of the Corporation from the transition date to the 
     privatization date shall be considered a judgment against the 
     United States.''.
       (C) Subsection (d) of section 1406 (42 U.S.C. 2297c-5(d)) 
     is amended--
       (i) by inserting ``and Privatization'' after ``Transition'' 
     in the heading; and
       (ii) by striking ``the transition date'' and inserting 
     ``the privatization date (or, in the event the privatization 
     date does not occur, the transition date)''.
       (6) Transfer of uranium.--Title II (42 U.S.C. 2297 et seq.) 
     is amended by redesignating section 1408 as section 1409 and 
     by inserting after section 1407 the following:

     ``SEC. 1408. TRANSFER OF URANIUM.

       ``The Secretary may, before the privatization date, 
     transfer to the Corporation without charge raw uranium, low-
     enriched uranium, and highly enriched uranium.''.
       (f) Privatization of the Corporation.--
       (1) Establishment of private corporation.--Chapter 25 (42 
     U.S.C. 2297d et seq.) is amended by adding at the end the 
     following new section:

     ``SEC. 1503. ESTABLISHMENT OF PRIVATE CORPORATION.

       ``(a) Establishment.--
       ``(1) In general.--In order to facilitate privatization, 
     the Corporation may provide for the establishment of a 
     private corporation organized under the laws of any of the 
     several States. Such corporation shall have among its 
     purposes the following:
       ``(A) To help maintain a reliable and economical domestic 
     source of uranium enrichment services.
       ``(B) To undertake any and all activities as provided in 
     its corporate charter.
       ``(2) Authorities.--The corporation established pursuant to 
     paragraph (1) shall be authorized to--
       ``(A) enrich uranium, provide for uranium to be enriched by 
     others, or acquire enriched uranium (including low-enriched 
     uranium derived from highly enriched uranium);
       ``(B) conduct, or provide for conducting, those research 
     and development activities related to uranium enrichment and 
     related processes and activities the corporation considers 
     necessary or advisable to maintain itself as a commercial 
     enterprise operating on a profitable and efficient basis;
       ``(C) enter into transactions regarding uranium, enriched 
     uranium, or depleted uranium with--
       ``(i) persons licensed under section 53, 63, 103, or 104 in 
     accordance with the licenses held by those persons;
       ``(ii) persons in accordance with, and within the period 
     of, an agreement for cooperation arranged under section 123; 
     or
       ``(iii) persons otherwise authorized by law to enter into 
     such transactions;
       ``(D) enter into contracts with persons licensed under 
     section 53, 63, 103, or 104, for as long as the corporation 
     considers necessary or desirable, to provide uranium or 
     uranium enrichment and related services;
       ``(E) enter into contracts to provide uranium or uranium 
     enrichment and related services in accordance with, and 
     within the period of, an agreement for cooperation arranged 
     under section 123 or as otherwise authorized by law; and
       ``(F) take any and all such other actions as are permitted 
     by the law of the jurisdiction of incorporation of the 
     corporation.
       ``(3) Transfer of assets.--For purposes of implementing the 
     privatization, the Corporation may transfer some or all of 
     its assets and obligations to the corporation established 
     pursuant to this section, including--
       ``(A) all of the Corporation's assets, including all 
     contracts, agreements, and leases, including all uranium 
     enrichment contracts and power purchase contracts;
       ``(B) all funds in accounts of the Corporation held by the 
     Treasury or on deposit with any bank or other financial 
     institution;
       ``(C) all of the Corporation's rights, duties, and 
     obligations, accruing subsequent to the privatization date, 
     under the power purchase contracts covered by section 
     1401(b)(2)(B); and
       ``(D) all of the Corporation's rights, duties, and 
     obligations, accruing subsequent to the privatization date, 
     under the lease agreement between the Department and the 
     Corporation executed by the Department and the Corporation 
     pursuant to section 1403.
       ``(4) Merger or consolidation.--For purposes of 
     implementing the privatization, the Corporation may merge or 
     consolidate with the corporation established pursuant to 
     subsection (a)(1) if such action is contemplated by the plan 
     for privatization approved by the President under section 
     1502(b). The Board shall have exclusive authority to approve 
     such merger or consolidation and to take all further actions 
     necessary to consummate such merger or consolidation, and no 
     action by or in respect of shareholders shall be required. 
     The merger or consolidation shall be effected in accordance 
     with, and have the effects of a merger or consolidation 
     under, the laws of the jurisdiction of incorporation of the 
     surviving corporation, and all rights and benefits provided 
     under this title to the Corporation shall apply to the 
     surviving corporation as if it were the Corporation.
       ``(5) Tax treatment of privatization.--
       ``(A) Transfer of assets or merger.--No income, gain, or 
     loss shall be recognized by any person by reason of the 
     transfer of the Corporation's assets to, or the Corporation's 
     merger with, the corporation established pursuant to 
     subsection (a)(1) in connection with the privatization.
       ``(B) Cancellation of debt and common stock.--No income, 
     gain, or loss shall be recognized by any person by reason of 
     any cancellation of any obligation or common stock of the 
     Corporation in connection with the privatization.
       ``(b) OSHA Requirements.--For purposes of the regulation of 
     radiological and nonradiological hazards under the 
     Occupational Safety and Health Act of 1970, the corporation 
     established pursuant to subsection (a)(1) shall be treated in 
     the same manner as other employers licensed by the Nuclear 
     Regulatory Commission. Any interagency agreement entered into 
     between the Nuclear Regulatory Commission and the 
     Occupational Safety and Health Administration governing the 
     scope of their respective regulatory authorities shall apply 
     to the corporation as if the corporation were a Nuclear 
     Regulatory Commission licensee.
       ``(c) Legal Status of Private Corporation.--
       ``(1) Not federal agency.--The corporation established 
     pursuant to subsection (a)(1) shall not be an agency, 
     instrumentality, or establishment of the United States 
     Government and shall not be a Government corporation or 
     Government-controlled corporation.
       ``(2) No recourse against united states.--Obligations of 
     the corporation established pursuant to subsection (a)(1) 
     shall not be obligations of, or guaranteed as to principal or 
     interest by, the Corporation or the United States, and the 
     obligations shall so plainly state.
       ``(3) No claims court jurisdiction.--No action under 
     section 1491 of title 28, United States Code, shall be 
     allowable against the United States based on the actions of 
     the corporation established pursuant to subsection (a)(1).
       ``(d) Board of Director's Election After Public Offering.--
     In the event that the privatization is implemented by means 
     of a public offering, an election of the members of the board 
     of directors of the Corporation by the shareholders shall be 
     conducted before the end of the 1-year period beginning the 
     date shares are first offered to the public pursuant to such 
     public offering.
       ``(e) Adequate Proceeds.--The Secretary of Energy shall not 
     allow the privatization of the Corporation unless before the 
     sale date the Secretary determines that the estimated sum of 
     the gross proceeds from the sale of the Corporation will be 
     an adequate amount.''.
       (2) Ownership limitations.--Chapter 25 (as amended by 
     paragraph (1)) is amended by adding at the end the following 
     new section:

[[Page H10526]]


     ``SEC. 1504. OWNERSHIP LIMITATIONS.

       ``(a) Securities Limitation.--In the event that the 
     privatization is implemented by means of a public offering, 
     during a period of 3 years beginning on the privatization 
     date, no person, directly or indirectly, may acquire or hold 
     securities representing more than 10 percent of the total 
     votes of all outstanding voting securities of the 
     Corporation.
       ``(b) Application.--Subsection (a) shall not apply--
       ``(1) to any employee stock ownership plan of the 
     Corporation,
       ``(2) to underwriting syndicates holding shares for resale, 
     or
       ``(3) in the case of shares beneficially held for others, 
     to commercial banks, broker-dealers, clearing corporations, 
     or other nominees.
       ``(c) No director, officer, or employee of the Corporation 
     may acquire any securities, or any right to acquire 
     securities, of the Corporation--
       ``(1) in the public offering of securities of the 
     Corporation in the implementation of the privatization,
       ``(2) pursuant to any agreement, arrangement, or 
     understanding entered into before the privatization date, or
       ``(3) before the election of directors of the Corporation 
     under section 1503(d) on any terms more favorable than those 
     offered to the general public.''.
       (3) Exemption from liability.--Chapter 25 (as amended by 
     paragraph (2)) is amended by adding at the end the following 
     new section:

     ``SEC. 1505. EXEMPTION FROM LIABILITY.

       ``(a) In General.--No director, officer, employee, or agent 
     of the Corporation shall be liable, for money damages or 
     otherwise, to any party if, with respect to the subject 
     matter of the action, suit, or proceeding, such person was 
     fulfilling a duty, in connection with any action taken in 
     connection with the privatization, which such person in good 
     faith reasonably believed to be required by law or vested in 
     such person.
       ``(b) Exception.--The privatization shall be subject to the 
     Securities Act of 1933 and the Securities Exchange Act of 
     1934. The exemption set forth in subsection (a) shall not 
     apply to claims arising under such Acts or under the 
     Constitution or laws of any State, territory, or possession 
     of the United States relating to transactions in securities, 
     which claims are in connection with a public offering 
     implementing the privatization.''.
       (4) Resolution of certain issues.--Chapter 25 (as amended 
     by paragraph (3)) is amended by adding at the end the 
     following new section:

     ``SEC. 1506. RESOLUTION OF CERTAIN ISSUES.

       ``(a) Corporation Actions.--Notwithstanding any provision 
     of any agreement to which the Corporation is a party, the 
     Corporation shall not be considered to be in breach, default, 
     or violation of any such agreement because of any provision 
     of this chapter or any action the Corporation is required to 
     take under this chapter.
       ``(b) Right To Sue Withdrawn.--The United States hereby 
     withdraws any stated or implied consent for the United 
     States, or any agent or officer of the United States, to be 
     sued by any person for any legal, equitable, or other relief 
     with respect to any claim arising out of, or resulting from, 
     acts or omissions under this chapter.''.
       (5) Application of privatization proceeds.--Chapter 25 (as 
     amended by paragraph (4)) is amended by adding at the end the 
     following new section:

     ``SEC. 1507. APPLICATION OF PRIVATIZATION PROCEEDS.

       ``The proceeds from the privatization shall be included in 
     the budget baseline required by the Balanced Budget and 
     Emergency Deficit Control Act of 1985 and shall be counted as 
     an offset to direct spending for purposes of section 252 of 
     such Act, notwithstanding section 257(e) of such Act.''.
       (6) Conforming amendment.--The table of contents for 
     chapter 25 is amended by inserting after the item for section 
     1502 the following:

``Sec. 1503. Establishment of private corporation.
``Sec. 1504. Ownership limitations.
``Sec. 1505. Exemption from liability.
``Sec. 1506. Resolution of certain issues.
``Sec. 1507. Application of privatization proceeds.''.

       (7) Section 193 (42 U.S.C. 2243) is amended by adding at 
     the end the following:
       ``(f) Limitation.--If the privatization of the United 
     States Enrichment Corporation results in the Corporation 
     being--
       ``(1) owned, controlled, or dominated by a foreign 
     corporation or a foreign government, or
       ``(2) otherwise inimical to the common defense or security 
     of the United States,

     any license held by the Corporation under sections 53 and 63 
     shall be terminated.''.
       (8) Period for congressional review.--Section 1502(d) (42 
     U.S.C. 2297d-1(d)) is amended by striking ``less than 60 days 
     after notification of the Congress'' and inserting ``less 
     than 60 days after the date of the report to Congress by the 
     Comptroller General under subsection (c)''.
       (g) Periodic Certification of Compliance.--Section 
     1701(c)(2) (42 U.S.C. 2297f(c)(2)) is amended by striking 
     ``Annual application for certificate of compliance.--The 
     Corporation shall apply at least annually to the Nuclear 
     Regulatory Commission for a certificate of compliance under 
     paragraph (1).'' and inserting ``Periodic application for 
     certificate of compliance.--The Corporation shall apply to 
     the Nuclear Regulatory Commission for a certificate of 
     compliance under paragraph (1) periodically, as determined by 
     the Nuclear Regulatory Commission, but not less than every 5 
     years.''.
       (h) Licensing of Other Technologies.--Subsection (a) of 
     section 1702 (42 U.S.C. 2297f-1(a)) is amended by striking 
     ``other than'' and inserting ``including''.
       (i) Conforming Amendments.--
       (1) Repeals in atomic energy act of 1954 as of the 
     privatization date.--
       (A) Repeals.--As of the privatization date (as defined in 
     section 1201(13) of the Atomic Energy Act of 1954), the 
     following sections (as in effect on such privatization date) 
     of the Atomic Energy Act of 1954 are repealed:
       (i) Section 1202.
       (ii) Sections 1301 through 1304.
       (iii) Sections 1306 through 1316.
       (iv) Sections 1404 and 1405.
       (v) Section 1601.
       (vi) Sections 1603 through 1607.
       (B) Conforming amendment.--The table of contents of such 
     Act is amended by repealing the items referring to sections 
     repealed by paragraph (1).
       (2) Statutory modifications.--As of such privatization 
     date, the following shall take effect:
       (A) For purposes of title I of the Atomic Energy Act of 
     1954, all references in such Act to the ``United States 
     Enrichment Corporation'' shall be deemed to be references to 
     the corporation established pursuant to section 1503 of the 
     Atomic Energy Act of 1954 (as added by subsection (f)(1)).
       (B) Section 1018(1) of the Energy Policy Act of 1992 (42 
     U.S.C. 2296b-7(1)) is amended by striking ``the United 
     States'' and all that follows through the period and 
     inserting ``the corporation referred to in section 1201(4) of 
     the Atomic Energy Act of 1954.''.
       (C) Section 9101(3) of title 31, United States Code, is 
     amended by striking subparagraph (N), as added by section 
     902(b) of Public Law 102-486.
       (3) Revision of section 1305.--As of such privatization 
     date, section 1305 of the Atomic Energy Act of 1954 (42 U.S.C 
     2297b-4) is amended--
       (A) by repealing subsections (a), (b), (c), and (d), and
       (B) in subsection (e)--
       (i) by striking the subsection designation and heading,
       (ii) by redesignating paragraphs (1) and (2) (as added by 
     subsection (d)(1)) as subsections (a) and (b) and by moving 
     the margins 2-ems to the left,
       (iii) by striking paragraph (3), and
       (iv) by redesignating paragraph (4) (as amended by 
     subsection (d)(2)) as subsection (c), and by moving the 
     margins 2-ems to the left.

     SEC. 1102. MAKING PERMANENT NUCLEAR REGULATORY COMMISSION 
                   ANNUAL CHARGES.

       Paragraph (3) of section 6101(a)(3) of the Omnibus Budget 
     Reconciliation Act of 1990 (42 U.S.C. 2214(a)(3)) is 
     repealed.

     SEC. 1103. COGENERATION.

       Section 804(2)(B) of the National Energy Conservation 
     Policy Act (42 U.S.C. 8287c(2)(B)) is amended by striking ``, 
     excluding any cogeneration process for other than a federally 
     owned building or buildings or other federally owned 
     facilities''.

     SEC. 1104. FEMA RADIOLOGICAL EMERGENCY PREPAREDNESS FEES.

       (a) In General.--The Director of the Federal Emergency 
     Management Agency may assess and collect fees applicable to 
     persons subject to radiological emergency preparedness 
     regulations issued by the Director.
       (b) Requirements.--The assessment and collection of fees by 
     the Director under subsection (a) shall be fair and equitable 
     and shall reflect the full amount of costs to the Agency of 
     providing radiological emergency planning, preparedness, 
     response, and associated services. Such fees shall be 
     assessed by the Director in a manner which reflects the use 
     of resources of the Agency for classes of regulated persons 
     and the administrative costs of collecting such fees.
       (c) Amount of Fees.--The aggregate amount of fees assessed 
     under subsection (a) in a fiscal year shall approximate, but 
     not be less than, 100 percent of the amounts anticipated by 
     the Director to be obligated for the radiological emergency 
     preparedness program of the Agency for such fiscal year.
       (d) Deposit of Fees in Treasury.--Fees received pursuant to 
     subsection (a) shall be deposited in the general fund of the 
     Treasury as offsetting receipts.
                        Subtitle B--Central Utah

     SEC. 1121. PREPAYMENT OF CERTAIN REPAYMENT CONTRACTS BETWEEN 
                   THE UNITED STATES AND THE CENTRAL UTAH WATER 
                   CONSERVANCY DISTRICT.

       The second sentence of section 210 of the Central Utah 
     Project Completion Act (106 Stat. 4624) is amended to read as 
     follows: ``The Secretary of the Interior shall allow for 
     prepayment of the repayment contract between the United 
     States and the Central Utah Water Conservancy District dated 
     December 28, 1965, and supplemented on November 26, 1985, 
     providing for repayment of the municipal and industrial water 
     delivery facilities for which repayment is provided pursuant 
     to such contract, under such terms and conditions as the 
     Secretary deems appropriate to protect the interest of the 
     United States, which shall be similar to the terms 

[[Page H10527]]

     and conditions contained in the supplemental contract that 
     provided for the prepayment of the Jordan Aqueduct dated 
     October 28, 1993. The District shall exercise its right to 
     prepayment pursuant to this section by the end of fiscal year 
     2002.''.
                  Subtitle C--Army Corps of Engineers

     SEC. 1131. REGULATORY PROGRAM FUND.

       (a) Establishment.--There is established in the Treasury of 
     the United States the ``Army Civil Works Regulatory Program 
     Fund'' (hereinafter in this section referred to as the 
     ``Regulatory Program Fund'') into which shall be deposited 
     fees collected by the Secretary of the Army pursuant to 
     subsection (b). Amounts deposited into the Regulatory Program 
     Fund are authorized to be appropriated to the Secretary of 
     the Army to cover a portion of the expenses incurred by the 
     Department of the Army in administering laws pertaining to 
     the regulation of the navigable waters of the United States, 
     including wetlands.
       (b) Regulatory Fees.--
       (1) Collection.--Not later than 60 days after the date of 
     the enactment of this Act, the Secretary of the Army shall 
     establish fees for the evaluation of commercial permit 
     applications, for the recovery of costs associated with the 
     preparation of environmental impact statements required by 
     the National Environmental Policy Act of 1969, and for the 
     recovery of costs associated with wetlands delineations for 
     major developments affecting wetlands. The Secretary shall 
     collect such fees and deposit amounts collected pursuant to 
     this paragraph into the Regulatory Program Fund.
       (2) Fees.--The fees described in paragraph (1) shall be 
     established by the Secretary of the Army at rates that will 
     allow for the recovery of receipts at amounts sufficient to 
     cover the costs for which the fees are established under 
     paragraph (1).
                       Subtitle D--Helium Reserve

     SEC. 1141. SALE OF HELIUM PROCESSING AND STORAGE FACILITY.

       (a) Short Title.--This section may be cited as the ``Helium 
     Act of 1995''.
       (b) References.--Except as otherwise expressly provided, 
     whenever in this section an amendment or repeal 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 a 
     section or other provision of the Helium Act (50 U.S.C. 167 
     to 167n).
       (c) Authority of Secretary.--Sections 3, 4, and 5 are 
     amended to read as follows:

     ``SEC. 3. AUTHORITY OF SECRETARY.

       ``(a) Extraction and Disposal of Helium on Federal Lands.--
     (1) The Secretary may enter into agreements with private 
     parties for the recovery and disposal of helium on Federal 
     lands upon such terms and conditions as he deems fair, 
     reasonable and necessary. The Secretary may grant leasehold 
     rights to any such helium. The Secretary may not enter into 
     any agreement by which the Secretary sells such helium other 
     than to a private party with whom the Secretary has an 
     agreement for recovery and disposal of helium. Such 
     agreements may be subject to such rules and regulations as 
     may be prescribed by the Secretary.
       ``(2) Any agreement under this subsection shall be subject 
     to the existing rights of any affected Federal oil and gas 
     lessee. Each such agreement (and any extension or renewal 
     thereof) shall contain such terms and conditions as deemed 
     appropriate by the Secretary.
       ``(3) This subsection shall not in any manner affect or 
     diminish the rights and obligations of the Secretary and 
     private parties under agreements to dispose of helium 
     produced from Federal lands in existence at the enactment of 
     the Helium Act of 1995 except to the extent that such 
     agreements are renewed or extended after such date.
       ``(b) Storage, Transportation and Sale.--The Secretary is 
     authorized to store, transport, and sell helium only in 
     accordance with this Act.
       ``(c) Monitoring and Reporting.--The Secretary is 
     authorized to monitor helium production and helium reserves 
     in the United States and to periodically prepare reports 
     regarding the amounts of helium produced and the quantity of 
     crude helium in storage in the United States.

     ``SEC. 4. STORAGE AND TRANSPORTATION OF CRUDE HELIUM.

       ``(a) Storage and Transportation.--The Secretary is 
     authorized to store and transport crude helium and to 
     maintain and operate existing crude helium storage at the 
     Bureau of Mines Cliffside Field, together with related helium 
     transportation and withdrawal facilities.
       ``(b) Cessation of Production, Refining, and Marketing.--
     Effective one year after the date of enactment of the Helium 
     Act of 1995, the Secretary shall cease producing, refining 
     and marketing refined helium and shall cease carrying out all 
     other activities relating to helium which the Secretary was 
     authorized to carry out under this Act before the date of 
     enactment of the Helium Act of 1995, except those activities 
     described in subsection (a).
       ``(c) Disposal of Facilities.--(1) Within one year after 
     the date of enactment of the Helium Act of 1995, the 
     Secretary shall dispose of all facilities, equipment, and 
     other real and personal property, together with all interests 
     therein, held by the United States for the purpose of 
     producing, refining and marketing refined helium. The 
     disposal of such property shall be in accordance with the 
     provisions of law governing the disposal of excess or surplus 
     properties of the United States.
       ``(2) All proceeds accruing to the United States by reason 
     of the sale or other disposal of such property shall be 
     treated as moneys received under this chapter for purposes of 
     section 6(f). All costs associated with such sale and 
     disposal (including costs associated with termination of 
     personnel) and with the cessation of activities under 
     subsection (b) shall be paid from amounts available in the 
     helium production fund established under section 6(f).
       ``(3) Paragraph (1) shall not apply to any facilities, 
     equipment, or other real or personal property, or any 
     interest therein, necessary for the storage and 
     transportation of crude helium.
       ``(d) Existing Contracts.--All contracts which were entered 
     into by any person with the Secretary for the purchase by 
     such person from the Secretary of refined helium and which 
     are in effect on the date of the enactment of the Helium Act 
     of 1995 shall remain in force and effect until the date on 
     which the facilities referred to in subsection (c) are 
     disposed of. Any costs associated with the termination of 
     such contracts shall be paid from the helium production fund 
     established under section 6(f).

     ``SEC. 5. FEES FOR STORAGE, TRANSPORTATION AND WITHDRAWAL.

       ``Whenever the Secretary provides helium storage, 
     withdrawal, or transportation services to any person, the 
     Secretary is authorized and directed to impose fees on such 
     person to reimburse the Secretary for the full costs of 
     providing such storage, transportation, and withdrawal. All 
     such fees received by the Secretary shall be treated as 
     moneys received under this Act for purposes of section 
     6(f).''.
       (d) Sale of Crude Helium.--Section 6 is amended as follows:
       (1) Subsection (a) is amended by striking out ``from the 
     Secretary'' and inserting ``from persons who have entered 
     into enforceable contracts to purchase an equivalent amount 
     of crude helium from the Secretary''.
       (2) Subsection (b) is amended by inserting ``crude'' before 
     ``helium'' and by adding the following at the end thereof: 
     ``Except as may be required by reason of subsection (a), the 
     Secretary shall not make sales of crude helium under this 
     section in such amounts as will disrupt the market price of 
     crude helium.''.
       (3) Subsection (c) is amended by inserting ``crude'' before 
     ``helium'' after the words ``Sales of'' and by striking 
     ``together with interest as provided in this subsection'' and 
     all that follows down through the period at the end of such 
     subsection and inserting the following: ``all funds required 
     to be repaid to the United States as of October 1, 1994 under 
     this section (hereinafter referred to as `repayable 
     amounts'). The price at which crude helium is sold by the 
     Secretary shall not be less than the amount determined by the 
     Secretary as follows:
       ``(1) Divide the outstanding amount of such repayable 
     amounts by the volume (in mcf) of crude helium owned by the 
     United States and stored in the Bureau of Mines Cliffside 
     Field at the time of the sale concerned.
       ``(2) Adjust the amount determined under paragraph (1) by 
     the Consumer Price Index for years beginning after December 
     31, 1994.''.
       (4) Subsection (d) is amended to read as follows:
       ``(d) Extraction of Helium From Deposits on Federal 
     Lands.--All moneys received by the Secretary from the sale or 
     disposition of helium on Federal lands shall be paid to the 
     Treasury and credited against the amounts required to be 
     repaid to the Treasury under subsection (c) of this 
     section.''.
       (5) Subsection (e) is repealed.
       (6) Subsection (f) is amended by inserting ``(1)'' after 
     ``(f)'' and by adding the following at the end thereof:
       ``(2) Within 7 days after the commencement of each fiscal 
     year after the disposal of the facilities referred to in 
     section 4(c), all amounts in such fund in excess of 
     $2,000,000 (or such lesser sum as the Secretary deems 
     necessary to carry out this Act during such fiscal year) 
     shall be paid to the Treasury and credited as provided in 
     paragraph (1). Upon repayment of all amounts referred to in 
     subsection (c), the fund established under this section shall 
     be terminated and all moneys received under this Act shall be 
     deposited in the Treasury as General Revenues.''.
       (e) Elimination of Stockpile.--Section 8 is amended to read 
     as follows:

     ``SEC. 8. ELIMINATION OF STOCKPILE.

       ``(a) Review of Reserves.--Not later than January 1, 2014 
     the Secretary shall review the known helium reserves in the 
     United States and make a determination as to the expected 
     life of the domestic helium reserves (other than federally 
     owned helium stored at the Cliffside Reservoir) at that time.
       ``(b) Reserves Below 1 BCF in 2014.--Not later than January 
     1, 2014, if the Secretary determines that domestic helium 
     reserves (other than federally owned helium stored at the 
     Cliffside Reservoir) are less than 1 billion cubic feet 
     (bcf), the Secretary shall commence making sales of crude 
     helium from helium reserves owned by the United States in 
     such amounts as may be necessary to dispose of all such 
     helium reserves in excess of 600 million cubic feet (mcf) by 
     January 1, 2019. The sales shall be at such times and in such 
     lots as the Secretary determines, in consultation with the 
     helium industry, necessary to carry out this subsection. The 

[[Page H10528]]

     price for all such sales, as determined by the Secretary in 
     consultation with the helium industry, shall be such as will 
     ensure repayment of the amounts required to be repaid to the 
     Treasury under section 6(c) by the year 2019 with minimum 
     market disruption. The date specified in this subsection for 
     completion of such sales and for repayment of debt may be 
     extended by the Secretary for a period of not to exceed 5 
     additional years if necessary in order to assure repayment of 
     such debt with minimum market disruption.
       ``(c) Reserves Above 1 BCF in 2014.--Not later than January 
     1, 2014, if the Secretary determines that domestic helium 
     reserves (other than federally owned helium stored at the 
     Cliffside Reservoir) are more than 1 billion cubic feet 
     (bcf), the Secretary shall commence making sales of crude 
     helium from helium reserves owned by the United States in 
     such amounts as may be necessary to dispose of all such 
     helium reserves in excess of 600 million cubic feet (mcf) by 
     January 1, 2024. The sales shall be at such times and in such 
     lots as the Secretary determines, in consultation with the 
     helium industry, necessary to carry out this subsection with 
     minimum disruption of the market for crude helium.
       ``(d) Discovery of Additional Reserves.--The discovery of 
     additional helium reserves after the year 2014 shall not 
     affect the duty of the Secretary to make sales of helium as 
     provided in subsection (b) or (c), as the case may be.''.
       (f) Repeal of Authority To Borrow.--Sections 12 and 15 are 
     repealed.
                        Subtitle E--Territories

     SEC. 1151. TERMINATION OF ANNUAL DIRECT ASSISTANCE TO 
                   NORTHERN MARIANA ISLANDS.

       (a) In General.--No annual payment may be made under 
     section 701, 702, or 704 of the Covenant to Establish a 
     Commonwealth of the Northern Mariana Islands in Political 
     Union with the United States of America (48 U.S.C. 1681 
     note), for any fiscal year beginning after September 30, 
     1995.
       (b) Elimination of 7-Year Extensions.--
       (1) In general.--The Act of March 24, 1976 (90 Stat. 263; 
     16 U.S.C. 1681 note), is amended by striking sections 3 and 
     4.
       (2) Conforming changes.--(A) Section 5 of the Act of March 
     24, 1976 (90 Stat. 263; 16 U.S.C. 1681 note) is redesignated 
     as section 3.
       (B) Section 3 of such Act, as redesignated by subparagraph 
     (A) of this paragraph, is amended--
       (i) by striking ``agreement identified in section 3 of this 
     Act'' and inserting ``Agreement of the Special 
     Representatives on Future United States Financial Assistance 
     for the Government of the Northern Mariana Islands, executed 
     June 10, 1985, between the special representative of the 
     President of the United States and the special 
     representatives of the Governor of the Northern Mariana 
     Islands''; and
       (ii) by striking ``Interior and Insular Affairs'' and 
     inserting ``Resources''.
                    TITLE II--AGRICULTURAL PROGRAMS

     SEC. 2001. SHORT TITLE AND TABLE OF CONTENTS.

       (a) Short Title.--This title may be cited as the 
     ``Agricultural Reconciliation Act of 1995''.
       (b) Table of Contents.--The table of contents of this title 
     is as follows:

                    TITLE II--AGRICULTURAL PROGRAMS

Sec. 2001. Short title and table of contents.

  Subtitle A--Extension and Modification of Various Commodity Programs

Sec. 2101. Extension of loans, payments, and acreage reduction programs 
              for wheat through 2002.
Sec. 2102. Extension of loans, payments, and acreage reduction programs 
              for feed grains through 2002.
Sec. 2103. Extension of loans, payments, and acreage reduction programs 
              for cotton through 2002.
Sec. 2104. Extension of loans, payments, and acreage reduction programs 
              for rice through 2002.
Sec. 2105. Extension of loans and payments for oilseeds through 2002.
Sec. 2106. Increase in flex acres.
Sec. 2107. Reduction in 50/85 and 0/85 programs.

                           Subtitle B--Sugar

Sec. 2201. Extension and modification of sugar program.

                          Subtitle C--Peanuts

Sec. 2301. Extension of price support program for peanuts and related 
              programs.
Sec. 2302. National poundage quotas and acreage allotments.
Sec. 2303. Sale, lease, or transfer of farm poundage quota.
Sec. 2304. Penalty for reentry of exported peanut products.
Sec. 2305. Price support program for peanuts.
Sec. 2306. Referendum regarding poundage quotas.
Sec. 2307. Regulations.

                          Subtitle D--Tobacco

Sec. 2401. Elimination of Federal budgetary outlays for tobacco 
              programs.
Sec. 2402. Establishment of farm yield for Flue-cured tobacco based on 
              individual farm production history.
Sec. 2403. Removal of farm reconstitution exception for Burley tobacco.
Sec. 2404. Reduction in percentage threshold for transfer of Flue-cured 
              tobacco quota in cases of disaster.
Sec. 2405. Expansion of types of tobacco subject to no net cost 
              assessment.
Sec. 2406. Repeal of reporting requirements relating to export of 
              tobacco.
Sec. 2407. Repeal of limitation on reducing national marketing quota 
              for Flue-cured and Burley tobacco.
Sec. 2408. Application of civil penalties under Tobacco Inspection Act.
Sec. 2409. Transfers of quota or allotment across county lines in a 
              State.
Sec. 2410. Calculation of national marketing quota.
Sec. 2411. Clarification of authority to access civil money penalties.
Sec. 2412. Lease and transfer of farm marketing quotas for Burley 
              tobacco.
Sec. 2413. Limitation on transfer of acreage allotments of other 
              tobacco.
Sec. 2414. Good faith reliance on actions or advice of Department 
              representatives.
Sec. 2415. Uniform forfeiture dates for Flue-cured and Burley tobacco.
Sec. 2416. Sale of Burley and Flue-cured tobacco marketing quotas for a 
              farm by recent purchasers.

                    Subtitle E--Planting Flexibility

Sec. 2501. Definitions.
Sec. 2502. Crop and total acreage bases.
Sec. 2503. Planting flexibility.
Sec. 2504. Farm program payment yields.
Sec. 2505. Application of provisions.

                  Subtitle F--Miscellaneous Provisions

Sec. 2601. Limitations on amount of deficiency payments and land 
              diversion payments.
Sec. 2602. Sense of Congress regarding certain Canadian trade 
              practices.
  Subtitle A--Extension and Modification of Various Commodity Programs

     SEC. 2101. EXTENSION OF LOANS, PAYMENTS, AND ACREAGE 
                   REDUCTION PROGRAMS FOR WHEAT THROUGH 2002.

       (a) Agricultural Act of 1949.--Section 107B of the 
     Agricultural Act of 1949 (7 U.S.C. 1445b-3a) is amended--
       (1) in the section heading by striking ``1995'' and 
     inserting ``2002'';
       (2) in subsections (a)(1), (a)(4)(C), (b)(1), (c)(1)(A), 
     (c)(1)(B)(iii), (e)(1)(G), (e)(3)(A), (e)(3)(C)(iii), (f)(1), 
     (q), by striking ``1995'' each place it appears and inserting 
     ``2002'';
       (3) in the heading of subsection (c)(1)(B)(ii), by striking 
     ``and 1995'' and inserting ``through 2002'';
       (4) in subsection (c)(1)(B)(ii), by striking ``and 1995'' 
     and inserting ``through 2002'';
       (5) in subsection (c)(1)(E)(vii), by striking ``1997'' and 
     inserting ``2002'';
       (6) in the heading of subsection (e)(1)(G), by striking 
     ``1995'' and inserting ``2002''; and
       (7) in subsection (g)(1), by striking ``and 1995'' and 
     inserting ``through 2002''.
       (b) Food Security Wheat Reserve.--Section 302(i) of the 
     Food Security Wheat Reserve Act of 1980 (7 U.S.C. 1736f-1(i)) 
     is amended by striking ``1995'' both places it appears and 
     inserting ``2002''.
       (c) Nonapplicability of Certificate Requirements.--Sections 
     379d through 379j of the Agricultural Adjustment Act of 1938 
     (7 U.S.C. 1379d-1379j) shall not be applicable to wheat 
     processors or exporters during the period June 1, 1996, 
     through May 31, 2003.
       (d) Suspension of Land Use, Wheat Marketing Allocation, and 
     Producer Certificate Provisions.--Sections 331 through 339, 
     379b, and 379c of the Agricultural Adjustment Act of 1938 (7 
     U.S.C. 1331 through 1339, 1379b, and 1379c) shall not be 
     applicable to the 1996 through 2002 crops of wheat.
       (e) Suspension of Certain Quota Provisions.--.The joint 
     resolution entitled ``A joint resolution relating to corn and 
     wheat marketing quotas under the Agricultural Adjustment Act 
     of 1938, as amended'', approved May 26, 1941 (7 U.S.C. 1330 
     and 1340), shall not be applicable to the crops of wheat 
     planted for harvest in the calendar years 1996 through 2002.
       (f) Nonapplicability of Section 107 of Agricultural Act of 
     1949.--Section 107 of the Agricultural Act of 1949 (7 U.S.C. 
     1445a) shall not be applicable to the 1996 through 2002 crops 
     of wheat.

     SEC. 2102. EXTENSION OF LOANS, PAYMENTS, AND ACREAGE 
                   REDUCTION PROGRAMS FOR FEED GRAINS THROUGH 
                   2002.

       (a) Agricultural Act of 1949.--Section 105B of the 
     Agricultural Act of 1949 (7 U.S.C. 1444f) is amended--
       (1) in the section heading, by striking ``1995'' and 
     inserting ``2002'';
       (2) in subsections (a)(1), (a)(4)(C), (a)(6), (b)(1), 
     (c)(1)(A), (c)(1)(B)(iii), (e)(1)(G), (e)(1)(H), (e)(2)(H), 
     (e)(3)(A), (e)(3)(C)(iii), (f)(1), (p)(1), (q)(1), and (r), 
     by striking ``1995'' each place it appears and inserting 
     ``2002'';
       (3) in the heading of subsection (c)(1)(B)(ii), by striking 
     ``and 1995'' and inserting ``through 2002'';
       (4) in subsection (c)(1)(B)(ii), by striking ``and 1995'' 
     and inserting ``through 2002'';
       (5) in subsection (c)(1)(E)(vii), by striking ``1997'' and 
     inserting ``2002'';
       (6) in the headings of subsections (e)(1)(G) and (e)(1)(H), 
     by striking ``1995'' both places it appears and inserting 
     ``2002''; and
       (7) in subsection (g)(1), by striking ``and 1995'' and 
     inserting ``through 2002''.
       (b) Recourse Loan Program For Silage.--Section 403 of the 
     Food Security Act of 1985 (7 U.S.C. 1444e-1) is amended by 
     striking ``1996'' and inserting ``2002''.
       (c) Nonapplicability of Section 105 of Agricultural Act of 
     1949.--Section 105 of the 

[[Page H10529]]

     Agricultural Act of 1949 (7 U.S.C. 1444b) shall not be 
     applicable to the 1996 through 2002 crops of feed grains.

     SEC. 2103. EXTENSION OF LOANS, PAYMENTS, AND ACREAGE 
                   REDUCTION PROGRAMS FOR COTTON THROUGH 2002.

       (a) Extra Long Staple Cotton.--Section 103(h)(16) of the 
     Agricultural Act of 1949 (7 U.S.C. 1444(h)(16)) is amended by 
     striking ``1996'' and inserting ``2003''.
       (b) Upland Cotton.--Section 103B of the Agricultural Act of 
     1949 (7 U.S.C. 1444-2) is amended--
       (1) in the section heading, by striking ``1997'' and 
     inserting ``2002'';
       (2) in subsections (a)(1), (b)(1), (c)(1)(A), 
     (c)(1)(B)(ii), (c)(1)(D)(v)(II), and (o), by striking 
     ``1997'' each place it appears and inserting ``2002'';
       (3) in the heading of subsection (c)(1)(D)(v)(II), by 
     striking ``1997 crops'' and inserting ``2002 crops'';
       (4) in subsection (e)(1)(D), by striking ``the 1997 crop'' 
     and inserting ``each of the 1997 through 2002 crops'';
       (5) in subsections (e)(3)(A) and (f)(1), by striking 
     ``1995'' each place it appears and inserting ``2002''; and
       (6) in subparagraphs (B)(i), (D)(i), (E)(i), and (F)(i) of 
     subsection (a)(5), by striking ``1998'' each place it appears 
     and inserting ``2003''.
       (c) Cottonseed and Cottonseed Oil.--Section 203(b) of the 
     Agricultural Act of 1949 (7 U.S.C. 1446d(b)) is amended by 
     striking ``1995'' and inserting ``2002''.
       (d) Agricultural Adjustment Act of 1938.--Section 374(a) of 
     the Agricultural Adjustment Act of 1938 (7 U.S.C. 1374(a)) is 
     amended by striking ``1995'' each place it appears and 
     inserting ``2002''.
       (e) Suspension of Base Acreage Allotments, Marketing 
     Quotas, and Related Provisions.--Sections 342, 343, 344, 345, 
     346, and 377 of the Agricultural Adjustment Act of 1938 (7 
     U.S.C. 1342-1346 and 1377) shall not be applicable to any of 
     the 1996 through 2002 crops of upland cotton.
       (f) Suspension of Miscellaneous Cotton Provisions.--Section 
     103(a) of the Agricultural Act of 1949 (7 U.S.C. 1444(a)) 
     shall not be applicable to the 1996 through 2002 crops.
       (g) Preliminary Allotments for 2003 Crop of Upland 
     Cotton.--Notwithstanding any other provision of law, the 
     permanent State, county, and farm base acreage allotments for 
     the 1977 crop of upland cotton, adjusted for any 
     underplantings in 1977 and reconstituted as provided in 
     section 379 of the Agricultural Adjustment Act of 1938 (7 
     U.S.C. 1379), shall be the preliminary allotments for the 
     2003 crop.
       (h) Cotton Classification Services.--The first sentence of 
     section 3a of the Act of March 3, 1927 (commonly known as the 
     ``Cotton Statistics and Estimates Act'') (chapter 337; 7 
     U.S.C. 473a), is amended by striking ``1996'' and inserting 
     ``2002''.

     SEC. 2104. EXTENSION OF LOANS, PAYMENTS, AND ACREAGE 
                   REDUCTION PROGRAMS FOR RICE THROUGH 2002.

       Section 101B of the Agricultural Act of 1949 (7 U.S.C. 
     1441-2) is amended--
       (1) in the section heading, by striking ``1995'' and 
     inserting ``2002'';
       (2) in subsections (a)(1), (a)(3), (b)(1), (c)(1)(A), 
     (c)(1)(B)(iii), (e)(3)(A), (f)(1), and (n), by striking 
     ``1995'' each place it appears and inserting ``2002'';
       (3) in subsection (a)(5)(D)(i), by striking ``1996'' and 
     inserting ``2001'';
       (4) in the heading of subsection (c)(1)(B)(ii), by striking 
     ``and 1995'' and inserting ``through 2002'';
       (5) in subsection (c)(1)(B)(ii), by striking ``and 1995'' 
     and inserting ``through 2002'';
       (6) in subsection (c)(1)(D)(v)(II), by striking ``1997'' 
     and inserting ``2002''; and
       (7) in the heading of subsection (c)(1)(D)(v)(II), by 
     striking ``1997 crops'' and inserting ``2002 crops''.

     SEC. 2105. EXTENSION OF LOANS AND PAYMENTS FOR OILSEEDS 
                   THROUGH 2002.

       Section 205 of the Agricultural Act of 1949 (7 U.S.C. 
     1446f) is amended--
       (1) in the section heading, by striking ``1995'' and 
     inserting ``2002'';
       (2) in subsections (b), (c), (e)(1), and (n), by striking 
     ``1995'' each place it appears and inserting ``2002''; and
       (3) in subsections (c) and (h)(2), by striking ``1997'' 
     each places it appears and inserting ``2002''.

     SEC. 2106. INCREASE IN FLEX ACRES.

       (a) Wheat.--Subsection (c)(1)(C)(ii) of section 107B of the 
     Agricultural Act of 1949 (7 U.S.C. 1445b-3a) is amended by 
     striking ``85 percent'' and inserting ``85 percent (through 
     the 1995 crop of wheat) and 79 percent (for the 1996 through 
     2002 crops)''.
       (b) Feed Grains.--Subsection (c)(1)(C)(ii) of section 105B 
     of such Act (7 U.S.C. 1444f) is amended by striking ``85 
     percent'' and inserting ``85 percent (through the 1995 crop) 
     and 79 percent (for the 1996 through 2002 crops)''.
       (c) Upland Cotton.--Subsection (c)(1)(C)(ii) of section 
     103B of such Act (7 U.S.C. 1444-2) is amended by striking 
     ``85 percent'' and inserting ``85 percent (through the 1995 
     crop of upland cotton) and 79 percent (for the 1996 through 
     2002 crops)''.
       (d) Rice.--Subsection (c)(1)(C)(ii) of section 101B of such 
     Act (7 U.S.C. 1441-2) is amended by striking ``85 percent'' 
     and inserting ``85 percent (through the 1995 crop of rice) 
     and 79 percent (for the 1996 through 2002 crops)''.

     SEC. 2107. REDUCTION IN 50/85 AND 0/85 PROGRAMS.

       (a) Rice.--Section 101B(c)(1)(D) of the Agricultural Act of 
     1949 (7 U.S.C. 1441-2(c)(1)(D)) is amended--
       (1) in the subparagraph heading, by striking ``50/85 
     program'' and inserting ``50/80 program''; and
       (2) in clause (i), by striking ``8 percent for each of the 
     1991 through 1993 crops, and 15 percent for each of the 1994 
     through 1997 crops'' both places it appears and inserting 
     ``20 percent for each of the 1996 through 2002 crops''.
       (b) Cotton.--Section 103B(c)(1)(D) of such Act (7 U.S.C. 
     1444-2(c)(1)(D)) is amended--
       (1) in the subparagraph heading, by striking ``50/85 
     program'' and inserting ``50/80 program''; and
       (2) in clause (i), by striking ``8 percent for each of the 
     1991 through 1993 crops, and 15 percent for each of the 1994 
     through 1997 crops'' both places it appears and inserting 
     ``20 percent for each of the 1996 through 2002 crops''.
       (c) Feed Grains.--Section 105B(c)(1)(E) of such Act (7 
     U.S.C. 1444f(c)(1)(E)) is amended--
       (1) in the subparagraph heading, by striking ``0/85 
     program'' and inserting ``0/80 program''; and
       (2) in clause (i), by striking ``8 percent for each of the 
     1991 through 1993 crops, and 15 percent for each of the 1994 
     through 1997 crops'' both places it appears and inserting 
     ``20 percent for each of the 1996 through 2002 crops''.
       (d) Wheat.--Section 107B(c)(1)(E) of such Act (7 U.S.C. 
     1445-3a(c)(1)(E)) is amended--
       (1) in the subparagraph heading, by striking ``0/85 
     program'' and inserting ``0/80 program''; and
       (2) in clause (i), by striking ``8 percent for each of the 
     1991 through 1993 crops, and 15 percent for each of the 1994 
     through 1997 crops'' both places it appears and inserting 
     ``20 percent for each of the 1996 through 2002 crops''.
       (e) Effect of Amendments on Prior Crop Years.--Sections 
     101B(c)(1)(D), 103B(c)(1)(D), 105B(c)(1)(E), and 
     107B(c)(1)(E) of the Agricultural Act of 1949, as in effect 
     on the day before the date of the enactment of this Act, 
     shall continue to apply with respect to the 1991 through 1995 
     crops covered by such sections.
                           Subtitle B--Sugar

     SEC. 2201. EXTENSION AND MODIFICATION OF SUGAR PROGRAM.

       (a) Assurance of Sugar Supply.--Section 206 of the 
     Agricultural Act of 1949 (7 U.S.C. 1446g, et seq.) is amended 
     to read as follows:

     ``SEC. 206. ASSURANCE OF SUGAR SUPPLY.

       ``(a) In General.--The price of each crop of sugar beets 
     and sugarcane, respectively, shall be supported in accordance 
     with this section.
       ``(b) Sugarcane.--Subject to subsection (d), the Secretary 
     shall support the price of domestically grown sugarcane 
     through loans at 18 cents per pound for raw cane sugar.
       ``(c) Sugar Beets.--Subject to subsection (d), the 
     Secretary shall support the price of each crop of 
     domestically grown sugar beets through loans at the level 
     provided for refined beet sugar produced from the 1995 crop 
     of domestically grown sugar beets.
       ``(d) Adjustment in Support Level.--
       ``(1) Downward adjustment in support level.--
       ``(A) In general.--The Secretary shall decrease the support 
     price of domestically grown sugarcane and sugar beets from 
     the price determined for the preceding crop, as established 
     under this section, if negotiated reductions in export 
     subsidies and domestic subsidies provided for sugar of the 
     European Union and other major sugar growing, producing, and 
     exporting countries (`major countries') in the aggregate 
     exceed the commitments made as part of the Uruguay Round 
     Agreements.
       ``(B) Extent of reduction.--The Secretary shall not reduce 
     the support price under this section below a level that 
     provides an equal measure of support to that provided by any 
     other major country or customs union based on an examination 
     of both domestic and export subsidies subject to reduction in 
     the Agreement on Agriculture referenced in 19 U.S.C. 
     3511(d)(2).
       ``(C) Major countries.--For purposes of this subsection, 
     the term `major countries' includes all countries allocated a 
     share of the tariff rate quota for imported sugars and syrups 
     by the United States Trade Representative pursuant to 
     additional U.S. note 5 of chapter 17 of the Harmonized Tariff 
     Schedule, all countries of the European Union, and the 
     People's Republic of China.
       ``(2) Increases in support level.--The Secretary may 
     increase the support level for each crop of domestically 
     grown sugarcane and sugar beets from the level determined for 
     the preceding crop based on such factors as the Secretary 
     determines appropriate, including changes (during the 2 crop 
     years immediately preceding the crop year for which the 
     determination is made) in the cost of sugar products, the 
     cost of domestic sugar production, the amount of any 
     applicable assessments, and other factors or circumstances 
     that may adversely affect domestic sugar production.
       ``(e) Loan Type; Processor Assurances.--
       ``(1) In general.--Subject to paragraph (2), the Secretary 
     shall carry out this section through the use of recourse 
     loans.
       ``(2) Modification.--During any fiscal year in which the 
     tariff rate quota for imports of sugar into the United States 
     is set at, or is increased to, a level that exceeds the 
     minimum level for such imports committed to by the United 
     States under the Agreement on Agriculture contained in the 
     Uruguay Round of Agreements of the General Agreement on 
     Tariffs and Trade, the Secretary shall carry 

[[Page H10530]]

     out this section by making available nonrecourse loans. Any 
     recourse loan previously made available by the Secretary 
     under this section during such fiscal year shall be modified 
     by the Secretary into a nonrecourse loan.
       ``(3) Processor assurances.--In order to effectively 
     support the prices of sugar beets and sugarcane received by 
     the producer, the Secretary shall obtain from each processor 
     that receives a loan under this section such assurances as 
     the Secretary considers adequate that, if the Secretary is 
     required under paragraph (2) to make nonrecourse loans 
     available, or modify recourse loans into nonrecourse loans, 
     each producer served by the processor will receive the 
     appropriate minimum payment for sugar beets and sugarcane 
     delivered by the producer, as determined by the Secretary.
       ``(f) Announcements.--In order to ensure the efficient 
     administration of the program under this section and the 
     effective support of the price of sugar, the Secretary shall 
     announce the type of loans available and the loan rates for 
     beet sugar and cane sugar for any fiscal year under this 
     section as far in advance as is practicable.
       ``(g) Loan Term.--
       ``(1) In general.--Except as provided in paragraph (2) and 
     subsection (h), loans under this section during any fiscal 
     year shall be made available not earlier than the beginning 
     of the fiscal year and shall mature at the end of 3 months.
       ``(2) Extension.--The maturity of a loan under this section 
     may be extended for up to 2 additional 3-month periods, at 
     the option of the borrower, upon written request to the 
     Commodity Credit Corporation. The maturity of a loan may not 
     be extended under this paragraph beyond the end of the fiscal 
     year.
       ``(h) Supplementary Loans.--Subject to subsection (d), the 
     Secretary shall make available to eligible processors price 
     support loans with respect to sugar processed from sugar 
     beets and sugarcane harvested in the last 3 months of a 
     fiscal year. Such loans shall mature at the end of the fiscal 
     year. The processor may repledge the sugar as collateral for 
     a price support loan in the subsequent fiscal year, except 
     that the second loan shall--
       ``(1) be made at the loan rate in effect at the time the 
     second loan is made; and
       ``(2) mature in not more than 9 months less the quantity of 
     time that the first loan was in effect.
       ``(i) Use of Commodity Credit Corporation.--The Secretary 
     shall use the funds, facilities, and authorities of the 
     Commodity Credit Corporation to carry out this section.
       ``(j) Marketing Assessments.--The following assessments 
     shall be collected with respect to all sugar marketed within 
     the United States during the 1996 through 2003 fiscal years:
       ``(1) Beet sugar.--The first seller of beet sugar produced 
     from sugar beets or sugar beet molasses, or refined sugar 
     refined outside of the United States, shall remit to the 
     Commodity Credit Corporation a nonrefundable marketing 
     assessment in an amount equal to 1.1794 percent of the loan 
     level established under subsection (b) per pound of sugar 
     marketed.
       ``(2) Cane sugar.--The first seller of raw cane sugar 
     produced from sugarcane or sugarcane molasses, shall remit to 
     the Commodity Credit Corporation a nonrefundable marketing 
     assessment in an amount equal to 1.1 percent of the loan 
     level established under subsection (b) per pound of sugar 
     marketed (including the transfer or delivery of the sugar to 
     a refinery for further processing or marketing).
       ``(3) Collection.--
       ``(A) Timing.--Marketing assessments required under this 
     subsection shall be collected and remitted to the Commodity 
     Credit Corporation within 30 days of the date that the sugar 
     is marketed.
       ``(B) Manner.--Subject to subparagraph (A), marketing 
     assessments shall be collected under this subsection in the 
     manner prescribed by the Secretary and shall be 
     nonrefundable.
       ``(4) Penalties.--If any person fails to remit an 
     assessment required by this subsection or fails to comply 
     with such requirements for recordkeeping or otherwise as are 
     required by the Secretary to carry out this subsection, the 
     person shall be liable to the Secretary for a civil penalty 
     up to an amount determined by multiplying--
       ``(A) the quantity of sugar involved in the violation; by
       ``(B) the loan level for the applicable crop of sugarcane 
     or sugar beets from which the sugar is produced.
       For the purposes of this paragraph, refined sugar shall be 
     treated as produced from sugar beets.
       ``(5) Enforcement.--The Secretary may enforce this 
     subsection in the courts of the United States.
       ``(6) Regulations.--The Secretary shall promulgate 
     regulations to carry out this subsection.
       ``(k) Information Reporting.--
       ``(1) Duty of processors and refiners to report.--All 
     sugarcane processors, cane sugar refiners, and sugar beet 
     processors shall furnish the Secretary, on a monthly basis, 
     such information as the Secretary may require to administer 
     sugar programs, including the quantity of purchases of 
     sugarcane, sugar beets, and sugar, and production, 
     importation, distribution, and stock levels of sugar.
       ``(2) Duty of producers to report.--In order to efficiently 
     and effectively carry out the program under this section, the 
     Secretary may require a producer of sugarcane or sugar beets 
     to report, in the manner prescribed by the Secretary, the 
     producer's sugarcane or sugar beet yields and acres planted 
     to sugarcane or sugar beets, respectively.
       ``(3) Penalty.--Any person willfully failing or refusing to 
     furnish the information, or furnishing willfully any false 
     information, shall be subject to a civil penalty of not more 
     than $10,000 for each such violation.
       ``(4) Monthly reports.--Taking into consideration the 
     information received under paragraph (1), the Secretary shall 
     publish on a monthly basis composite data on production, 
     imports, distribution, and stock levels of sugar.
       ``(l) Sugar Estimates.--
       ``(1) Domestic requirement.--Before the beginning of each 
     fiscal year, the Secretary shall estimate the domestic sugar 
     requirement of the United States equal to Total Estimated 
     Disappearance minus the quantity of sugar that will be 
     available from carry-in stocks.
       ``(2) Total disappearance.--For the purposes of this 
     subsection, the term`` Total Estimated Disappearance'' means 
     the quantity of sugar, as estimated by the Secretary, that 
     will be consumed in the United States during the fiscal year 
     (other than sugar imported for the production of polyhydric 
     alcohol or to be refined and reexported in refined form or in 
     sugar containing products) plus the quantity of sugar that 
     would provide for adequate carryover stocks.
       ``(3) Quarterly reestimates.--The Secretary shall make 
     quarterly reestimates of sugar consumption, stocks, 
     production, and imports for a fiscal year no later than the 
     beginning of each of the second through fourth quarters of 
     the fiscal year.
       ``(m) Definition of Market.--For purposes of this section, 
     the term `market' means to sell or otherwise dispose of in 
     commerce in the United States (including, with respect to any 
     integrated processor and refiner, the movement of raw cane 
     sugar into the refining process) and deliver to a buyer.
       ``(n) Crops.--This section shall be effective only for the 
     1996 through 2002 crops of sugar beets and sugarcane.''.
       (b) Conforming Amendment.--Part VII of subtitle B of title 
     III of the Agricultural Adjustment Act of 1938 (7 U.S.C. 
     1359aa et seq.) is repealed.
                          Subtitle C--Peanuts

     SEC. 2301. EXTENSION OF PRICE SUPPORT PROGRAM FOR PEANUTS AND 
                   RELATED PROGRAMS.

       (a) Agricultural Act of 1949.--Section 108B of the 
     Agricultural Act of 1949 (7 U.S.C. 1445c-3) is amended--
       (1) in the section heading, by striking ``1997'' and 
     inserting ``2002'';
       (2) in subsection (a)(1), (a)(2), (b)(1), and (h), by 
     striking ``1997'' each place it appears and inserting 
     ``2002''; and
       (3) in subsection (g)(1), by striking ``1997 crops'' the 
     first place it appears and inserting ``2002 crops''.
       (b) Agricultural Adjustment Act of 1938.--Part VI of 
     subtitle B of title III of the Agricultural Adjustment Act of 
     1938 is amended--
       (1) in section 358-1 (7 U.S.C. 1358-1)--
       (A) in the section heading, by striking ``1997'' and 
     inserting ``2002'';
       (B) in subsection (a)(3), by striking ``1990'' and 
     inserting ``1990, for the 1991 through 1995 marketing years, 
     and 1995, for the 1996 through 2002 marketing years'';
       (C) in subsection (b)(1)(A)--
       (i) by striking ``1997'' and inserting ``2002''; and
       (ii) in clause (i), by inserting before the semicolon the 
     following: ``, for the 1991 through 1995 marketing years, and 
     the 1995 marketing year, for the 1996 through 2002 marketing 
     years''; and
       (D) in subsections (b)(1)(B), (b)(2)(A), (b)(2)(C), 
     (b)(3)(A), and (f), by striking ``1997'' each place it 
     appears and inserting ``2002'';
       (2) in section 358b (7 U.S.C. 1358b)--
       (A) in the section heading, by striking ``1995'' and 
     inserting ``2002''; and
       (B) in subsection (c), by striking ``1995'' and inserting 
     ``2002'';
       (3) in section 358c(d) (7 U.S.C. 1358c(d)), by striking 
     ``1995'' and inserting ``2002''; and
       (4) in section 358e (7 U.S.C. 1359a)--
       (A) in the section heading, by striking ``1997'' and 
     inserting ``2002''; and
       (B) in subsection (i), by striking ``1997'' and inserting 
     ``2002''.
       (c) Food, Agriculture, Conservation, and Trade Act of 
     1990.--Title VIII of the Food, Agriculture, Conservation, and 
     Trade Act of 1990 (Public Law 101-624; 104 Stat. 3459) is 
     amended--
       (1) in section 801 (104 Stat. 3459), by striking ``1995'' 
     and inserting ``2002'';
       (2) in section 807 (104 Stat. 3478), by striking ``1995'' 
     and inserting ``2002''; and
       (3) in section 808 (7 U.S.C. 1441 note), by striking 
     ``1995'' and inserting ``2002''.

     SEC. 2302. NATIONAL POUNDAGE QUOTAS AND ACREAGE ALLOTMENTS.

       (a) Establishment.--Subsection (a)(1) of section 358-1 of 
     the Agricultural Adjustment Act of 1938 (7 U.S.C. 1358-1) is 
     amended to read as follows:
       ``(1) Establishment.--The national poundage quota for 
     peanuts for each of the 1991 through 2002 marketing years 
     shall be established by the Secretary at a level that is 
     equal to the quantity of peanuts (in tons) that the Secretary 
     estimates will be devoted in each such marketing year to 
     domestic edible and related uses. Beginning with the 1996 

[[Page H10531]]

     marketing year, the Secretary shall exclude seed uses from 
     the estimate of domestic edible and related uses, but shall 
     include the estimated quantity of peanuts and peanut products 
     to be imported into the United States for the marketing year 
     for which the quota is being established.''.
       (b) Exclusions from Farm Poundage Quota.--Subsection (b) of 
     such section is amended--
       (1) in paragraph (1)(B), by striking clauses (i) and (ii) 
     and inserting the following new clauses:
       ``(i) through the 1995 marketing year, any increases for 
     undermarketings from previous years; or
       ``(ii) through the 2002 marketing year, any increases 
     resulting from the allocation of quotas voluntarily released 
     for 1 year under paragraph (7).''; and
       (2) in paragraph (3)(B), by striking clauses (i) and (ii) 
     and inserting the following new clauses:
       ``(i) through the 1995 marketing year, any increases for 
     undermarketings of quota peanuts from previous years; or
       ``(ii) through the 2002 marketing year, any increase 
     resulting from the allocation of quotas voluntarily released 
     for 1 year under paragraph (7).''.
       (c) Temporary Quota Allocation.--Subsection (b)(2) of such 
     section is amended--
       (1) in subparagraph (A), by striking ``subparagraph (B) and 
     subject to''; and
       (2) by striking subparagraph (B) and inserting the 
     following new subparagraph:
       ``(B) Temporary quota allocation.--
       ``(i) Allocation related to seed peanuts.--Temporary 
     allocation of quota pounds for the marketing year only in 
     which the crop is planted shall be made to producers for each 
     of the 1996 through 2002 marketing years as provided in this 
     subparagraph. The temporary quota allocation shall be equal 
     to the pounds of seed peanuts planted on the farm, as may be 
     adjusted under regulations prescribed by the Secretary. The 
     temporary allocation of quota pounds under this paragraph 
     shall be in addition to the farm poundage quota otherwise 
     established under this subsection and shall be credited for 
     the applicable marketing year only, in total to the producer 
     of the peanuts on the farm in a manner prescribed by the 
     Secretary.
       ``(ii) Condition on allocation.--The allocation of quota 
     pounds to producers under this subparagraph shall be 
     performed in such a manner so that such allocation will not 
     result in a net decrease in the farm poundage quota for a 
     farm in excess of 3 percent, after temporary seed quota is 
     added, from the basic farm quota in 1996. Such decrease shall 
     occur one time only and shall be applicable to the 1996 
     marketing year only.
       ``(iii) Term of provision.--Application of this 
     subparagraph may continue so long as doing so does not result 
     in increased cost to the Commodity Credit Corporation by 
     displacement of quota peanuts by additional peanuts in the 
     domestic market, increased losses in the Association loan 
     pools, or other such increases in cost.
       ``(iv) Effect of other requirements.--Nothing in this 
     section shall alter or change in any way the requirements 
     regarding the use of quota and additional peanuts established 
     by section 359a(b) of the Agricultural Act of 1949 (7 U.S.C. 
     1359a(b)), as added by section 804 of the Food, Agriculture, 
     Conservation, and Trade Act of 1990.''.
       (d) Quota Considered Produced.--Subsection (b)(4) of such 
     section is amended to read as follows:
       ``(4) Quota considered produced.--
       ``(A) Natural disaster.--For purposes of this subsection, 
     the farm poundage quota shall be considered produced on a 
     farm if the farm poundage quota was not produced on the farm 
     because of drought, flood, or any other natural disaster, or 
     any other condition beyond the control of the producer, as 
     determined by the Secretary.
       ``(B) Lease or release of quota.--Such farm poundage quota 
     shall also be considered produced on a farm if the farm 
     poundage quota was either leased to another owner or operator 
     of a farm within the same county for transfer to such farm 
     for only 1 of the 3 marketing years immediately preceding the 
     marketing year for which the determination is being made or 
     the farm poundage quota was released voluntarily under 
     paragraph (7) for only 1 of the 3 marketing years immediately 
     preceding the marketing year for which the determination is 
     being made. The farm poundage quota leased or released under 
     this subparagraph shall be considered produced for only 1 of 
     the 3 marketing years immediately preceding the marketing 
     year for which the determination is being made. The farm 
     shall not receive considered produced credit for more than 1 
     marketing year out of the 3 immediately preceding marketing 
     years under the options in this subparagraph.''.
       (e) Allocation of Quotas Reduced or Released to Farms 
     Without Quotas.--Subsection (b)(6) of such section is amended 
     to read as follows:
       ``(6) Allocation of quotas reduced or released.--
       ``(A) In general.--The total quantity of the farm poundage 
     quotas reduced or voluntarily released from farms in a State 
     for any marketing year under paragraphs 3 and (5) shall be 
     allocated under subparagraph (B), as the Secretary may by 
     regulation prescribe, to other farms in the State on which 
     peanuts were produced in at least 2 of the 3 crop years 
     immediately preceding the year for which the allocation is 
     being made.
       ``(B) Set-aside for farms with no quota.--The total amount 
     of farm poundage quota to be allocated in the State under 
     subparagraph (A) shall be allocated to farms in the State for 
     which no farm poundage quota was established for the 
     immediately preceding year's crop. The allocation to any such 
     farm shall not exceed the average farm production of peanuts 
     for the 3 immediately preceding years during which peanuts 
     were produced on the farm. Any farm quota pounds remaining 
     after allocation to farms under this subparagraph shall be 
     allocated to farms in the State on which poundage quotas were 
     established for the immediately preceding crop year.''.
       (f) Transfer of Additional Peanuts.--Subsection (b) of such 
     section is amended by striking paragraphs (8) and (9) and 
     inserting the following new paragraph:
       ``(8) Transfer of additional peanuts.--Additional peanuts 
     on a farm from which the quota poundage was not harvested and 
     marketed may be transferred to the quota loan pool for 
     pricing purposes on such basis as the Secretary shall by 
     regulation provide, except that the poundage of such peanuts 
     so transferred shall not exceed the difference in the total 
     peanuts meeting quality requirements for domestic edible use 
     as determined by the Secretary marketed from the farm and the 
     total farm poundage quota, excluding quota pounds transferred 
     to the farm in the fall. Peanuts transferred under this 
     paragraph shall be supported at a total of not less than 70 
     percent of the quota support rate for the marketing years in 
     which such transfers occur and such transfers for a farm 
     shall not exceed 25 percent of the total farm quota pounds, 
     excluding pounds transferred in the fall.''.

     SEC. 2303. SALE, LEASE, OR TRANSFER OF FARM POUNDAGE QUOTA.

       (a) Transfers Authorized under Certain Circumstances.--
     Subsection (a) of section 358b of the Agricultural Adjustment 
     Act of 1938 (7 U.S.C. 1358b) is amended--
       (1) in paragraph (1)--
       (A) by striking ``(including any applicable under 
     marketings)'' both places it appears;
       (B) in subparagraph (A), by striking ``undermarketings 
     and''; and
       (C) by adding at the end the following new sentences: ``In 
     the case of a fall transfer only, poundage quota from a farm 
     may be leased to another owner or operator of a farm within 
     the same county or to another owner or operator of a farm in 
     any other county within the State. Fall transfers of quota 
     pounds shall not affect the farm quota history for the 
     transferring or receiving farm and shall not result in 
     reducing the farm poundage quota on the transferring farm.'';
       (2) by striking paragraph (2) and inserting the following 
     new paragraph:
       ``(2) Transfers to other self-owned farms.--The owner or 
     operator of a farm may transfer all or any part of the farm 
     poundage quota for the farm to any other farm owned or 
     controlled by the owner or operator that is in the same 
     county or any other county within the same State and that had 
     a farm poundage quota for the preceding crop year, if both 
     the transferring and the receiving farms were under the 
     control of the owner or operator for at least 3 crop years 
     prior to the crop year in which the farm poundage quota is 
     transferred. Any farm poundage quota transferred under this 
     paragraph shall not result in any reduction in the farm 
     poundage quota for the transferring farm if sufficient 
     acreage is planted on the receiving farm to produce the quota 
     pounds transferred.'';
       (3) in paragraph (3), by striking ``(including any 
     applicable undermarketings)''; and
       (4) by adding at the end the following new paragraph:
       ``(4) Transfers by sale in states having quotas of 10,000 
     tons or more.--Subject to such terms and conditions as the 
     Secretary may prescribe, the owner, or operator with 
     permission of the owner, of any farm for which a farm quota 
     has been established and which is located in a State having a 
     quota of 10,000 tons or more may sell poundage quota to any 
     other eligible owner or operator of a farm within the same 
     State. The Secretary shall ensure that no more than 15 
     percent of the total poundage quota within a county as of 
     January 1, 1996, is sold and transferred in 1996 under this 
     paragraph and that no more than 5 percent of the quota pounds 
     remaining in a county as of January 1 in each of the next 4 
     years are sold and transferred in any such year. 
     Notwithstanding any other provision of this paragraph, no 
     more than 30 percent of the total poundage quota within a 
     county may be sold and transferred. Quota pounds sold and 
     transferred under this paragraph may not be leased or sold 
     from the farm to which transferred to another farm owner or 
     operator within the same State for a period of 5 years 
     following the original transfer to the farm.''.
       (b) Conditions.--Subsection (b) of such section is 
     amended--
       (1) in paragraph (1), by inserting before the period at the 
     end the following: ``, except that no such agreement shall be 
     necessary in the event of fall lease, if the operator had the 
     lienholder's agreement for a previous spring cash lease''; 
     and
       (2) by striking paragraph (3) and inserting the following 
     new paragraph:
       ``(3) Record.--No transfer of the farm poundage quota shall 
     be effective until a 

[[Page H10532]]

     record thereof is filed with the county committees of the 
     counties from which transferred and to which transferred and 
     the committees determine that the transfer complies with this 
     section.''.

     SEC. 2304. PENALTY FOR REENTRY OF EXPORTED PEANUT PRODUCTS.

       Section 358e(d)(6)(A) of the Agricultural Adjustment Act of 
     1938 (7 U.S.C. 1359a(d)(6)(A)) is amended by inserting ``or 
     peanut products manufactured from additional peanuts'' after 
     ``any additional peanuts''.

     SEC. 2305. PRICE SUPPORT PROGRAM FOR PEANUTS.

       (a) Support Rates.--Subsection (a)(2) Section 108B of the 
     Agricultural Act of 1949 (7 U.S.C. 1445c-3) is amended--
       (1) by striking ``any increase'' and inserting ``any 
     increase or decrease''; and
       (2) by striking ``, except that'' and all that follows 
     through ``preceding crop'' and inserting the following: ``In 
     no event shall the national average quota support rate be 
     increased by more than 5 percent of the national average 
     quota support rate for the preceding crop. In no event shall 
     the national average quota support rate be decreased by more 
     than 5 percent of the national average quota support rate for 
     the preceding crop.''.
       (b) Special Rule Regarding New Mexico Pools.--Subsection 
     (c)(2)(A) of such section is amended by inserting after the 
     first sentence the following new sentence: ``Peanuts 
     physically produced outside the State of New Mexico shall not 
     be eligible for entry into or participation in the New Mexico 
     pools even though the farm on which the peanuts are produced 
     is considered to be a New Mexican farm for administrative 
     purposes.''.
       (c) Losses in Area Quota Pools.--Subsection (d)(2) of such 
     section is amended--
       (1) by redesignating subparagraph (B) as subparagraph (D);
       (2) by inserting after subparagraph (A) the following new 
     paragraphs:
       ``(B) Reduction of gains of other producers in same pool.--
     If use of the authority provided in subparagraph (A) is not 
     sufficient to cover losses in an area quota pool, the 
     additional losses shall be offset by reducing the gain of any 
     producer in such pool by the amount of pool gains attributed 
     to the same producer from the sale of additional peanuts for 
     domestic and export edible use.
       ``(C) Use of marketing assessments.--If use of the 
     authority provided in subparagraphs (A) and (B) is not 
     sufficient to cover losses in area quota pools, the Secretary 
     shall use funds collected under subsection (g) to offset such 
     losses. At the end of each year, the Secretary shall deposit 
     in the Treasury those funds collected under subsection (g) 
     that the Secretary determines are not required to cover 
     losses in area quota pools for that year.''; and
       (3) in subparagraph (D), as redesignated by paragraph (1), 
     by adding at the end the following new sentence: ``This 
     subparagraph shall apply only to the extent that use of the 
     authority provided in subparagraphs (A), (B), and (C) is not 
     sufficient to cover losses in an area quota pool.''.
       (d) Compliance With Quality Standards.--Subsection (f)(2) 
     of such section is amended to read as follows:
       ``(2) Exports and other peanuts.--The Secretary shall 
     require that all peanuts in the domestic market, including 
     peanuts imported into the United States, meet all United 
     States quality standards under Marketing Agreement No. 146 
     and that importers of such peanuts fully comply with 
     inspection, handling, storage, and processing requirements 
     implemented under Marketing Agreement No. 146. The Secretary 
     shall ensure that peanuts produced for the export market meet 
     quality, inspection, handling, storage, and processing 
     requirements under Marketing Agreement No. 146.''.
       (e) Assessment Rates.--Subsection (g) of such section is 
     amended--
       (1) in paragraph (1), by striking ``1.15 percent'' the 
     first place it appears and all that follows through the 
     period at the end of such paragraph and inserting ``and 1.2 
     percent for the 1996 through 2002 crops, of the applicable 
     support rate under this subsection.'';
       (2) in paragraph (2)(A)(i)--
       (A) by inserting ``and'' at the end of subclause (II); and
       (B) by striking subclauses (III) and (IV) and inserting the 
     following new subclause:

       ``(III) in the case of each of the 1996 through 2002 crops, 
     .6 percent of the applicable national average support 
     rate;''; and

       (3) in paragraph (2)(A)(ii)--
       (A) by striking ``and'' at the end of subclause (I);
       (B) in subclause (II), by striking ``through 1997 crops'' 
     and inserting ``and 1995 crops''; and
       (C) by adding at the end the following new subclause:

       ``(III) in the case of each of the 1996 through 2002 crops, 
     .6 percent of the applicable national average support rate; 
     and''.

       (f) Assessment on Imports.--Subsection (g) of such section 
     is further amended--
       (1) by redesignating paragraphs (3), (4), (5), and (6) as 
     paragraphs (4), (5), (6), and (7), respectively; and
       (2) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) Imports.--Each importer of peanuts produced outside 
     of the United States and imported into the United States 
     after the date of the enactment of this paragraph shall remit 
     to the Commodity Credit Corporation a nonrefundable marketing 
     assessment in an amount equal to the product obtained by 
     multiplying the number of pounds of peanuts imported by the 
     importer by 1.2 percent of the national average support rate 
     for additional peanuts.''.

     SEC. 2306. REFERENDUM REGARDING POUNDAGE QUOTAS.

       Section 358-1(d) of the Agricultural Adjustment Act of 1938 
     (7 U.S.C. 13581(d)) is amended by striking paragraph (1) and 
     inserting the following new paragraph:
       ``(1) In general.--Each calendar year, the Secretary shall 
     conduct a referendum of producers engaged in the production 
     of quota peanuts in the calendar year in which the referendum 
     is held to determine whether the producers are in favor of or 
     opposed to poundage quotas with respect to the crops of 
     peanuts produced in the seven calendar years immediately 
     following the year in which the referendum is held, except 
     that, if as many as two-thirds of the producers voting in any 
     referendum vote in favor of poundage quotas, no referendum 
     shall be held with respect to quotas for the next six years 
     of the period. In the case of the referendum required in 
     1995, the Secretary shall conduct the referendum as soon as 
     practicable after the date of the enactment of the 
     Agricultural Reconciliation Act of 1995. In the case of any 
     referendum required in calendar years 1996 through 2002, the 
     Secretary shall conduct the referendum not later than 
     December 15 of the calendar year in which the referendum is 
     required.''.

     SEC. 2307. REGULATIONS.

       The Secretary of Agriculture shall issue such regulations 
     as are necessary to carry out this title and the amendments 
     made by this title. In issuing the regulations, the 
     Secretary--
       (1) is encouraged to comply with subchapter II of chapter 5 
     of title 5, United States Code;
       (2) shall provide public notice through the Federal 
     Register of any such proposed regulations; and
       (3) shall allow adequate time for written public comment 
     prior to the formulation and issuance of any final 
     regulations.
                          Subtitle D--Tobacco

     SEC. 2401. ELIMINATION OF FEDERAL BUDGETARY OUTLAYS FOR 
                   TOBACCO PROGRAMS.

       Section 106(g)(1) of the Agricultural Act of 1949 (7 U.S.C. 
     1445(g)(1)) is amended--
       (1) by striking ``1998'' and inserting ``2002''; and
       (2) by inserting after ``equal to'' the following: ``a pro 
     rata share of the total amount of the costs of other 
     Department of Agriculture programs related to tobacco 
     production or processing that are not required to be covered 
     by user fees or by contributions or assessments under section 
     106A(d)(1) or 106B(d)(1), but in no event less than''.

     SEC. 2402. ESTABLISHMENT OF FARM YIELD FOR FLUE-CURED TOBACCO 
                   BASED ON INDIVIDUAL FARM PRODUCTION HISTORY.

       (a) Method of Determining Farm Acreage Allotments.--
     Subsection (a) of section 317 of the Agricultural Adjustment 
     Act of 1938 (7 U.S.C. 1314c) is amended by striking 
     paragraphs (2) through (8) and inserting the following new 
     paragraphs:
       ``(2) Farm acreage allotments.--The term `farm acreage 
     allotment' for a tobacco farm, other than a new tobacco farm, 
     means the acreage allotment determined by dividing the farm 
     marketing quota by the farm yield.
       ``(3) Farm yield.--The term `farm yield' means the yield 
     per acre for a farm determined according to regulations 
     issued by the Secretary and which would be expected to result 
     in a quality of tobacco acceptable to the tobacco trade.
       ``(4) Farm marketing quota.--
       ``(A) In general.--The term `farm marketing quota' for a 
     farm for a marketing year means a number that is equal to the 
     number of pounds of tobacco determined by multiplying--
       ``(i) the farm marketing quota for the farm for the 
     previous marketing year (prior to any adjustment for 
     undermarketing or overmarketing); by
       ``(ii) the national factor.
       ``(B) Adjustment.--The farm marketing quota determined 
     under subparagraph (A) for a marketing year shall be 
     increased for undermarketing or decreased for overmarketing 
     by the number of pounds by which marketings of tobacco from 
     the farm during the immediate preceding marketing year (if 
     marketing quotas were in effect for that year under the 
     program established by this section) is less than or exceeds 
     the farm marketing quota for such year. Notwithstanding the 
     preceding sentence, the farm marketing quota for a marketing 
     year shall not be increased under this subparagraph for 
     undermarketing by an amount in excess of the farm marketing 
     quota determined for the farm for the immediately preceding 
     year prior to any increase for undermarketing or decrease for 
     overmarketing. If due to excess marketing in the preceding 
     marketing year, the farm marketing quota for the marketing 
     year is reduced to zero pounds without reflecting the entire 
     reduction required, the additional reduction shall be made 
     for the subsequent marketing year or years.
       ``(5) National factor.--The term `national factor' for a 
     marketing year means a number obtained by dividing--
       ``(A) the national marketing quota (less the reserve 
     provided for under subsection (e)); by
       ``(B) the sum of the farm marketing quotas (prior to any 
     adjustments for 

[[Page H10533]]

     undermarketing or overmarketing) for the immediate preceding 
     marketing year for all farms for which marketing quotas for 
     the kind of tobacco involved will be determined for such 
     succeeding marketing year.''.
       (b) Conforming Amendments.--Such section is further 
     amended--
       (1) in the first sentence of subsection (b), by striking 
     ``and the national acreage allotment and national average 
     yield goal for the 1965 crop of Flue-cured tobacco,'';
       (2) in the first sentence of subsection (c), by striking 
     ``and at the same time announce the national acreage 
     allotment and national average yield goal'';
       (3) in subsection (d)--
       (A) in the sixth sentence, by striking ``, national acreage 
     allotment, and national average yield goal'';
       (B) in the eighth sentence, by striking ``, national 
     acreage allotment and national average yield goal''; and
       (C) in the ninth sentence, by striking ``, national acreage 
     allotment, and national average goal are'' and inserting 
     ``is'';
       (4) in subsection (e)--
       (A) in the first sentence, by striking ``No farm acreage 
     allotment or farm yield shall be established'' and inserting 
     ``A farm marketing quota and farm yield shall not be 
     established'';
       (B) in the second sentence, by striking ``acreage 
     allotment'' both places it appears and inserting ``marketing 
     quota'';
       (C) in the second sentence, by striking ``acreage 
     allotments'' both places it appears and inserting ``marketing 
     quotas''; and
       (D) in the last sentence, by striking ``acreage allotment'' 
     and inserting ``marketing quota''; and
       (5) in subsection (g)--
       (A) in paragraph (1), by striking ``paragraph (a)(8)'' and 
     inserting ``subsection (a)(4)''; and
       (B) in paragraph (3), by striking ``subsection (a)(8)'' and 
     inserting ``subsection (a)(4)''.
       (c) Farm Marketing Quota Reductions.--Subsection (f) of 
     such section is amended to read as follows:
       ``(f) Causes for Farm Marketing Quota Reduction.--(1) When 
     an acreage-poundage program is in effect for any kind of 
     tobacco under this section, the farm marketing quota next 
     established for a farm shall be reduced by the amount of such 
     kind of tobacco produced on the farm--
       ``(A) which was marketed as having been produced on a 
     different farm;
       ``(B) for which proof of disposition is not furnished as 
     required by the Secretary;
       ``(C) on acreage equal to the difference between the 
     acreage reported by the farm operator or a duly authorized 
     representative and the determined acreage for the farm; and
       ``(D) as to which any producer on the farm filed, or aids, 
     or acquiesces, in the filing of any false report with respect 
     to the production or marketing of tobacco.
       ``(2) If the Secretary, through the local committee, find 
     that no person connected with a farm caused, aided, or 
     acquiesced in any irregularity described in paragraph (1), 
     the next established farm marketing quota shall not be 
     reduced under this subsection.
       ``(3) The reduction required under this subsection shall be 
     in addition to any other adjustments made pursuant to this 
     section.
       ``(4) In establishing farm marketing quotas for other farms 
     owned by the owner displaced by acquisition of the owner's 
     land by any agency, as provided in section 378 of this Act, 
     increases or decreases in such farm marketing quotas as 
     provided in this section shall be made on account of 
     marketings below or in excess of the farm marketing quotas 
     for the farm acquired by the agency.
       ``(5) Acreage allotments and farm marketing quotas 
     determined under this section may (except in the case of 
     kinds of tobacco not subject to section 316) be leased and 
     sold under the terms and conditions in section 316 of this 
     Act, except that any credit for undermarketing or charge for 
     overmarketing shall be attributed to the farm to which 
     transferred.''.
       (d) Effect of Amendments on Current Tobacco Crop.--Section 
     317 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 
     1314c), as in effect on the day before the date of the 
     enactment of this Act, shall continue to apply with respect 
     to the 1995 crop of Flue-cured tobacco.

     SEC. 2403. REMOVAL OF FARM RECONSTITUTION EXCEPTION FOR 
                   BURLEY TOBACCO.

       Section 379(a)(6) of the Agricultural Adjustment Act of 
     1938 (7 U.S.C. 1379(a)(6)) is amended by striking ``, but 
     this clause (6) shall not be applicable in the case of burley 
     tobacco''.

     SEC. 2404. REDUCTION IN PERCENTAGE THRESHOLD FOR TRANSFER OF 
                   FLUE-CURED TOBACCO QUOTA IN CASES OF DISASTER.

       The second subsection (h) in section 316 of the 
     Agricultural Adjustment Act of 1938 (7 U.S.C. 1314b) is 
     amended by striking ``90 percent'' in paragraph (1)(A) and 
     inserting ``80 percent''.

     SEC. 2405. EXPANSION OF TYPES OF TOBACCO SUBJECT TO NO NET 
                   COST ASSESSMENT.

       (a) No Net Cost Tobacco Fund.--Section 106A(d)(1)(A) of the 
     Agricultural Act of 1949 (7 U.S.C. 1445-1(d)(1)(A)) is 
     amended--
       (1) in clause (ii), by inserting after ``Burley quota 
     tobacco'' the following: ``and cigar-type quota tobacco''; 
     and
       (2) in clause (iii)--
       (A) in the matter preceding the subclauses, by striking 
     ``Flue-cured or Burley tobacco'' and inserting ``each kind of 
     tobacco for which price support is made available under this 
     Act, and each kind of like tobacco,''; and
       (B) by striking subclause (II) and inserting the following 
     new subclause:
       ``(II) the sum of the amount of the per pound producer 
     contribution and purchaser assessment (if any) for such kind 
     of tobacco payable under clauses (i) and (ii); and''.
       (b) No Net Cost Tobacco Account.--Section 106B(d)(1) of the 
     Agricultural Act of 1949 (7 U.S.C. 1445-2(d)(1)) is amended--
       (1) in subparagraph (B), by inserting after ``Burley quota 
     tobacco'' the following: ``and cigar-type quota tobacco''; 
     and
       (2) in subparagraph (C), by striking ``Flue-cured and 
     Burley tobacco'' and inserting ``each kind of tobacco for 
     which price support is made available under this Act, and 
     each kind of like tobacco,''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect 60 days after the date of the enactment of 
     this Act.

     SEC. 2406. REPEAL OF REPORTING REQUIREMENTS RELATING TO 
                   EXPORT OF TOBACCO.

       Section 214 of the Tobacco Adjustment Act of 1983 (7 U.S.C. 
     509) is repealed.

     SEC. 2407. REPEAL OF LIMITATION ON REDUCING NATIONAL 
                   MARKETING QUOTA FOR FLUE-CURED AND BURLEY 
                   TOBACCO.

       (a) Flue-cured Tobacco.--Section 317(a)(1) of the 
     Agricultural Adjustment Act of 1938 (7 U.S.C. 1314c(a)(1)) is 
     amended by striking subparagraph (C).
       (b) Burley Tobacco.--Section 319(c)(3) of the Agricultural 
     Adjustment Act of 1938 (7 U.S.C. 1314e(c)(3)) is amended by 
     striking subparagraph (C).

     SEC. 2408. APPLICATION OF CIVIL PENALTIES UNDER TOBACCO 
                   INSPECTION ACT.

       Section 12 of the Tobacco Inspection Act (7 U.S.C. 511k) is 
     amended--
       (1) by inserting ``(a) Fine for Violations.--'' after 
     ``That any person''; and
       (2) by adding at the end the following new subsections:
       ``(b) Jurisdiction.--The district courts of the United 
     States are vested with jurisdiction specifically to enforce, 
     and to prevent and restrain any person from violating, any 
     rule or regulation issued under this Act.
       ``(c) Referral to Attorney General.--A civil action 
     authorized to be commenced under this section shall be 
     referred to the Attorney General for appropriate action, 
     except that the Secretary shall not be required to refer to 
     the Attorney General a violation of this Act, if the 
     Secretary believes that the administration and enforcement of 
     this Act would be adequately served by providing a suitable 
     written notice or warning to the person who committed such 
     violation or administrative action.
       ``(d) Civil Penalties and Orders.--
       ``(1) Civil penalties.--Any person who willfully violates 
     any provision of this Act or any of the regulations issued by 
     the Secretary under this Act may be assessed a civil penalty 
     by the Secretary of not less than $500 or more than $5,000 
     for each such violation. Each violation shall be a separate 
     offense.
       ``(2) Cease and desist orders.--In addition to, or in lieu 
     of, a civil penalty under paragraph (1), the Secretary may 
     issue an order requiring a person to cease and desist from 
     continuing any such violation.
       ``(3) Notice and hearing.--No penalty shall be assessed or 
     cease-and-desist order issued by the Secretary under this 
     subsection unless the person against whom the penalty is 
     assessed or the order is issued is given notice and 
     opportunity for a hearing before the Secretary with respect 
     to such violation.
       ``(4) Finality.--The order of the Secretary assessing a 
     penalty or imposing a cease-and-desist order under this 
     subsection shall be final and conclusive unless the affected 
     person files an appeal of the Secretary's order with the 
     appropriate district court of the United States, in 
     accordance with subsection (e).
       ``(e) Review by District Court.--
       ``(1) Commencement of action.--Any person who has been 
     determined to be in violation of this Act, or against whom a 
     civil penalty has been assessed or a cease-and-desist order 
     issued under subsection (d), may obtain review of the penalty 
     or order--
       ``(A) by filing, within the 30-day period beginning on the 
     date the penalty is assessed or order issued, a notice of 
     appeal in--
       ``(i) the district court of the United States for the 
     district in which the person resides or conducts business; or
       ``(ii) the United States District Court for the District of 
     Columbia; and
       ``(B) by sending, within the same period, a copy of such 
     notice by certified mail to the Secretary.
       ``(2) Record.--The Secretary shall file promptly in the 
     appropriate court referred to in paragraph (1), a certified 
     copy of the record on which the Secretary has determined that 
     the person had committed a violation.
       ``(3) Standard of review.--A finding of the Secretary under 
     this section shall be set aside only if such finding is found 
     to be unsupported by substantial evidence.
       ``(f) Failure to obey orders.--Any person who fails to obey 
     a cease-and-desist order under this section after such order 
     has become final and unappealable, or after the appropriate 
     United States district court has entered a final judgment in 
     favor of the Secretary, shall be subject to a civil penalty 
     assessed by the Secretary, after opportunity for hearing and 
     for a judicial review under the procedures specified in 
     subsection (e), of 

[[Page H10534]]

     not more than $500 for each offense. Each day during which 
     such failure continues shall be considered as a separate 
     violation of such order.
       ``(g) Failure to Pay Penalties.--If any person fails to pay 
     an assessment of a civil penalty under this section after it 
     has become a final and unappealable order, or after the 
     appropriate United States district court has entered final 
     judgment in favor of the Secretary, the Secretary shall refer 
     the matter to the Attorney General for recovery of the amount 
     assessed in the district court of the United States for the 
     district in which the person resides or conducts business. In 
     such action, the validity and appropriateness of the final 
     order imposing the civil penalty shall not be subject to 
     review.
       ``(h) Additional Remedies.--The remedies provided in this 
     section shall be in addition to, and not exclusive of, other 
     remedies that may be available.''.

     SEC. 2409. TRANSFERS OF QUOTA OR ALLOTMENT ACROSS COUNTY 
                   LINES IN A STATE.

       (a) Transfers Allowed by Referendum.--
       (1) Flue-cured tobacco.--Section 316(g) of the Agricultural 
     Adjustment Act of 1938 (7 U.S.C. 1314b(g)) is amended by 
     adding at the end the following:
       ``(3) Notwithstanding paragraph (1), the Secretary may 
     permit the sale of a Flue-cured tobacco allotment or quota 
     from one farm in a State to any other farm in the State if a 
     majority of active Flue-cured tobacco producers within the 
     State approve of such sales by a state-wide referendum to be 
     conducted by the Secretary.''.
       (2) Other tobacco.--Section 318(b) of such Act (7 U.S.C. 
     1314d(b)) is amended in the proviso by inserting after ``same 
     State'' the following: ``and, in the case of other kinds of 
     tobacco, any such transfer may be made to a farm in another 
     county in the same State if transfers of such type are 
     approved by a majority of the active producers of that kind 
     of tobacco in the State who vote in a referendum held on the 
     subject''.
       (3) Burley tobacco.--Section 319(l) of such Act (7 U.S.C. 
     1314e(l)) is amended by striking the last sentence.
       (b) Same Grower in Contiguous Counties.--Section 379(b) of 
     such Act (7 U.S.C. 1379(b)) is amended by striking ``Burley 
     tobacco poundage quota'' and inserting ``tobacco quota or 
     allotment''.

     SEC. 2410. CALCULATION OF NATIONAL MARKETING QUOTA.

       (a) Flue-cured Tobacco.--Section 317(a)(1)(B)(ii) of the 
     Agricultural Adjustment Act of 1938 (7 U.S.C. 
     1314c(a)(1)(B)(ii)) is amended by inserting before the 
     semicolon the following: ``, but excluding any exports of 
     unmanufactured tobacco counted under clause (i)''.
       (b) Burley tobacco.--Section 319(c)(3)(A)(ii) of such Act 
     (7 U.S.C. 1314e(l)) is amended by inserting before the 
     semicolon the following: ``, but excluding any exports of 
     unmanufactured tobacco counted under clause (i)''.
       (c) Application of Amendments.--The amendments made by this 
     section shall apply with respect to the 1996 and subsequent 
     crops of Flue-cured and Burley tobacco.

     SEC. 2411. CLARIFICATION OF AUTHORITY TO ACCESS CIVIL MONEY 
                   PENALTIES.

       Section 314 of the Agricultural Adjustment Act of 1938 (7 
     U.S.C. 1314) is amended--
       (1) by redesignating subsection (c) as subsection (d); and
       (2) by inserting after subsection (b) the following new 
     subsection:
       ``(c) The failure by a person to comply with regulations 
     issued by the Secretary governing the marketing, disposition, 
     or handling of tobacco under this part shall subject the 
     person to a penalty at the rate provided in subsection 
     (a).''.

     SEC. 2412. LEASE AND TRANSFER OF FARM MARKETING QUOTAS FOR 
                   BURLEY TOBACCO.

       Section 319(g) of the Agricultural Adjustment Act of 1938 
     (7 U.S.C. 1314e(g)) is amended--
       (1) in paragraph (1), by striking ``July 1'' each place it 
     appears and inserting ``September 1''; and
       (2) in paragraph (3)--
       (A) by striking ``within the three immediately preceding 
     crop years'' in the first sentence and inserting ``during the 
     current crop year or either of the two immediately preceding 
     crop years''; and
       (B) by striking ``July 1'' in the second sentence and 
     inserting ``September 1''.

     SEC. 2413. LIMITATION ON TRANSFER OF ACREAGE ALLOTMENTS OF 
                   OTHER TOBACCO.

       Section 318(g) of the Agricultural Adjustment Act of 1938 
     (7 U.S.C. 1314d(g)) is amended by striking ``ten acres'' and 
     inserting ``20 acres''.

     SEC. 2414. GOOD FAITH RELIANCE ON ACTIONS OR ADVICE OF 
                   DEPARTMENT REPRESENTATIVES.

       The Agricultural Adjustment Act of 1938 is amended by 
     inserting after section 314A (7 U.S.C. 1314-1) the following 
     new section:

     ``SEC. 315. GOOD FAITH RELIANCE ON ACTIONS OR ADVICE OF 
                   DEPARTMENT REPRESENTATIVES.

       ``Notwithstanding any other provision of law, the 
     performance rendered in good faith by a person in good faith 
     in reliance upon action or advice of an authorized 
     representative of the Secretary may be accepted as meeting 
     the requirements of this part.''.

     SEC. 2415. UNIFORM FORFEITURE DATES FOR FLUE-CURED AND BURLEY 
                   TOBACCO.

       (a) Sale or Forfeiture of Flue-cured Tobacco Allotment or 
     Quota.--The first subsection (h) of section 316 of the 
     Agricultural Adjustment Act of 1938 (7 U.S.C. 1314b) is 
     amended--
       (1) in paragraph (1), by striking ``before the expiration 
     of the eighteen month period beginning on July 1 of the year 
     in which such crop is planted'' and inserting ``before 
     February 15 of the year after the end of the marketing year 
     for the planted crop''; and
       (2) in paragraph (2), by striking ``July 1'' and inserting 
     ``February 15''.
       (b) Mandatory Sale of Flue-cured Tobacco Allotment or 
     Quota.--Section 316A of such Act (7 U.S.C. 1314b-1) is 
     amended--
       (1) in subsection (a), by striking ``December 1 of the 
     year'' and inserting ``February 15 of the year''; and
       (2) in subsection (b), by striking ``July 1'' and inserting 
     ``February 15''.
       (c) Mandatory Sale of Burley Tobacco Allotment or Quota.--
     Section 316B of such Act (7 U.S.C. 1314b-2) is amended--
       (1) in subsection (a), by striking ``December 1 of the 
     year'' and inserting ``February 15 of the year''; and
       (2) in subsection (c)(1), by striking ``before the 
     expiration of the eighteen month period beginning on July 1 
     of the year in which such crop is planted'' and inserting 
     ``before February 15 of the year after the end of the 
     marketing year for the planted crop''.

     SEC. 2416. SALE OF BURLEY AND FLUE-CURED TOBACCO MARKETING 
                   QUOTAS FOR A FARM BY RECENT PURCHASERS.

       The Agricultural Adjustment Act of 1938 is amended by 
     inserting after section 316B (7 U.S.C. 1314b-2) the following 
     new section:

     ``SEC. 316C. AUTHORITY FOR RECENT PURCHASER OF A FARM TO SELL 
                   BURLEY TOBACCO OR FLUE-CURED TOBACCO MARKETING 
                   QUOTAS FOR THE FARM.

       ``A new owner of a farm that has purchase history of Burley 
     tobacco or Flue-cured tobacco may sell the purchased tobacco 
     quota notwithstanding any limitations on such a sale 
     contained in this part if the sale is completed not later 
     than one year after the purchase date of the farm.''.
                    Subtitle E--Planting Flexibility

     SEC. 2501. DEFINITIONS.

       Section 502 of the Agricultural Act of 1949 (7 U.S.C. 1462) 
     is amended by adding at the end the following:
       ``(4) Acreage conservation reserve, reduced acreage.--The 
     terms `acreage conservation reserve' and `reduced acreage' 
     mean the number of acres on a farm to be devoted to 
     conservation uses on the farm, which must be protected from 
     weeds and erosion. Such number shall be determined by 
     multiplying the specific crop acreage base for a crop on the 
     farm by the percentage acreage reduction required by the 
     Secretary.
       ``(5) Permitted acreage.--The term `permitted acreage' 
     means the crop acreage base for a program crop for the farm 
     less the acreage conservation reserve. If an acreage 
     reduction program is not in effect for a program crop, for 
     purposes of administering this title, the permitted acreage 
     of such a crop on a farm shall be equal to the crop acreage 
     base for the crop for the farm.
       ``(6) Payment acreage.--The term `payment acreage' means 
     the lesser of--
       ``(A) the number of acres planted and considered planted to 
     an eligible crop, as determined in sections 503(c) and 
     504(b)(1), for harvest within the permitted acreage; or
       ``(B) 79 percent of the crop acreage base for the crop for 
     the farm less the acreage conservation reserve.
       ``(7) Resource-conserving crop.--The term `resource-
     conserving crop' means legumes, legume-grass mixtures, 
     legume-small grain mixtures, legume-grass-small grain 
     mixtures, and experimental and industrial crops, crops 
     planted for special conservation practices, biomass 
     production, intensive rotational grazing, and non-legume 
     crops, as determined by the Secretary, to satisfy program 
     objectives.
       ``(8) Resource-conserving crop rotation.--The term 
     `resource-conserving crop rotation' means a crop rotation 
     that includes at least one resource-conserving crop and that 
     reduces erosion, maintains or improves soil fertility and 
     tilth, interrupts pest cycles, or conserves water.
       ``(9) Farming operations and practices.--The term `farming 
     operations and practices' means practices which include the 
     integration of crops and crop-plant variety selection, 
     rotation practices, tillage systems, soil conserving and soil 
     building practices, nutrient management strategies, 
     biological control and integrated pest management strategies, 
     livestock production and management systems, animal waste 
     management systems, water and energy conservation measures, 
     and health and safety considerations.
       ``(10) Integrated farm management plan.--The term 
     `integrated farm management plan' means a comprehensive, 
     multiyear, site-specific plan that meets the requirements of 
     section 1451 of the Food, Agriculture, Conservation, and 
     Trade Act of 1990 (7 U.S.C. 5822).
       ``(11) Grass.--The term `grass' means any perennial grasses 
     commonly used for haying or grazing.
       ``(12) Legume.--The term `legume' means any forage legumes 
     (such as alfalfa or clover) or any legume grown for use as a 
     forage or green manure, but not including any bean crop from 
     which the seeds are harvested.
       ``(13) Small grain.--The term `small grain'' does not 
     include malting barley or wheat, except for wheat 
     interplanted with other small grain crops for nonhuman 
     consumption.''.

[[Page H10535]]


     SEC. 2502. CROP AND TOTAL ACREAGE BASES.

       Section 503 of the Agricultural Act of 1949 (7 U.S.C. 1463) 
     is amended--
       (1) in the section heading, by inserting ``and total'' 
     after ``crop'';
       (2) at the end of subsection (a), by adding the following 
     new paragraph:
       ``(4) Total acreage base.--The total acreage base for a 
     farm shall equal the sum of the crop acreage bases 
     established for program crops on the farm that are enrolled 
     in the acreage reduction programs established by the 
     Secretary.'';
       (3) in the heading for subsection (b) by adding ``of Crop 
     Acreage Bases'' after ``Calculation'';
       (4) in subsection (b)(2)--
       (A) by striking ``(A) In general'';
       (B) by striking ``except as provided in subparagraph 
     (B),''; and
       (C) by striking subparagraph (B); and
       (5) in subsection (c)(1), by striking ``reduced acreage'' 
     and inserting ``acreage conservation reserve''.

     SEC. 2503. PLANTING FLEXIBILITY.

       (a) Specified Commodities.--Subsection (b) of section 504 
     of the Agricultural Act of 1949 (7 U.S.C. 1464) is amended--
       (1) in paragraph (1)--
       (A) by striking ``and'' at the end of subparagraph (D);
       (B) by redesignating subparagraph (E) as subparagraph (F); 
     and
       (C) by inserting the following new subparagraph after 
     subparagraph (D):
       ``(E) any cover crop (including maintenance of native 
     cover) and summer fallow which, as determined by the 
     Secretary, will protect the land from weeds and erosion; 
     and'';
       (2) by striking paragraph (2) and inserting the following 
     new paragraph:
       ``(2) Limitations on Crops.--
       ``(A) In general.--For purposes of this section, the 
     Secretary may restrict the planting on a crop acreage base of 
     any crop specified in paragraph (1).
       ``(B) Effect of acreage reduction program.--If an acreage 
     reduction program is in effect for any specific program crop, 
     the Secretary may limit the plantings of the specific program 
     crop for which there is an acreage reduction program in 
     effect to no more than the sum of--
       ``(i) the permitted acreage for the specific program crop 
     for which there is an acreage reduction program in effect; 
     plus
       ``(ii) 21 percent of other crop acreage bases which are 
     included in the total acreage base for a farm.
       ``(C) Minimum planting.--The Secretary may require that, as 
     a condition for eligibility for loans, deficiency payments 
     and any other program benefits authorized by this Act, a 
     minimum percentage not to exceed 50 percent of a specific 
     permitted acreage, be planted to the specific program 
     crop.''; and
       (3) in paragraph (3) by striking ``make a determination in 
     each crop year of'' and inserting ``determine''.
       (b) Limitation on Plantings.--Subsection (c) of such 
     section is amended by striking paragraphs (1) and (2) and 
     inserting the following:
       ``The quantity of the total acreage base that may be 
     planted to program crops enrolled in an acreage reduction 
     program shall not exceed 100 percent of the total acreage 
     base, less the acreage conservation reserve for the farm.''.
       (c) Plantings in Excess of Permitted Acreage.--Subsection 
     (d) of such section is amended to read as follows:
       ``(d) Plantings in Excess of Permitted Acreage.--
     Notwithstanding any other provision of this Act, except as 
     provided in section 504(b)(2)(B), producers of a program crop 
     who are participating in the acreage reduction program for 
     that crop shall be allowed to plant that program crop in a 
     quantity that exceeds the permitted acreage for that crop 
     without losing their eligibility for loans or payments with 
     respect to that crop if--
       ``(1) the acreage planted to that program crop on the farm 
     in excess of the permitted acreage for that crop does not 
     exceed the permitted acreage of other program crops on the 
     farm; and
       ``(2) the producer agrees to a reduction in permitted 
     acreage for the other program crops produced on the farm by a 
     quantity equal to the overplanting.''.
       (d) Loan Eligibility.--Subsection (e) of such section is 
     amended to read as follows:
       ``(e) Loan Eligibility.--Producers of a specific program 
     crop (referred to in this subsection as the `original program 
     crop') who plant for harvest on the crop acreage base 
     established for such original program crop another program 
     crop in accordance with this section and who are participants 
     in the program established for such other program crop shall 
     be eligible to receive loans or loan deficiency payments for 
     such other program crop on the same terms and conditions as 
     are provided to participants in a acreage reduction program 
     established for such other program crop if the producers--
       ``(1) plant such other program crop in an amount that does 
     not exceed 100 percent of the permitted acreage established 
     for the original program crop; and
       ``(2) agree to a reduction in the permitted acreage for the 
     original program crop for the particular crop year.''.

     SEC. 2504. FARM PROGRAM PAYMENT YIELDS.

       Section 505 of the Agricultural Act of 1949 (7 U.S.C. 1465) 
     is amended to read as follows:

     ``SEC. 505. FARM PROGRAM PAYMENT YIELDS.

       ``(a) Establishment.--The Secretary shall provide for the 
     establishment of a farm program payment yield for each farm 
     for each program crop for each crop year in accordance with 
     subsection (b) or (c).
       ``(b) Farm Program Payment Yields Based on 1995 Crop 
     Year.--
       ``(1) In general.--If the Secretary determines that farm 
     program payment yields shall be established in accordance 
     with this subsection, except as provided in paragraph (2), 
     the farm program payment yield for each of the 1996 through 
     2002 crop years shall be the farm program payment yield for 
     the 1995 crop year for the farm.
       ``(2) Additional yield payments.--In the case of each of 
     the 1991 through 2002 crop years for a commodity, if the farm 
     program payment yield for a farm is reduced more than 10 
     percent below the farm program payment yield for the 1985 
     crop year, the Secretary shall make available to producers 
     established price payments for the commodity in such amount 
     as the Secretary determines is necessary to provide the same 
     total return to producers as if the farm program payment 
     yield had not been reduced more than 10 percent below the 
     farm program payment yield for the 1985 crop year. The 
     payments shall be made available not later than the time 
     final deficiency payments are made.
       ``(3) No yield available.--If no farm program payment yield 
     was established for the farm for 1995 crop, the farm program 
     payment yield shall be established on the basis of the 
     average farm program payment yield for the crop years for 
     similar farms in the area.
       ``(4) National, state, or county yields.--If the Secretary 
     determines the action is necessary, the Secretary may 
     establish national, State, or county program payment yields 
     on the basis of--
       ``(A) historical yields, as adjusted by the Secretary to 
     correct for abnormal factors affecting the yields in the 
     historical period; or
       ``(B) the Secretary's estimate of actual yields for the 
     crop year involved if historical yield data is not available.
       ``(5) Balancing yields.--If national, State, or county 
     program payment yields are established, the farm program 
     payment yields shall balance to the national, State, or 
     county program payment yields.
       ``(c) Determination of Yields.--
       ``(1) Actual yields.--With respect to the 1996 and 
     subsequent crop years, the Secretary may--
       ``(A) establish the farm program payment yield as provided 
     in subsection (a); or
       ``(B) establish a farm program payment yield for any 
     program crop for any farm on the basis of the average of the 
     yield per harvested acre for the crop for the farm for each 
     of the 5 crop years immediately preceding the crop year, 
     excluding the crop year with the highest yield per harvested 
     acre, the crop year with the lowest yield per harvested acre, 
     and any crop year in which such crop was not planted on the 
     farm.
       ``(2) Prior yields.--For purposes of the preceding 
     sentence, the farm program payment yield for the 1996 crop 
     year and the actual yield per harvested acre with respect to 
     the 1997 and subsequent crop years shall be used in 
     determining farm program payment yields.
       (3) Reduction limitation.--Notwithstanding any other 
     provision of this subsection, for purposes of establishing a 
     farm program payment yield for any program crop for any farm 
     for the 1991 and subsequent crop years, the farm program 
     payment yield for the 1986 crop year may not be reduced more 
     than 10 percent below the farm program payment yield for the 
     farm for the 1985 crop year.
       (4) Adjustment of yields.--The county committee, in 
     accordance with regulations prescribed by the Secretary, may 
     adjust any farm program payment yield for any program crop 
     for any farm if the farm program payment yield for the crop 
     on the farm does not accurately reflect the productive 
     potential of the farm.
       (d) Assignment of Yields.--In the case of any farm for 
     which the actual yield per harvested acre for any program 
     crop referred to in subsection (c) for any crop year is not 
     available, the county committee may assign the farm a yield 
     for the crop for the crop year on the basis of actual yields 
     for the crop for the crop year on similar farms in the area.
       ``(e) Actual Yield Data.--
       ``(1) Provision.--The Secretary shall, under such terms and 
     conditions as the Secretary may prescribe, allow producers to 
     provide to county committees data with respect to the actual 
     yield for each farm for each program crop.
       ``(2) Maintenance.--The Secretary shall maintain the data 
     for at least 5 crop years after receipt in a manner that will 
     permit the data to be used, if necessary, in the 
     administration of the commodity programs.''.

     SEC. 2505. APPLICATION OF PROVISIONS.

       Section 509 of the Agricultural Act of 1949 (7 U.S.C. 1469) 
     is amended to read as follows:

     ``SEC. 509. APPLICATION OF TITLE.

       ``Except as provided in section 406, this title shall apply 
     only with respect to the 1996 through 2002 crops.''.
                  Subtitle F--Miscellaneous Provisions

     SEC. 2601. LIMITATIONS ON AMOUNT OF DEFICIENCY PAYMENTS AND 
                   LAND DIVERSION PAYMENTS.

       Section 1001(1)(A) of the Food Security Act of 1985 (7 
     U.S.C. 1308(1)(A)) is amended by striking ``$50,000'' and 
     inserting ``$47,000''.

     SEC. 2602. SENSE OF CONGRESS REGARDING CERTAIN CANADIAN TRADE 
                   PRACTICES.

       (a) Findings.--The Congress finds the following:

[[Page H10536]]

       (1) On October 15, 1993, in response to a request from the 
     National Potato Council, the Foreign Agricultural Service of 
     the Department of Agriculture listed several Canadian 
     nontariff barriers that violate the national treatment 
     principle of the General Agreement on Tariffs and Trade, 
     including the prohibition on bulk shipments, container size 
     limitations on processed products, and prohibitions on 
     consignment sales.
       (2) Current Government-to-Government and direct grower-to-
     grower discussions with Canada have failed to result in 
     changes in Canadian trade practices.
       (b) Sense of Congress.--It is the sense of the Congress 
     that the Secretary of Agriculture and the United States Trade 
     Representative should intensify efforts to resolve the 
     Canadian potato trade concerns and begin to consider formal 
     action under the dispute resolution procedures of the North 
     American Free Trade Agreement or the General Agreement on 
     Tariffs and Trade.
                          TITLE III--COMMERCE

     SEC. 3101. 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 non-
     Government uses that protect the safety of life, health, and 
     property and that are not made commercially available to the 
     public; or
       ``(C) for initial licenses or construction permits for new 
     terrestrial digital television services assigned by the 
     Commission to existing terrestrial broadcast licensees to 
     replace their current television licenses.''; and
       (B) by striking ``1998'' in paragraph (11) and inserting 
     ``2002''.
       (2) Conforming amendment.--Subsection (i) of section 309 of 
     such Act 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; and
       (D) have not, as of the date of enactment of this Act--
       (i) been designated by Commission regulation for assignment 
     pursuant to such section; or
       (ii) been identified by the Secretary of Commerce pursuant 
     to section 113 of the National Telecommunications and 
     Information Administration Organization Act.

     The Commission shall conduct the competitive bidding for not 
     less than one-half of such aggregate spectrum by September 
     30, 2000.
       (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;
       (C) take into account the needs of public safety radio 
     services; and
       (D) 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).
       (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 
     3001(b)(3) of the Seven-Year Balanced Budget Reconciliation 
     Act of 1995, the Secretary shall prepare and submit to the 
     President 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.'';
       (2) in section 114(a)(1), by striking ``(a) or (d)(1)'' and 
     inserting ``(a), (d)(1), or (f)''.
       (d) Completion of C-Block PCS Auction.--The Federal 
     Communications Commission shall commence the Broadband 
     Personal Communications Services C-Block auction described in 
     the Commission's Sixth Report and Order in DP Docket 93-253 
     (FCC 93-510, released July 18, 1995) not later than December 
     4, 1995. The Commission's competitive bidding rules governing 
     such auction, as set forth in such Sixth Report and Order, 
     are hereby ratified and adopted as a matter of Federal law.
       (e) Modification of Auction Policy To Preserve Auction 
     Value of Spectrum.--The voluntary negotiation period for 
     relocating fixed microwave licensees to frequency bands other 
     than those allocated for licensed emerging technology 
     services (including licensed personal communications 
     services), established by the Commission's Third Report and 
     Order in ET Docket No. 92-9, shall expire one year after the 
     date of acceptance by the Commission of applications for such 
     licensed emerging technology services. The mandatory 
     negotiation period for relocating fixed microwave licensees 
     to frequency bands other than those allocated for licensed 
     emerging technology services (including licensed personal 
     communications services), established in such Third Report 
     and Order, shall expire two years after the date of 
     acceptance by the Commission of applications for such 
     licensed emerging technology services.
       (f) 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); and
       (D) by inserting after paragraph (2) the following new 
     paragraph:
       ``(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 single 
     frequency band that spans not less than an additional 20 
     megahertz, that is located below 3 gigahertz, and that meets 
     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 1 
     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 allocation and 
     assignment under the 1934 Act of such frequencies. Such plan 
     shall propose the immediate allocation and assignment of all 
     such frequencies in accordance with section 309(j).''.

     SEC. 3102. FEDERAL COMMUNICATIONS COMMISSION FEE COLLECTIONS

       (a) Application Fees.--
       (1) Adjustment of application fee schedule.--Section 8(b) 
     of the Communications Act of 1934 (47 U.S.C. 158(b)) is 
     amended to read as follows:
       ``(b)(1) For fiscal year 1996 and each fiscal year 
     thereafter, the Commission shall, by regulation, modify the 
     application fees by proportionate increases or decreases so 
     as to result in estimated total collections for the fiscal 
     year equal to--
       ``(A) $40,000,000; plus
       ``(B) an additional amount, specified in an appropriation 
     Act for the Commission for that fiscal year to be collected 
     and credited to such appropriation, not to exceed the amount 
     by which the necessary expenses for the costs described in 
     paragraph (5) exceeds $40,000,000.
       ``(2) In making adjustments pursuant to this paragraph the 
     Commission may round such fees to the nearest $5.00 in the 
     case of fees under $100, or to the nearest $20 in the case of 
     fees of $100 or more. The Commission 

[[Page H10537]]

     shall transmit to the Congress notification of any adjustment 
     made pursuant to this paragraph immediately upon the adoption 
     of such adjustment.
       ``(3) The Commission is authorized to continue to collect 
     fees at the prior year's rate until the effective date of fee 
     adjustments or amendments made pursuant to paragraphs (1) and 
     (4).
       ``(4) The Commission shall, by regulation, add, delete, or 
     reclassify services, categories, applications, or other 
     filings subject to application fees to reflect additions, 
     deletions, or changes in the nature of its services or 
     authorization of service processes as a consequence of 
     Commission rulemaking proceedings or changes in law.
       ``(5) Any modified fees established under paragraph (4) 
     shall be derived by determining the full-time equivalent 
     number of employees performing application activities, 
     adjusted to take into account other expenses that are 
     reasonably related to the cost of processing the application 
     or filing, including all executive and legal costs incurred 
     by the Commission in the discharge of these functions, and 
     other factors that the Commission determines are necessary in 
     the public interest. The Commission shall--
       ``(A) transmit to the Congress notification of any proposed 
     modification made pursuant to this paragraph immediately upon 
     adoption of such proposal; and
       ``(B) transmit to the Congress notification of any 
     modification made pursuant to this paragraph immediately upon 
     adoption of such modification.
       ``(6) Increases or decreases in application fees made 
     pursuant to this subsection shall not be subject to judicial 
     review.''.
       (2) Treatment of additional collections.--Section 8(e) of 
     such Act is amended to read as follows:
       ``(e) Of the moneys received from fees authorized under 
     this section--
       ``(1) $40,000,000 shall be deposited in the general fund of 
     the Treasury to reimburse the United States for amounts 
     appropriated for use by the Commission in carrying out its 
     functions under this Act; and
       ``(2) the remainder shall be deposited as an offsetting 
     collection in, and credited to, the account providing 
     appropriations to carry out the functions of the 
     Commission.''.
       (3) Schedule of application fees for PCS.--The schedule of 
     application fees in section 8(g) of such Act is amended by 
     adding, at the end of the portion under the heading ``common 
     carrier services'', the following new item:

  ``23. Personal communications services

  ``a. Initial or new application..................................230 
  ``b. Amendment to pending application.............................35 
  ``c. Application for assignment or transfer of control...........230 
  ``d. Application for renewal of license...........................35 
  ``e. Request for special temporary authority.....................200 
  ``f. Notification of completion of construction...................35 
  ``g. Request to combine service areas...........................50''.
       (4) Vanity call signs.--
       (A) Lifetime license fees.--
       (i) Amendment.--The schedule of application fees in section 
     8(g) of such Act is further amended by adding, at the end of 
     the portion under the heading ``private radio services'', the 
     following new item:

  ``11. Amateur vanity call signs.............................150.00''.

       (ii) Treatment of receipts.--Moneys received from fees 
     established under the amendment made by this subsection shall 
     be deposited as an offsetting collection in, and credited to, 
     the account providing appropriations to carry out the 
     functions of the Commission.
       (B) Termination of annual regulatory fees.--The schedule of 
     regulatory fees in section 9(g) of such Act (47 U.S.C. 
     159(g)) is amended by striking the following item from the 
     fees applicable to the Private Radio Bureau:
``Amateur vanity call-signs........................................7''.

       (b) Regulatory Fees.
       (1) Executive and legal costs.--Section 9(a)(1) of the 
     Communications Act of 1934 (47 U.S.C. 159(a)(1)) is amended 
     by inserting before the period at the end the following: ``, 
     and all executive and legal costs incurred by the Commission 
     in the discharge of these functions''.
       (2) Establishment and adjustment.--Section 9(b) of such Act 
     is amended--
       (A) in paragraph (4)(B), by striking ``90 days'' and 
     inserting ``45 days''; and
       (B) by adding at the end the following new paragraph:
       ``(5) Effective date of adjustments.--The Commission is 
     authorized to continue to collect fees at the prior year's 
     rate until the effective date of fee adjustments or 
     amendments made pursuant to paragraph (2) or (3).''.
       (3) Regulatory fees for satellite TV operations.--The 
     schedule of regulatory fees in section 9(g) of such Act is 
     amended, in the fees applicable to the Mass Media Bureau, by 
     inserting after each of the items pertaining to construction 
     permits in the fees applicable to VHF commercial and UHF 
     commercial TV the following new item:
  ``Terrestrial television satellite operations..................500''.

       (4) Governmental entities use for common carrier 
     purposes.--Section 9(h) of such Act is amended by adding at 
     the end the following new sentence: ``The exceptions provided 
     by this subsection for governmental entities shall not be 
     applicable to any services that are provided on a commercial 
     basis in competition with another carrier.''.
       (5) Information required in connection with adjustment of 
     regulatory fees.--Title I of such Act is amended--
       (A) in section 9, by striking subsection (i); and
       (B) by inserting after section 9 the following new section:

     ``SEC. 10. ACCOUNTING SYSTEM AND ADJUSTMENT INFORMATION.

       ``(a) Accounting System Required.--The Commission shall 
     develop accounting systems for the purposes of making the 
     adjustments authorized by sections 8 and 9. The Commission 
     shall annually prepare and submit to the Congress an analysis 
     of such systems and shall annually afford interested persons 
     the opportunity to submit comments concerning the allocation 
     of the costs of performing the functions described in section 
     8(a)(5) and 9(a)(1) in making such adjustments in the 
     schedules required by sections 8 and 9.
       ``(b) Information Required in Connection with Adjustment of 
     Application and Regulatory Fees.--
       ``(1) Schedule of requested amounts.--No later than May 1 
     of each calendar year, the Commission shall prepare and 
     transmit to the Committees of Congress responsible for the 
     Commission's authorization and appropriations a detailed 
     schedule of the amounts requested by the President's budget 
     to be appropriated for the ensuing fiscal year for the 
     activities described in sections 8(a)(5) and 9(a)(1), 
     allocated by bureaus, divisions, and offices of the 
     Commission.
       ``(2) Explanatory statement.--If the Commission anticipates 
     increases in the application fees or regulatory fees 
     applicable to any applicant, licensee, or unit subject to 
     payment of fees, the Commission shall submit to the Congress 
     by May 1 of such calendar year a statement explaining the 
     relationship between any such increases and either (A) 
     increases in the amounts requested to be appropriated for 
     Commission activities in connection with such applicants, 
     licensees, or units subject to payment of fees, or (B) 
     additional activities to be performed with respect to such 
     applicants, licensees, or units.
       ``(3) Definition.--For purposes of this subsection, the 
     term `amount requested by the President's budget' shall 
     include any adjustments to such requests that are made by May 
     1 of such calendar year. If any such adjustment is made after 
     May 1, the Commission shall provide such Committees with 
     updated schedules and statements containing the information 
     required by this subsection within 10 days after the date of 
     any such adjustment.''.

     SEC. 3103. AUCTION OF RECAPTURED ANALOG LICENSES.

       (a) Limitations on Terms of Analog Television Licenses 
     (``Reversion Date'').--The Commission shall not renew any 
     analog television license for a period that extends beyond 
     the earlier of December 31, 2005, or one year after the date 
     the Commission finds, based on annual surveys conducted 
     pursuant to subsection (b), that at least 95 percent of 
     households in the United States have the capability to 
     receive and display video signals, other than video signals 
     transmitted pursuant to an analog television license. After 
     such date, the Commission shall not issue any television 
     licenses other than advanced television licenses.
       (b) Annual Survey.--The Secretary of Commerce shall, each 
     calendar year from 1998 to 2005, conduct a survey to estimate 
     the percentage of households in the United States that have 
     the capability to receive and display video signals other 
     than signals transmitted pursuant to an analog television 
     license.
       (c) Spectrum Reversion.--The Commission shall ensure that, 
     as analog television licenses expire pursuant to subsection 
     (a), spectrum previously used for the broadcast of analog 
     television signals is reclaimed and reallocated in such 
     manner as to maximize the deployment of new services. 
     Licensees for new services shall be selected by competitive 
     bidding. The Commission shall complete the competitive 
     bidding procedure by May 1, 2002.
       (d) Minimum Service Obligation.--
       (1) Provision of capability to receive advanced services.--
     The Commission shall, by regulation, establish procedures to 
     ensure that, within the year prior to the reversion date 
     defined in subsection (a), the advanced television licensees 
     shall provide each household with the capability to receive 
     and display video signals for advanced television services if 
     such household requests such capability.
       (2) Provision of nonsubscription services.--Each advanced 
     television service licensee shall provide, for at least a 
     minimum of 5 years from the date identified in subsection 
     (a), at least one nonsubscription video service that meets or 
     exceeds minimum technical standards established by the 
     Commission. In setting such minimum technical standards, the 
     Commission shall, to the extent technically feasible, ensure 
     that picture and audio quality are at least as good as that 
     provided to recipients within the Grade B contour of an 
     analog television license. The Commission shall revoke the 
     license of any advanced television licensee who fails to meet 
     this condition of the license.
       (e) Definitions.--As used in this section:

[[Page H10538]]

       (1) The term ``Commission'' means the Federal 
     Communications Commission.
       (2) The term ``advanced television services'' means 
     television services provided using digital or other advanced 
     technology to enhance audio quality and video resolution, as 
     further defined in the Opinion, Report, and Order of the 
     Commission entitled ``Advanced Television Systems and Their 
     Impact Upon the Existing Television Service,'' MM Docket No. 
     87-268.
       (3) The term ``analog television licenses'' means licenses 
     issued pursuant to 47 C.F.R. 73.682 et seq.

     SEC. 3104. PATENT AND TRADEMARK FEES.

       Section 10101 of the Omnibus Budget Reconciliation Act of 
     1990 (35 U.S.C. 41 note) is amended--
       (1) in subsection (a) by striking ``1998'' and inserting 
     ``2002'';
       (2) in subsection (b)(2) by striking ``1998'' and inserting 
     ``2002''; and
       (3) in subsection (c)--
       (A) by striking ``through 1998'' and inserting ``through 
     2002''; and
       (B) by adding at the end the following:
       ``(9) $119,000,000 in fiscal year 1999.
       ``(10) $119,000,000 in fiscal year 2000.
       ``(11) $119,000,000 in fiscal year 2001.
       ``(12) $119,000,000 in fiscal year 2002.''.

     SEC. 3105. REPEAL OF AUTHORIZATION OF TRANSITIONAL 
                   APPROPRIATIONS FOR THE UNITED STATES POSTAL 
                   SERVICE.

       (a) In General.--(1) Section 2004 of title 39, United 
     States Code, is repealed.
       (2)(A) The table of sections for chapter 20 of such title 
     is amended by repealing the item relating to section 2004.
       (B) Section 2003(e)(2) of such title is amended by striking 
     ``sections 2401 and 2004'' each place it appears and 
     inserting ``section 2401''.
       (b) Clarification That Liabilities Formerly Paid Pursuant 
     to Section 2004 Remain Liabilities Payable by the Postal 
     Service.--Section 2003 of title 39, United States Code, is 
     amended by adding at the end the following:
       ``(h) Liabilities of the former Post Office Department to 
     the Employees' Compensation Fund (appropriations for which 
     were authorized by former section 2004, as in effect before 
     the effective date of this subsection) shall be liabilities 
     of the Postal Service payable out of the Fund.''.
                        TITLE IV--TRANSPORTATION

     SEC. 4101. EXTENSION OF RAILROAD SAFETY FEES.

       Subsection (e) of section 20115 of title 49, United States 
     Code, is repealed.

     SEC. 4102. PERMANENT EXTENSION OF VESSEL TONNAGE DUTIES.

       (a) Extension of Duties.--Section 36 of the Act of August 
     5, 1909 (36 Stat. 111; 46 App. U.S.C. 121), is amended--
       (1) by striking ``for fiscal years 1991, 1992, 1993, 1994, 
     1995, 1996, 1997, 1998, and 2 cents per ton not to exceed in 
     the aggregate 10 cents per tone in any one year, for each 
     fiscal year thereafter''; and
       (2) by striking ``for fiscal years 1991, 1992, 1993, 1994, 
     1995, 1996, 1997, 1998, and 6 cents per ton, not to exceed 30 
     cents per ton for each fiscal year thereafter''.
       (b) Conforming Amendment.--The Act entitled ``An Act 
     concerning tonnage duties on vessels entering otherwise than 
     by sea'', approved March 8, 1910 (36 Stat. 234; 46 App. 
     U.S.C. 132), is amended by striking ``for fiscal years 1991, 
     1992, 1993, 1994, 1995, 1996, 1997, and 1998, and 2 cents per 
     ton, not to exceed in the aggregate 10 cents per ton in any 1 
     year, for each fiscal year thereafter,''.

     SEC. 4103. SALE OF GOVERNORS ISLAND, NEW YORK.

       (a) In General.--Notwithstanding any other provision of 
     law, the Administrator of General Services shall dispose of 
     by sale at fair market value all rights, title, and interests 
     of the United States in and to the land of, and improvements 
     to, Governors Island, New York.
       (b) Right of First Refusal.--Before a sale is made under 
     subsection (a) to any other parties, the State of New York 
     and the city of New York shall be given the right of first 
     refusal to purchase all or part of Governors Island. Such 
     right may be exercised by either the State of New York or the 
     city of New York or by both parties acting jointly.
       (c) Proceeds.--Proceeds from the disposal of Governors 
     Island under subsection (a) shall be deposited in the general 
     fund of the Treasury and credited as miscellaneous receipts.

     SEC. 4104. SALE OF AIR RIGHTS.

       (a) In General.--Notwithstanding any other provision of 
     law, the Administrator of General Services shall sell, at 
     fair market value and in a manner to be determined by the 
     Administrator, the air rights adjacent to Washington Union 
     Station described in subsection (b), including air rights 
     conveyed to the Administrator under subsection (d). The 
     Administrator shall complete the sale by such date as is 
     necessary to ensure that the proceeds from the sale will be 
     deposited in accordance with subsection (c).
       (b) Description.--The air rights referred to in subsection 
     (a) total approximately 16.5 acres and are depicted on the 
     plat map of the District of Columbia as follows:
       (1) Part of lot 172, square 720.
       (2) Part of lots 172 and 823, square 720.
       (3) Part of lot 811, square 717.
       (c) Proceeds.--Before September 30, 1996, proceeds from the 
     sale of air rights under subsection (a) shall be deposited in 
     the general fund of the Treasury and credited as 
     miscellaneous receipts.
       (d) Conveyance of Amtrak Air Rights.--
       (1) General rule.--As a condition of future Federal 
     financial assistance, Amtrak shall convey to the 
     Administrator of General Services on or before December 31, 
     1995, at no charge, all of the air rights of Amtrak described 
     in subsection (b).
       (2) Failure to comply.--If Amtrak does not meet the 
     condition established by paragraph (1), Amtrak shall be 
     prohibited from obligating Federal funds after March 1, 1996.
                      TITLE V--HOUSING PROVISIONS

     SEC. 5101. REDUCTION OF SECTION 8 ANNUAL ADJUSTMENT FACTORS 
                   FOR UNITS WITHOUT TENANT TURNOVER.

       Paragraph (2)(A) of section 8(c) of the United States 
     Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)) is amended by 
     striking the last sentence.

     SEC. 5102. MAXIMUM MORTGAGE AMOUNT FLOOR FOR SINGLE FAMILY 
                   MORTGAGE INSURANCE.

       Subparagraph (A) of the first sentence of section 203(b)(2) 
     of the National Housing Act (12 U.S.C. 1709(b)(2)(A)) is 
     amended by striking ``the greater of'' and all that follows 
     through ``applicable size'' and inserting the following: ``50 
     percent of the dollar amount limitation determined under 
     section 305(a)(2) of the Federal Home Loan Mortgage 
     Corporation Act (as adjusted annually under such section) for 
     a residence of the applicable size''.

     SEC. 5103. FORECLOSURE AVOIDANCE AND BORROWER ASSISTANCE.

       (a) Foreclosure Avoidance.--The last sentence of section 
     204(a) of the National Housing Act (12 U.S.C. 1710(a)) is 
     amended by inserting before the period the following: ``: And 
     provided further, That the Secretary may pay insurance 
     benefits to the mortgagee to recompense the mortgagee for its 
     actions to provide an alternative to foreclosure of a 
     mortgage that is in default, which actions may include such 
     actions as special forbearance, loan modification, and deeds 
     in lieu of foreclosure, all upon such terms and conditions as 
     the mortgagee shall determine in the mortgagee's sole 
     discretion within guidelines provided by the Secretary, but 
     which may not include assignment of a mortgage to the 
     Secretary: And provided further, That for purposes of the 
     preceding proviso, no action authorized by the Secretary and 
     no action taken, nor any failure to act, by the Secretary or 
     the mortgagee shall be subject to judicial review''.
       (b) Authority to Assist Mortgagors in Default.--Section 230 
     of the National Housing Act (12 U.S.C. 1715u) is amended to 
     read as follows:


              ``authority to assist mortgagors in default

       ``Sec. 230. (a) Payment of Partial Claim.--The Secretary 
     may establish a program for payment of a partial insurance 
     claim to a mortgagee that agrees to apply the claim amount to 
     payment of a mortgage on a 1- to 4-family residence that is 
     in default. Any such payment under such program to the 
     mortgagee shall be made in the Secretary's sole discretion 
     and on terms and conditions acceptable to the Secretary, 
     except that--
       ``(1) the amount of the payment shall be in an amount 
     determined by the Secretary, which shall not exceed an amount 
     equivalent to 12 monthly mortgage payments and any costs 
     related to the default that are approved by the Secretary; 
     and
       ``(2) the mortgagor shall agree to repay the amount of the 
     insurance claim to the Secretary upon terms and conditions 
     acceptable to the Secretary.

     The Secretary may pay the mortgagee, from the appropriate 
     insurance fund, in connection with any activities that the 
     mortgagee is required to undertake concerning repayment by 
     the mortgagor of the amount owed to the Secretary.
       ``(b) Assignment.--
       ``(1) Program authority.--The Secretary may establish a 
     program for assignment to the Secretary, upon request of the 
     mortgagee, of a mortgage on a 1- to 4-family residence 
     insured under this Act.
       ``(2) Program requirements.--The Secretary may accept 
     assignment of a mortgage under a program under this 
     subsection only if--
       ``(A) the mortgage was in default;
       ``(B) the mortgagee has modified the mortgage to cure the 
     default and provide for mortgage payments within the 
     reasonable ability of the mortgagor to pay at interest rates 
     not exceeding current market interest rates; and
       ``(C) the Secretary arranges for servicing of the assigned 
     mortgage by a mortgagee (which may include the assigning 
     mortgagee) through procedures that the Secretary has 
     determined to be in the best interests of the appropriate 
     insurance fund.
       ``(3) Payment of insurance benefits.--Upon accepting 
     assignment of a mortgage under the program under this 
     subsection, the Secretary may pay insurance benefits to the 
     mortgagee from the appropriate insurance fund in an amount 
     that the Secretary determines to be appropriate, but which 
     may not exceed the amount necessary to compensate the 
     mortgagee for the assignment and any losses resulting from 
     the mortgage modification.
       ``(c) Prohibition of Judicial Review.--No decision by the 
     Secretary to exercise or forego exercising any authority 
     under this section shall be subject to judicial review.''.
       (c) Savings Provision.--Any mortgage for which the 
     mortgagor has applied to the Secretary of Housing and Urban 
     Development, 

[[Page H10539]]

     before the date of the enactment of this Act, for assignment 
     pursuant to section 230(b) of the National Housing Act shall 
     continue to be governed by the provisions of such section, as 
     in effect immediately before such date of enactment.
       (d) Applicability of Other Laws.--No provision of the 
     National Housing Act or any other law shall be construed to 
     require the Secretary of Housing and Urban Development to 
     provide an alternative to foreclosure for mortgagees with 
     mortgages on 1- to 4-family residences insured by the 
     Secretary under the National Housing Act, or to accept 
     assignments of such mortgages.
 TITLE VI--INDEXATION AND MISCELLANEOUS ENTITLEMENT-RELATED PROVISIONS

     SEC. 6101. CONSUMER PRICE INDEX.

       (a) Adjustments Applicable to Internal Revenue Code 
     Provisions.--
       (1) In general.--Paragraph (3) of section 1(f) of the 
     Internal Revenue Code of 1986 (defining cost-of-living 
     adjustment) is amended by striking the period at the end and 
     inserting a comma and by inserting at the end the following 
     flush material:

     ``reduced by the number of percentage points determined under 
     paragraph (8) for the calendar year for which such adjustment 
     is being determined.''
       (2) Limitation on increases.--Subsection (f) of section 1 
     of such Code is amended by adding at the end the following 
     new paragraph:
       ``(8) Limitation on increases in cpi.--
       ``(A) In general.--The number of percentage points 
     determined under this paragraph for any calendar year is--
       ``(i) in the case of calendar years 1996, 1997, and 1998, 
     0.5 percentage point, and
       ``(ii) in the case of calendar years 1999, 2000, 2001, and 
     2002, 0.3 percentage point.
       ``(B) Computation of base to reflect limitation.--The 
     Secretary shall adjust the number taken into account under 
     paragraph (3)(B) so that any increase which is not taken into 
     account by reason of subparagraph (A) shall not be taken into 
     account at any time so as to allow such increase for any 
     period.''
       (b) Adjustments Applicable to Certain Entitlement 
     Programs.--
       (1) In general.--For purposes of determining the amount of 
     any cost-of-living adjustment which takes effect for benefits 
     payable after December 31, 1995, with respect to any payment 
     (or benefit) described in paragraph (5)--
       (A) any increase in the relevant index (determined without 
     regard to this subsection) shall be reduced by the number of 
     percentage points determined under paragraph (2), and
       (B) the amount of the increase in such payment (or benefit) 
     shall be equal to the product of--
       (i) the increase in the relevant index (as reduced under 
     subparagraph (A)), and
       (ii) the average such payment (or benefit) for the 
     preceding calendar year under the program described in 
     paragraph (5) which provides such payment (or benefit).
       (2) Limitation on increases.--
       (A) In general.--The number of percentage points determined 
     under this paragraph for any calendar year is--
       (i) in the case of calendar years 1996, 1997, and 1998, 0.5 
     percentage point, and
       (ii) in the case of calendar years 1999, 2000, 2001, and 
     2002, 0.3 percentage point.
       (B) Computation of base to reflect limitation.--Any 
     increase which is not taken into account by reason of 
     subparagraph (A) shall not be taken into account at any time 
     so as to allow such increase for any period.
       (3) Paragraph (1) to apply only to computation of benefit 
     amounts.--Paragraph (1) shall apply only for purposes of 
     determining the amount of payments (or benefits) and not for 
     purposes of determining--
       (A) whether a threshold increase in the relevant index has 
     been met, or
       (B) increases in amounts under other provisions of law not 
     described in paragraph (5) which operate by reference to 
     increases in such payments (or benefits).
       (4) Definitions.--For purposes of this subsection--
       (A) Cost-of-living adjustment.--The term ``cost-of-living 
     adjustment'' means any adjustment in the amount of payments 
     (or benefits) described in paragraph (5) which is determined 
     by reference to changes in an index.
       (B) Index.--
       (i) Index.--The term ``index'' means the Consumer Price 
     Index and any other index of price or wages.
       (ii) Relevant index.--The term ``relevant index'' means the 
     index on the basis of which the amount of the cost-of-living 
     adjustment is determined.
       (5) Payments and benefits to which subsection applies.--For 
     purposes of this subsection, the payments and benefits 
     described in this paragraph are--
       (A) old age, survivors, and disability insurance benefits 
     subject to adjustment under section 215(i) of the Social 
     Security Act (but the limitation under paragraph (1) shall 
     not apply to supplemental security income benefits under 
     title XVI of such Act);
       (B) retired and retainer pay subject to adjustment under 
     section 1401a of title 10, United States Code;
       (C) civil service retirement benefits under section 8340 of 
     title 5, United States Code, foreign service retirement 
     benefits under section 826 of the Foreign Service Act of 
     1980, Central Intelligence Agency retirement benefits under 
     part J of the Central Intelligence Agency Retirement Act of 
     1964 for certain employees, and any other payments or 
     benefits under any similar provision under any retirement 
     system for employees of the government of the United States;
       (D) Federal workers' compensation under section 8146a of 
     title 5, United States Code;
       (E) benefits under section 3(a), 4(a), or 4(f) of the 
     Railroad Retirement Act of 1974; and
       (F) benefits under title XVIII or XIX of the Social 
     Security Act.

     SEC. 6102. REPEAL OF ENTITLEMENT FUNDING FOR FAMILY 
                   PRESERVATION AND SUPPORT SERVICES.

       (a) In General.--Subpart 2 of part B of title IV of the 
     Social Security Act (42 U.S.C. 629a-629e) is hereby repealed.
       (b) Conforming Amendments.--
       (1) Part B of title IV of such Act (42 U.S.C. 620 et seq.) 
     is amended by striking the heading for such part and for 
     subpart 1 of such part and inserting the following:

                  ``PART B--CHILD WELFARE SERVICES''.

       (2) Section 422 of such Act (42 U.S.C. 622) is amended--
       (A) in subsection (a), by striking ``this subpart'' and 
     inserting ``this part'';
       (B) in subsection (b), by striking ``this subpart'' each 
     place such term appears and inserting ``this part''; and
       (C) in subsection (b)(2), by striking ``under the State 
     plan approved under subpart 2 of this part,'';
       (3) Section 423(a) of such Act (42 U.S.C. 623(a)) is 
     amended by striking ``this subpart'' and inserting ``this 
     part''.
       (4) Section 428(a) of such Act (42 U.S.C. 628(a)) is 
     amended by striking ``this subpart'' each place such term 
     appears and inserting ``this part''.
       (5) Section 471(a)(2) of such Act (42 U.S.C. 671(a)(2)) is 
     amended by striking ``subpart 1 of''.
       (6) Section 13712(c) of the Omnibus Budget Reconciliation 
     Act of 1993 (42 U.S.C. 670 note) is amended by inserting 
     ``(as in effect before the effective date of section 6101 of 
     the Omnibus Budget Reconciliation Act of 1995)'' after 
     ``Act'' each place such term appears.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1996.

     SEC. 6103. MATCHING RATE REQUIREMENT FOR TITLE XX BLOCK 
                   GRANTS TO STATES FOR SOCIAL SERVICES.

       Section 2002(a)(1) of the Social Security Act (42 U.S.C. 
     1397a(a)(1)) is amended by striking ``Each State'' and all 
     that follows through the period and inserting the following: 
     ``(A) Each State shall be entitled to payment under this 
     title for each fiscal year in an amount equal to the lesser 
     of--
       ``(i) 80 percent of the total amount expended by the State 
     during the fiscal year for services referred to in 
     subparagraph (B); or
       ``(ii) the allotment of the State for the fiscal year.
       ``(B) A State to which a payment is made under this title 
     shall use the payment for services directed at the goals set 
     forth in section 2001, subject to the requirements of this 
     title.''.

     SEC. 6104. DENIAL OF UNEMPLOYMENT INSURANCE TO CERTAIN HIGH-
                   INCOME INDIVIDUALS.

       (a) General Rule.--Subsection (a) of section 3304 of the 
     Internal Revenue Code of 1986, as amended by section 10101, 
     is further amended by striking ``and'' at the end of 
     paragraph (18), by redesignating paragraph (19) as paragraph 
     (20), and by inserting after paragraph (18) the following new 
     paragraph:
       ``(19) compensation shall not be payable to any individual 
     for any benefit year if the taxable income of such individual 
     for such individual's most recent taxable year ending before 
     the beginning of such benefit year exceeded $120,000; and''.
       (b) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendment made by this section shall apply to benefit years 
     beginning after December 31, 1995.
       (2) Special rule.--In the case of any State the legislature 
     of which has not been in session for at least 30 calendar 
     days (whether or not successive) between the date of the 
     enactment of this Act and December 31, 1995, the amendments 
     made by this section shall apply to benefit years beginning 
     after the day 30 calendar days after the first day on which 
     such legislature is in session on or after December 31, 1995.

     SEC. 6105. DENIAL OF UNEMPLOYMENT INSURANCE TO INDIVIDUALS 
                   WHO VOLUNTARILY LEAVE MILITARY SERVICE.

       (a) General Rule.--Paragraph (1) of section 8521(a) of 
     title 5, United States Code, is amended to read as follows:
       ``(1) `Federal service' means active service (not including 
     active duty in a reserve status unless for a continuous 
     period of 45 days or more) in the armed forces or the 
     commissioned corps of the National Oceanic and Atmospheric 
     Administration if with respect to that service the 
     individual--
       ``(A) was discharged or released under honorable 
     conditions,
       ``(B) did not resign or voluntarily leave the service, and
       ``(C) was not discharged or released for cause as defined 
     by the Secretary of Defense;''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply in the case of a discharge or release after the 
     date of the enactment of this Act.

[[Page H10540]]

                       TITLE VII--MEDICAID REFORM


                       table of contents of title

                 Subtitle A--Per Capita Spending Limit

Sec. 7001. Limitation on expenditures recognized for purposes of 
              Federal financial participation.

                   Subtitle B--Medicaid Managed Care

Sec. 7101. Permitting greater flexibility for States to enroll 
              beneficiaries in managed care arrangements.
Sec. 7102. Removal of barriers to provision of medicaid services 
              through managed care.
Sec. 7103. Additional requirements for medicaid managed care plans.
Sec. 7104. Preventing fraud in medicaid managed care.
Sec. 7105. Assuring adequacy of payments to medicaid managed care plans 
              and providers.
Sec. 7106. Sanctions for noncompliance by eligible managed care 
              providers.
Sec. 7107. Report on public health services.
Sec. 7108. Report on payments to hospitals.
Sec. 7109. Conforming amendments.
Sec. 7110. Effective date; status of waivers.

     Subtitle C--Additional Reforms of Medicaid Acute Care Program

Sec. 7201. Permitting increased flexibility in medicaid cost-sharing.
Sec. 7202. Limits on required coverage of additional treatment services 
              under EPSDT.
Sec. 7203. Delay in application of new requirements.
Sec. 7204. Deadline on action on waivers.

       Subtitle D--National Commission on Medicaid Restructuring

Sec. 7301. Establishment of commission.
Sec. 7302. Duties of commission.
Sec. 7303. Administration.
Sec. 7304. Authorization of appropriations.
Sec. 7305. Termination.

      Subtitle E--Restrictions on Disproportionate Share Payments

Sec. 7401. Reforming disproportionate share payments under State 
              medicaid programs.

                      Subtitle F--Fraud Reduction

Sec. 7501. Monitoring payments for dual eligibles.
Sec. 7502. Improved identification systems.
                 Subtitle A--Per Capita Spending Limit

     SEC. 7001. LIMITATION ON EXPENDITURES RECOGNIZED FOR PURPOSES 
                   OF FEDERAL FINANCIAL PARTICIPATION.

       (a) In General.--Title XIX of the Social Security Act is 
     amended--
       (1) in section 1903(a), by striking ``From'' and inserting 
     ``Subject to section 1931, from'';
       (2) by redesignating section 1931 as section 1932; and
       (3) by inserting after section 1930 the following new 
     section:


     ``limitation on federal financial participation based on per 
                          beneficiary spending

       ``Sec. 1931. (a) In General.--Subject to subsection (e), 
     the total amount of State expenditures for medical assistance 
     for which Federal financial participation may be made under 
     section 1903(a) for quarters in a fiscal year (beginning with 
     fiscal year 1997) may not exceed the sum of the following:
       ``(1) Nondisabled medicaid children.--The product of--
       ``(A) the number of full-year equivalent nondisabled 
     medicaid children (described in subsection (b)(1)) in the 
     State in the fiscal year, and
       ``(B) the per capita medical assistance limit established 
     under subsection (c)(1) for such category of individuals for 
     the fiscal year.
       ``(2) Nondisabled medicaid adults.--The product of--
       ``(A) the number of full-year equivalent nondisabled 
     medicaid adults (described in subsection (b)(2)) in the State 
     in the fiscal year, and
       ``(B) the per capita medical assistance limit established 
     under subsection (c)(1) for such category individuals for the 
     fiscal year.
       ``(3) Nondisabled elderly medicaid beneficiaries.--The 
     product of--
       ``(A) the number of full-year equivalent nondisabled 
     elderly medicaid beneficiaries (described in subsection 
     (b)(3)) in the State in the fiscal year, and
       ``(B) the per capita medical assistance limit established 
     under subsection (c)(1) for such category of individuals for 
     the fiscal year.
       ``(4) Disabled medicaid beneficiaries.--The product of--
       ``(A) the number of full-year equivalent disabled medicaid 
     beneficiaries (described in subsection (b)(4)) in the State 
     in the fiscal year, and
       ``(B) the per capita medical assistance limit established 
     under subsection (c)(1) for such category individuals for the 
     fiscal year.
       ``(5) Administrative expenditures.--The product of--
       ``(A) the number of full-year equivalent medicaid 
     beneficiaries who are in any category of beneficiaries in the 
     State in the fiscal year, and
       ``(B) the per capita limit established under subsection 
     (c)(1) for administrative expenditures for the fiscal year.

     This section shall not apply to expenditures for which no 
     Federal financial participation is available under this 
     title.
       ``(b) Definitions Relating to Categories of Individuals.--
     In this section:
       ``(1) Nondisabled medicaid children.--The term `nondisabled 
     medicaid child' means an individual entitled to medical 
     assistance under the State plan under this title who is not 
     disabled (as such term is used under paragraph (4)) and is 
     under 21 years of age.
       ``(2) Nondisabled medicaid adults.--The term `nondisabled 
     medicaid adult' means an individual entitled to medical 
     assistance under the State plan under this title who is not 
     disabled (as such term is used under paragraph (4)) and is at 
     least 21 years of age but under 65 years of age.
       ``(3) Nondisabled elderly medicaid beneficiary.--The term 
     `nondisabled medicaid adult' means an individual entitled to 
     medical assistance under the State plan under this title who 
     is not disabled (as such term is used under paragraph (4)) 
     and is at least 65 years of age.
       ``(4) Disabled medicaid beneficiaries.--The term `disabled 
     medicaid beneficiary' means an individual entitled to medical 
     assistance under the State plan under this title who is 
     entitled to such assistance solely on the basis of blindness 
     or disability.

     For purposes of this section, nondisabled medicaid children, 
     nondisabled medicaid adults, nondisabled elderly medicaid 
     beneficiaries, and disabled medicaid beneficiaries each 
     constitutes a separate category of medicaid beneficiaries.
       ``(c) Establishment of Per Capita Limits.--
       ``(1) In general.--The Secretary shall establish for each 
     State a per capita medical assistance limit for each category 
     of medicaid beneficiaries described in subsection (b) and for 
     administrative expenditures for a fiscal year equal to the 
     product of the following:
       ``(A) Previous expenditures.--The average of the amount of 
     the per capita matchable medical assistance expenditures 
     (determined under paragraph (2)(A)) for such category (or the 
     per capita matchable adminstrative expenditures determined 
     under paragraph (2)(B)) for such State for each of the 3 
     previous fiscal years.
       ``(B) Inflation factor.--The rolling 2-year CPI increase 
     factor (determined under paragraph (3)(A)) for the fiscal 
     year involved.
       ``(C) Transitional allowance.--The transitional allowance 
     factor (if any) applicable under paragraph (3)(B) to such 
     limit for the previous fiscal year and for the fiscal year 
     involved.
       ``(2) Per capita matchable medical assistance 
     expenditures.--For purposes of this section--
       ``(A) Medical assistance expenditures.--The `per capita 
     matchable medical assistance expenditures', for a category of 
     medicaid beneficiaries for a State for a fiscal year, is 
     equal to--
       ``(i) the amount of expenditures for which Federal 
     financial participation is (or may be) provided (consistent 
     with this section) to the State under paragraphs (1) and (5) 
     of section 1903(a) (other than expenditures excluded under 
     subsection (e)) with respect to medical assistance furnished 
     with respect to individuals in such category during the 
     fiscal year, divided by
       ``(ii) the number of full-year equivalent individuals in 
     such category in the State in such fiscal year.
       ``(B) Per capita matchable administrative expenditures.--
     The `per capita matchable administrative expenditures', for a 
     State for a fiscal year, is equal to--
       ``(i) the amount of expenditures for which Federal 
     financial participation is (or may be) provided (consistent 
     with this section) to the State under section 1903(a) (under 
     paragraphs (1) and (5) of such section) during the fiscal 
     year, divided by
       ``(ii) the number of full-year equivalent individuals in 
     any category of medicaid beneficiary in the State in such 
     fiscal year.
       ``(3) Increase factors.--In this subsection--
       ``(A) Rolling 2-year cpi increase factor.--The `rolling 2-
     year CPI increase factor' for a fiscal year is 1 plus the 
     percentage by which--
       ``(i) the Secretary's estimate of the average value of the 
     consumer price index for all urban consumers (all items, U.S. 
     city average) for months in the particular fiscal year, 
     exceeds
       ``(ii) the average value of such index for months in the 3 
     previous fiscal years.
       ``(B) Transitional allowance factors.--
       ``(i) Fiscal year 1996.--The `transitional allowance 
     factor' for fiscal year 1996--

       ``(I) for the category of nondisabled medicaid children, is 
     1.051;
       ``(II) for the category of nondisabled medicaid adults, is 
     1.067;
       ``(III) for the category of nondisabled elderly medicaid 
     beneficiaries is 1.031;
       ``(IV) for the category of disabled medicaid beneficiaries 
     is 1.015; and
       ``(V) for administrative expenditures is 1.046.

       ``(ii) Subsequent fiscal years for nondisabled children and 
     adults and for disabled categories.--The `transitional 
     allowance factor' for the categories of nondisabled medicaid 
     children, nondisabled medicaid adults, and disabled medicaid 
     beneficiaries--

       ``(I) for fiscal years 1997 and 1998 is 1.02,
       ``(II) for fiscal year 1999 is 1.015,
       ``(III) for fiscal year 2000 is 1.01,

       ``(IV) for fiscal year 2001 is 1.005, and
       ``(V) for each subsequent fiscal year is 1.0.

       ``(iii) Subsequent fiscal years for the elderly and 
     administrative expenditures.--The `transitional allowance 
     factor' 

[[Page H10541]]

     for the category of nondisabled elderly medicaid 
     beneficiaries and for administrative expenditures for fiscal 
     years after fiscal year 1996 is 1.0.
       ``(4) Notice.--The Secretary shall notify each State before 
     the beginning of each fiscal year of the per capita limits 
     established under this subsection for the State for the 
     fiscal year.
       ``(d) Special Rules and Exceptions.--For purposes of this 
     section, expenditures attributable to any of the following 
     shall not be subject to the limits established under this 
     section and shall not be taken into account in establishing 
     per capita medical assistance limits under subsection (c)(1):
       ``(1) DSH.--Payment adjustments under section 1923.
       ``(2) Medicare cost-sharing.--Payments for medical 
     assistance for medicare cost-sharing (as defined in section 
     1905(p)(3)).
       ``(3) Services through ihs and tribal providers.--Payments 
     for medical assistance for services described in the last 
     sentence of section 1905(b).

     Nothing in this section shall be construed as applying any 
     limitation to expenditures for the purchase and delivery of 
     qualified pediatric vaccines under section 1928.
       ``(e) Definitions.--In this section, the term `medicaid 
     beneficiary' means an individual entitled to medical 
     assistance under the State plan under this title.
       ``(f) Estimations and Notice.--
       ``(1) In general.--The Secretary shall--
       ``(A) establish a process for estimating the limits 
     established under subsection (a) for each State at the 
     beginning of each fiscal year and adjusting such estimate 
     during such year; and
       ``(B) notifying each State of the estimations and 
     adjustments referred to in subparagraph (A).
       ``(2) Determination of number of full-year equivalent 
     individuals.--For purposes of this section, the number of 
     full-year equivalent individuals in each category described 
     in subsection (b) for a State for a year shall be determined 
     based on actual reports submitted by the State to the 
     Secretary. In the case of individuals who were not entitled 
     to benefits under a State plan for the entire fiscal year (or 
     are within a group of individuals for only part of a fiscal 
     year), the number shall take into account only the portion of 
     the year in which they were so entitled or within such group. 
     The Secretary may audit such reports.
       ``(g) Anti-Gaming Adjustment to Reflect Changes in 
     Eligibility.--
       ``(1) Report on per capita expenditures.--If a State makes 
     a change (on or after October 15, 1995) relating to 
     eligibility for medical assistance in its State plan that 
     results in the addition or deletion of individuals eligible 
     for such assistance, the State shall submit to the Secretary 
     with such change such information as the Secretary may 
     require in order to carry out paragraph (2).
       ``(2) Adjustment for certain additions.--If a State makes a 
     change described in paragraph (1) that the Secretary believes 
     will result in making medical assistance available for 
     additional individuals (within a category described in 
     subsection (b)) with respect to whom the Secretary estimates 
     the per capita average medical assistance expenditures will 
     be less the applicable per capita limit established under 
     subsection (c)(1) for such category, the Secretary shall 
     apply the per capita limits under such subsection separately 
     with respect to individuals who are eligible for medical 
     assistance without regard to such addition and with respect 
     to the individuals so added.
       ``(3) Adjustment for certain deletions.--If a State makes a 
     change described in paragraph (1) that the Secretary believes 
     will result in denial of medical assistance for individuals 
     (within a category described in subsection (b)) with respect 
     to whom the Secretary estimates the per capita average 
     medical assistance expenditures is greater than the 
     applicable per capita limit established under subsection 
     (c)(1) for such catetory, the Secretary shall adjust the 
     payment limits under subsection (a) to reflect any decrease 
     in average per beneficiary expenditures that would result 
     from such change.
       ``(h) Treatment of States Operating Under Waivers.--The 
     Secretary shall provide for such adjustments to the per 
     capita limits under subsection (c) for a fiscal year as may 
     be appropriate to take into account the case of States which 
     either--
       ``(1) during any of the 3 previous fiscal years was 
     providing medical assistance to its residents under a waiver 
     granted under section 1115, section 1915, or other provision 
     of law, and, in the fiscal year involved is no longer 
     providing such medical assistance under such waiver; or
       ``(2) during any of the 3 previous fiscal years was not 
     providing medical assistance to its residents under a waiver 
     granted under section 1115, section 1915, or other provision 
     of law, and, in the fiscal year involved is providing such 
     medical assistance under such a waiver.''.
       (b) Enforcement-Related Provisions.--
       (1) Assuring actual payments to states consistent with 
     limitation.--Section 1903(d) of such Act (42 U.S.C. 1396b(d)) 
     is amended--
       (A) in paragraph (2)(A), by striking ``The Secretary'' and 
     inserting ``Subject to paragraph (7), the Secretary'', and
       (B) by adding at the end the following new paragraph:
       ``(7)(A) The Secretary shall take such steps as are 
     necessary to assure that payments under this subsection for 
     quarters in a fiscal year are consistent with the payment 
     limits established under section 1931 for the fiscal year. 
     Such steps may include limiting such payments for one or more 
     quarters in a fiscal year based on--
       ``(i) an appropriate proportion of the payment limits for 
     the fiscal year involved, and
       ``(ii) numbers of individuals within each category, as 
     reported under subparagraph (B) for a recent previous 
     quarter.
       ``(B) Each State shall include, in its report filed under 
     paragraph (1)(A) for a calendar quarter--
       ``(i) the actual number of individuals within each category 
     described in section 1931(b) for the second previous calendar 
     quarter and (based on the data available) for the previous 
     calendar quarter, and
       ``(ii) an estimate of such numbers for the calendar quarter 
     involved.''.
       (2) Restriction on authority of states to apply less 
     restrictive income and resource methodologies.--Section 
     1902(r)(2) of such Act (42 U.S.C. 1396a(r)(2)) is amended by 
     adding at the end the following new subparagraph:
       ``(C) Subparagraph (A) shall not apply to plan amendments 
     made on or after October 15, 1995.''.
       (c) Conforming Amendment.--Section 1903(i) of such Act (42 
     U.S.C. 1396b(i)) is amended--
       (1) by striking ``or'' at the end of paragraph (14),
       (2) by striking the period at the end of paragraph (15) and 
     inserting ``; or'', and
       (3) by inserting after paragraph (15) the following:
       ``(16) in accordance with section 1931, with respect to 
     amounts expended to the extent they exceed applicable limits 
     established under section 1931(a).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to payments for calendar quarters beginning on or 
     after October 1, 1996.
                   Subtitle B--Medicaid Managed Care

     SEC. 7101. PERMITTING GREATER FLEXIBILITY FOR STATES TO 
                   ENROLL BENEFICIARIES IN MANAGED CARE 
                   ARRANGEMENTS.

       (a) In General.--Title XIX of the Social Security Act (42 
     U.S.C. 1396 et seq.), as amended by section 7001(a), is 
     amended--
       (1) by redesignating section 1932 as section 1933; and
       (2) by inserting after section 1931 the following new 
     section:


    ``state options for enrollment of beneficiaries in managed care 
                              arrangements

       ``Sec. 1932. (a) Mandatory Enrollment.--
       ``(1) In general.--Subject to the succeeding provisions of 
     this section and notwithstanding paragraphs (1), (10)(B), and 
     (23) of section 1902(a), a State may require an individual 
     eligible for medical assistance under the State plan under 
     this title to enroll with an eligible managed care provider 
     as a condition of receiving such assistance and, with respect 
     to assistance furnished by or under arrangements with such 
     provider, to receive such assistance through the provider, if 
     the following provisions are met:
       ``(A) The provider meets the requirements of section 1933.
       ``(B) The provider enters into a contract with the State to 
     provide services for the benefit of individuals eligible for 
     benefits under this title under which prepaid payments to 
     such provider are made on an actuarially sound basis.
       ``(C) There is sufficient capacity among all providers 
     meeting such requirements to enroll and serve the individuals 
     required to enroll with such providers.
       ``(D) The individual is not a special needs individual (as 
     defined in subsection (c)).
       ``(E) The State--
       ``(i) permits an individual to choose an eligible managed 
     care provider--

       ``(I) from among not less than 2 medicaid managed care 
     plans; or
       ``(II) between a medicaid managed care plan and a primary 
     care case management provider;

       ``(ii) provides the individual with the opportunity to 
     change enrollment among eligible managed care providers not 
     less than once annually and notifies the individual of such 
     opportunity not later than 60 days prior to the first date on 
     which the individual may change enrollment;
       ``(iii) establishes a method for establishing enrollment 
     priorities in the case of an eligible managed care provider 
     that does not have sufficient capacity to enroll all such 
     individuals seeking enrollment under which individuals 
     already enrolled with the provider are given priority in 
     continuing enrollment with the provider;
       ``(iv) establishes a default enrollment process which meets 
     the requirements described in paragraph (2) and under which 
     any such individual who does not enroll with an eligible 
     managed care provider during the enrollment period specified 
     by the State shall be enrolled by the State with such a 
     provider in accordance with such process; and
       ``(v) establishes the sanctions provided for in section 
     1934.
       ``(2) Default enrollment process requirements.--The default 
     enrollment process established by a State under paragraph 
     (1)(E)(iv) shall--
       ``(A) provide that the State may not enroll individuals 
     with an eligible managed care provider which is not in 
     compliance with the requirements of section 1933; and
       ``(B) provide for an equitable distribution of individuals 
     among all eligible managed care providers available to enroll 
     individuals 

[[Page H10542]]

     through such default enrollment process, consistent with the 
     enrollment capacities of such providers.
       ``(b) Reenrollment of Individuals Who Regain Eligibility.--
       ``(1) In general.--If an individual eligible for medical 
     assistance under a State plan under this title and enrolled 
     with an eligible managed care provider with a contract under 
     subsection (a)(1)(B) ceases to be eligible for such 
     assistance for a period of not greater than 2 months, the 
     State may provide for the automatic reenrollment of the 
     individual with the provider as of the first day of the month 
     in which the individual is again eligible for such 
     assistance.
       ``(2) Conditions.--Paragraph (1) shall only apply if--
       ``(A) the month for which the individual is to be 
     reenrolled occurs during the enrollment period covered by the 
     individual's original enrollment with the eligible managed 
     care provider;
       ``(B) the eligible managed care provider continues to have 
     a contract with the State agency under subsection (a)(1)(B) 
     as of the first day of such month; and
       ``(C) the eligible managed care provider complies with the 
     requirements of section 1933.
       ``(3) Notice of reenrollment.--The State shall provide 
     timely notice to an eligible managed care provider of any 
     reenrollment of an individual under this subsection.
       ``(c) Special Needs Individuals Described.--In this 
     section, a `special needs individual' means any of the 
     following:
       ``(1) Special needs child.--An individual who is under 19 
     years of age who --
       ``(A) is eligible for supplemental security income under 
     title XVI;
       ``(B) is described under section 501(a)(1)(D);
       ``(C) is a child described in section 1902(e)(3); or
       ``(D) is in foster care or is otherwise in an out-of-home 
     placement.
       ``(2) Homeless individuals.--An individual who is homeless 
     (without regard to whether the individual is a member of a 
     family), including --
       ``(A) an individual whose primary residence during the 
     night is a supervised public or private facility that 
     provides temporary living accommodations; or
       ``(B) an individual who is a resident in transitional 
     housing.
       ``(3) Migrant agricultural workers.--A migratory 
     agricultural worker or a seasonal agricultural worker (as 
     such terms are defined in section 329 of the Public Health 
     Service Act), or the spouse or dependent of such a worker.
       ``(4) Indians.--An Indian (as defined in section 4(c) of 
     the Indian Health Care Improvement Act (25 U.S.C. 
     1603(c))).''.
       (b) Conforming Amendment.--Section 1902(a)(23) of such Act 
     (42 U.S.C. 1396a(a)(23)) is amended --
       (1) in the matter preceding subparagraph (A), by striking 
     ``subsection (g) and in section 1915'' and inserting 
     ``subsection (g), section 1915, and section 1931,''; and
       (2) in subparagraph (B) --
       (A) by striking ``a health maintenance organization, or a'' 
     and inserting ``or with an eligible managed care provider, as 
     defined in section 1933(g)(1), or''.

     SEC. 7102. REMOVAL OF BARRIERS TO PROVISION OF MEDICAID 
                   SERVICES THROUGH MANAGED CARE.

       (a) Repeal of Current Barriers.--Except as provided in 
     subsection (b), section 1903(m) of the Social Security Act 
     (42 U.S.C. 1396b(m)) is repealed on the date of the enactment 
     of this Act.
       (b) Existing Contracts.--In the case of any contract under 
     section 1903(m) of such Act which is in effect on the day 
     before the date of the enactment of this Act, the provisions 
     of such section shall apply to such contract until the 
     earlier of --
       (1) the day after the date of the expiration of the 
     contract; or
       (2) the date which is 1 year after the date of the 
     enactment of this Act.
       (c) Eligible Managed Care Providers Described.--Title XIX 
     of such Act (42 U.S.C. 1396 et seq.), as amended by sections 
     7001(a) and 7101(a), is amended--
       (1) by redesignating section 1933 as section 1934; and
       (2) by inserting after section 1932 the following new 
     section:


                   ``eligible managed care providers

       ``Sec. 1933. (a) Definitions.--In this section, the 
     following definitions shall apply:
       ``(1) Eligible managed care provider.--The term `eligible 
     managed care provider' means --
       ``(A) a medicaid managed care plan; or
       ``(B) a primary care case management provider.
       ``(2) Medicaid managed care plan.--The term `medicaid 
     managed care plan' means a health maintenance organization, 
     an eligible organization with a contract under Section 1876, 
     a provider sponsored network or any other plan which provides 
     or arranges for the provision of one or more items and 
     services to individuals eligible for medical assistance under 
     the State plan under this title in accordance with a contract 
     with the State under section 1932(a)(1)(B).
       ``(3) Primary care case management provider.--
       ``(A) In general.--The term `primary care case management 
     provider' means a health care provider that --
       ``(i) is a physician, group of physicians, a Federally-
     qualified health center, a rural health clinic, or an entity 
     employing or having other arrangements with physicians that 
     provides or arranges for the provision of one or more items 
     and services to individuals eligible for medical assistance 
     under the State plan under this title in accordance with a 
     contract with the State under section 1932(a)(1)(B);
       ``(ii) receives payment on a fee-for-service basis (or, in 
     the case of a Federally-qualified health center or a rural 
     health clinic, on a reasonable cost per encounter basis) for 
     the provision of health care items and services specified in 
     such contract to enrolled individuals;
       ``(iii) receives an additional fixed fee per enrollee for a 
     period specified in such contract for providing case 
     management services (including approving and arranging for 
     the provision of health care items and services specified in 
     such contract on a referral basis) to enrolled individuals; 
     and
       ``(iv) is not an entity that is at risk.
       ``(B) At risk.--In subparagraph (A)(iv), the term `at risk' 
     means an entity that --
       ``(i) has a contract with the State under which such entity 
     is paid a fixed amount for providing or arranging for the 
     provision of health care items or services specified in such 
     contract to an individual eligible for medical assistance 
     under the State plan and enrolled with such entity, 
     regardless of whether such items or services are furnished to 
     such individual; and
       ``(ii) is liable for all or part of the cost of furnishing 
     such items or services, regardless of whether such cost 
     exceeds such fixed payment.
       ``(b) Enrollment.--
       ``(1) Nondiscrimination.--An eligible managed care provider 
     may not discriminate on the basis of health status or 
     anticipated need for services in the enrollment, 
     reenrollment, or disenrollmentof individuals eligible to 
     receive medical assistance under a State plan under this 
     title or by discouraging enrollment (except as permitted by 
     this section) by eligible individuals.
       ``(2) Termination of enrollment.--
       ``(A) In general.--An eligible managed care provider shall 
     permit an individual eligible for medical assistance under 
     the State plan under this title who is enrolled with the 
     provider to terminate such enrollment for cause at any time, 
     and without cause during the 60-day period beginning on the 
     date the individual receives notice of enrollment, and shall 
     notify each such individual of the opportunity to terminate 
     enrollment under these conditions.
       ``(B) Fraudulent inducement or coercion as grounds for 
     cause.--For purposes of subparagraph (A), an individual 
     terminating enrollment with an eligible managed care provider 
     on the grounds that the enrollment was based on fraudulent 
     inducement or was obtained through coercion shall be 
     considered to terminate such enrollment for cause.
       ``(C) Notice of termination.--
       ``(i) Notice to state.--

       ``(I) By individuals.--Each individual terminating 
     enrollment with an eligible managed care provider under 
     subparagraph (A) shall do so by providing notice of the 
     termination to an office of the State agency administering 
     the State plan under this title, the State or local welfare 
     agency, or an office of an eligible managed care provider.
       ``(II) By plans.--Any eligible managed care provider which 
     receives notice of an individual's termination of enrollment 
     with such provider through receipt of such notice at an 
     office of an eligible managed care provider shall provide 
     timely notice of the termination to the State agency 
     administering the State plan under this title.

       ``(ii) Notice to plan.--The State agency administering the 
     State plan under this title or the State or local welfare 
     agency which receives notice of an individual's termination 
     of enrollment with an eligible managed care provider under 
     clause (i) shall provide timely notice of the termination to 
     such provider.
       ``(D) Reenrollment.--Each State shall establish a process 
     under which an individual terminating enrollment under this 
     paragraph shall be promptly enrolled with another eligible 
     managed care provider and notified of such enrollment.
       ``(3) Provision of enrollment materials in understandable 
     form.--Each eligible managed care provider shall provide all 
     enrollment materials in a manner and form which may be easily 
     understood by a typical adult enrollee of the provider who is 
     eligible for medical assistance under the State plan under 
     this title.
       ``(c) Quality Assurance.--
       ``(1) Access to services.--Each eligible managed care 
     provider shall provide or arrange for the provision of all 
     medically necessary medical assistance under this title which 
     is specified in the contract entered into between such 
     provider and the State under section 1932(a)(1)(B) for 
     enrollees who are eligible for medical assistance under the 
     State plan under this title.
       ``(2) Timely delivery of services.--Each eligible managed 
     care provider shall respond to requests from enrollees for 
     the delivery of medical assistance in a manner which --
       ``(A) makes such assistance --
       ``(i) available and accessible to each such individual, 
     within the area served by the provider, with reasonable 
     promptness and in a manner which assures continuity; and
       ``(ii) when medically necessary, available and accessible 
     24 hours a day and 7 days a week; and
       ``(B) with respect to assistance provided to such an 
     individual other than through the provider, or without prior 
     authorization, in 

[[Page H10543]]

     the case of a primary care case management provider, provides 
     for reimbursement to the individual (if applicable under the 
     contract between the State and the provider) if --
       ``(i) the services were medically necessary and immediately 
     required because of an unforeseen illness, injury, or 
     condition; and
       ``(ii) it was not reasonable given the circumstances to 
     obtain the services through the provider, or, in the case of 
     a primary care case management provider, with prior 
     authorization.
       ``(3) External independent review of eligible managed care 
     provider activities.--
       ``(A) Review of medicaid managed care plan contract.--
       ``(i) In general.--Except as provided in subparagraph (B), 
     each medicaid managed care plan shall be subject to an annual 
     external independent review of the quality and timeliness of, 
     and access to, the items and services specified in such 
     plan's contract with the State under section 1932(a)(1)(B). 
     Such review shall specifically evaluate the extent to which 
     the medicaid managed care plan provides such services in a 
     timely manner.
       ``(ii) Contents of review.--An external independent review 
     conducted under this paragraph shall include the following:

       ``(I) a review of the entity's medical care, through 
     sampling of medical records or other appropriate methods, for 
     indications of quality of care and inappropriate utilization 
     (including overutilization) and treatment,
       ``(II) a review of enrollee inpatient and ambulatory data, 
     through sampling of medical records or other appropriate 
     methods, to determine trends in quality and appropriateness 
     of care,
       ``(III) notification of the entity and the State when the 
     review under this paragraph indicates inappropriate care, 
     treatment, or utilization of services (including 
     overutilization), and
       ``(IV) other activities as prescribed by the Secretary or 
     the State.

       ``(iii) Availability of results.--The results of each 
     external independent review conducted under this subparagraph 
     shall be available to participating health care providers, 
     enrollees, and potential enrollees of the medicaid managed 
     care plan, except that the results may not be made available 
     in a manner that discloses the identity of any individual 
     patient.
       ``(B) Deemed compliance.--
       ``(i) Medicare plans.--The requirements of subparagraph (A) 
     shall not apply with respect to a medicaid managed care plan 
     if the plan is an eligible organization with a contract in 
     effect under section 1876.
       ``(ii) Private accreditation.--

       ``(I) In general.--The requirements of subparagraph (A) 
     shall not apply with respect to a medicaid managed care plan 
     if --

       ``(aa) the plan is accredited by an organization meeting 
     the requirements described in clause (iii); and
       ``(bb) the standards and process under which the plan is 
     accredited meet such requirements as are established under 
     subclause (II), without regard to whether or not the time 
     requirement of such subclause is satisfied.

       ``(II) Standards and process.--Not later than 180 days 
     after the date of the enactment of this Act, the Secretary 
     shall specify requirements for the standards and process 
     under which a medicaid managed care plan is accredited by an 
     organization meeting the requirements of clause (iii).

       ``(iii) Accrediting organization.--An accrediting 
     organization meets the requirements of this clause if the 
     organization --

       ``(I) is a private, nonprofit organization;
       ``(II) exists for the primary purpose of accrediting 
     managed care plans or health care providers; and
       ``(III) is independent of health care providers or 
     associations of health care providers.

       ``(C) Review of primary care case management provider 
     contract.--Each primary care case management provider shall 
     be subject to an annual external independent review of the 
     quality and timeliness of, and access to, the items and 
     services specified in the contract entered into between the 
     State and the primary care case management provider under 
     section 1932(a)(1)(B).
       ``(4) Federal monitoring responsibilities.--The Secretary 
     shall review the external independent reviews conducted 
     pursuant to paragraph (3) and shall monitor the effectiveness 
     of the State's monitoring and followup activities required 
     under subparagraph (A) of paragraph (2). If the Secretary 
     determines that a State's monitoring and followup activities 
     are not adequate to ensure that the requirements of paragraph 
     (2) are met, the Secretary shall undertake appropriate 
     followup activities to ensure that the State improves its 
     monitoring and followup activities.
       ``(5) Providing information on services.--
       ``(A) Requirements for medicaid managed care plans.--
       ``(i) Information to the state.--Each medicaid managed care 
     plan shall provide to the State (at such frequency as the 
     Secretary may require), complete and timely information 
     concerning the following:

       ``(I) The services that the plan provides to (or arranges 
     to be provided to) individuals eligible for medical 
     assistance under the State plan under this title.
       ``(II) The identity, locations, qualifications, and 
     availability of participating health care providers.
       ``(III) The rights and responsibilities of enrollees.
       ``(IV) The services provided by the plan which are subject 
     to prior authorization by the plan as a condition of coverage 
     (in accordance with paragraph (6)(A)).

       ``(V) The procedures available to an enrollee and a health 
     care provider to appeal the failure of the plan to cover a 
     service.

       ``(VI) The performance of the plan in serving individuals 
     eligible for medical assistance under the State plan under 
     this title.

       ``(ii) Information to health care providers, enrollees, and 
     potential enrollees.--Each medicaid managed care plan shall 
     --

       ``(I) upon request, make the information described in 
     clause (i) available to participating health care providers, 
     enrollees, and potential enrollees in the plan's service 
     area; and
       ``(II) provide to enrollees and potential enrollees 
     information regarding all items and services that are 
     available to enrollees under the contract between the State 
     and the plan that are covered either directly or through a 
     method of referral and prior authorization.

       ``(B) Requirements for primary care case management 
     providers.--Each primary care case management provider shall 
     --
       ``(i) provide to the State (at such frequency as the 
     Secretary may require), complete and timely information 
     concerning the services that the primary care case management 
     provider provides to (or arranges to be provided to) 
     individuals eligible for medical assistance under the State 
     plan under this title;
       ``(ii) make available to enrollees and potential enrollees 
     information concerning services available to the enrollee for 
     which prior authorization by the primary care case management 
     provider is required; and
       ``(iii) provide enrollees and potential enrollees 
     information regarding all items and services that are 
     available to enrollees under the contract between the State 
     and the primary care case management provider that are 
     covered either directly or through a method of referral and 
     prior authorization.
       ``(iv) provide assurances that such entities and their 
     professional personnel are licensed as required by State law 
     and qualified to provide case management services, through 
     methods such as ongoing monitoring of compliance with 
     applicable requirements and providing information and 
     technical assistance.
       ``(C) Requirements for both medicaid managed care plans and 
     primary care case management providers.--Each eligible 
     managed care provider shall provide the State with aggregate 
     encounter data for early and periodic screening, diagnostic, 
     and treatment services under section 1905(r) furnished to 
     individuals under 21 years of age. Any such data provided may 
     be audited by the State and the Secretary.
       ``(6) Timeliness of payment.--An eligible managed care 
     provider shall make payment to health care providers for 
     items and services which are subject to the contract under 
     section 1931(a)(1)(B) and which are furnished to individuals 
     eligible for medical assistance under the State plan under 
     this title who are enrolled with the provider on a timely 
     basis and under the claims payment procedures described in 
     section 1902(a)(37)(A), unless the health care provider and 
     the eligible managed care provider agree to an alternate 
     payment schedule.
       ``(7) Additional quality assurance requirements for 
     medicaid managed care plans.--
       ``(A) Conditions for prior authorization.--A medicaid 
     managed care plan may require the approval of medical 
     assistance for nonemergency services before the assistance is 
     furnished to an enrollee only if the system providing for 
     such approval --
       ``(i) provides that such decisions are made in a timely 
     manner, depending upon the urgency of the situation; and
       ``(ii) permits coverage of medically necessary medical 
     assistance provided to an enrollee without prior 
     authorization in the event of an emergency.
       ``(B) Internal grievance procedure.--Each medicaid managed 
     care plan shall establish an internal grievance procedure 
     under which a plan enrollee or a provider on behalf of such 
     an enrollee who is eligible for medical assistance under the 
     State plan under this title may challenge the denial of 
     coverage of or payment for such assistance.
       ``(C) Use of unique physician identifier for participating 
     physicians.--Each medicaid managed care plan shall require 
     each physician providing services to enrollees eligible for 
     medical assistance under the State plan under this title to 
     have a unique identifier in accordance with the system 
     established under section 1902(x).
       ``(D) Patient encounter data.--
       ``(i) In general.--Each medicaid managed care plan shall 
     maintain sufficient patient encounter data to identify the 
     health care provider who delivers services to patients and to 
     otherwise enable the State plan to meet the requirements of 
     section 1902(a)(27). The plan shall incorporate such 
     information in the maintenance of patient encounter data with 
     respect to such health care provider.
       ``(ii) Compliance.--A medicaid managed care plan shall --

       ``(I) submit the data maintained under clause (i) to the 
     State; or
       ``(II) demonstrate to the State that the data complies with 
     managed care quality assurance guidelines established by the 
     Secretary in accordance with clause (iii).

       ``(iii) Standards.--In establishing managed care quality 
     assurance guidelines under clause (ii)(II), the Secretary 
     shall consider --

[[Page H10544]]


       ``(I) managed care industry standards for --

       ``(aa) internal quality assurance; and
       ``(bb) performance measures; and

       ``(II) any managed care quality standards established by 
     the National Association of Insurance Commissioners.

       (E) Payments to hospitals.--A medicaid managed care plan 
     shall--
       ``(i) provide the State with assurances that payments for 
     hospital services are reasonable and adequate to meet the 
     costs which must be incurred by efficiently and economically 
     operated facilities in order to provide such services to 
     individuals enrolled with the plan under this title in 
     conformity with applicable State and Federal laws, 
     regulations, and quality and safety standards;
       ``(ii) report to the State at least annually--

       ``(I) the rates paid to hospitals by the plan for items and 
     services furnished to such individuals,
       ``(II) an explanation of the methodology used to compute 
     such rates, and
       ``(III) a comparison of such rates with the rates used by 
     the State to pay for hospital services furnished to 
     individuals who are eligible for benefits under the program 
     established by the State under this title but are not 
     enrolled in a medicaid managed care plan; and

       ``(iii) if the rates paid by the plan are lower than the 
     rates paid by the State (as described in clause (ii)(III)), 
     an explanation of why the rates paid by the plan nonetheless 
     meet the standard described in clause (i).
       ``(d) Due Process Requirements for Eligible Managed Care 
     Providers.--
       ``(1) Denial of or unreasonable delay in determining 
     coverage as grounds for hearing.--If an eligible managed care 
     provider --
       ``(A) denies coverage of or payment for medical assistance 
     with respect to an enrollee who is eligible for such 
     assistance under the State plan under this title; or
       ``(B) fails to make any eligibility or coverage 
     determination sought by an enrollee or, in the case of a 
     medicaid managed care plan, by a participating health care 
     provider or enrollee, in a timely manner, depending upon the 
     urgency of the situation, the enrollee or the health care 
     provider furnishing such assistance to the enrollee (as 
     applicable) may obtain a hearing before the State agency 
     administering the State plan under this title in accordance 
     with section 1902(a)(3), but only, with respect to a medicaid 
     managed care plan, after completion of the internal grievance 
     procedure established by the plan under subsection (c)(6)(B).
       ``(2) Completion of internal grievance procedure.--Nothing 
     in this subsection shall require completion of an internal 
     grievance procedure if such procedure does not exist or if 
     the procedure does not provide for timely review of health 
     needs considered by the enrollee's health care provider to be 
     of an urgent nature.
       ``(e) Miscellaneous.--
       ``(1) Protecting enrollees against the insolvency of 
     eligible managed care providers and against the failure of 
     the state to pay such providers.--Each eligible managed care 
     provider shall provide that an individual eligible for 
     medical assistance under the State plan under this title who 
     is enrolled with the provider may not be held liable--
       ``(A) for the debts of the eligible managed care provider, 
     in the event of the provider's insolvency;
       ``(B) for services provided to the individual --
       ``(i) in the event of the provider failing to receive 
     payment from the State for such services; or
       ``(ii) in the event of a health care provider with a 
     contractual or other arrangement with the eligible managed 
     care provider failing to receive payment from the State or 
     the eligible managed care provider for such services; or
       ``(C) for the debts of any health care provider with a 
     contractual or other arrangement with the provider to provide 
     services to the individual, in the event of the insolvency of 
     the health care provider.
       ``(2) Treatment of children with special health care 
     needs.--
       ``(A) In general.--In the case of an enrollee of an 
     eligible managed care provider who is a child with special 
     health care needs --
       ``(i) if any medical assistance specified in the contract 
     with the State is identified in a treatment plan prepared for 
     the enrollee by a program described in subparagraph (C), the 
     eligible managed care provider shall provide (or arrange to 
     be provided) such assistance in accordance with the treatment 
     plan either --

       ``(I) by referring the enrollee to a pediatric health care 
     provider who is trained and experienced in the provision of 
     such assistance and who has a contract with the eligible 
     managed care provider to provide such assistance; or
       ``(II) if appropriate services are not available through 
     the eligible managed care provider, permitting such enrollee 
     to seek appropriate specialty services from pediatric health 
     care providers outside of or apart from the eligible managed 
     care provider; and

       ``(ii) the eligible managed care provider shall require 
     each health care provider with whom the eligible managed care 
     provider has entered into an agreement to provide medical 
     assistance to enrollees to furnish the medical assistance 
     specified in such enrollee's treatment plan to the extent the 
     health care provider is able to carry out such treatment 
     plan.
       ``(B) Prior authorization.--An enrollee referred for 
     treatment under subparagraph (A)(i)(I), or permitted to seek 
     treatment outside of or apart from the eligible managed care 
     provider under subparagraph (A)(i)(II) shall be deemed to 
     have obtained any prior authorization required by the 
     provider.
       ``(C) Child with special health care needs.--For purposes 
     of subparagraph (A), a child with special health care needs 
     is a child who is receiving services under --
       ``(i) a program administered under part B or part H of the 
     Individuals with Disabilities Education Act;
       ``(ii) a program for children with special health care 
     needs under title V;
       ``(iii) a program under part B or part D of title IV; or
       ``(iv) any other program for children with special health 
     care needs identified by the Secretary.
       ``(3) Physician incentive plans.--Each medicaid managed 
     care plan shall require that any physician incentive plan 
     covering physicians who are participating in the medicaid 
     managed care plan shall meet the requirements of section 
     1876(i)(8).
       ``(4) Incentives for high quality eligible managed care 
     providers.--The Secretary and the State may establish a 
     program to reward, through public recognition, incentive 
     payments, or enrollment of additional individuals (or 
     combinations of such rewards), eligible managed care 
     providers that provide the highest quality care to 
     individuals eligible for medical assistance under the State 
     plan under this title who are enrolled with such providers. 
     For purposes of section 1903(a)(7), proper expenses incurred 
     by a State in carrying out such a program shall be considered 
     to be expenses necessary for the proper and efficient 
     administration of the State plan under this title.''.
       (d) Clarification of Application of FFP Denial Rules to 
     Payments Made Pursuant to Medicaid Managed Care Plans.--
     Section 1903(i) of such Act (42 U.S.C. 1396b(i)) is amended 
     by adding at the end the following sentence: ``Paragraphs 
     (1)(A), (1)(B), (2), (5), and (12) shall apply with respect 
     to items or services furnished and amounts expended by or 
     through an eligible managed care provider (as defined in 
     section 1933(a)(1)) in the same manner as such paragraphs 
     apply to items or services furnished and amounts expended 
     directly by the State.''.
       (e) Clarification of Certification Requirements for 
     Physicians Providing Services to Children and Pregnant 
     Women.--Section 1903(i)(12) of such Act (42 U.S.C. 
     1396b(i)(12)) is amended --
       (1) in subparagraph (A)(i), to read as follows:
       ``(i) is certified in family practice or pediatrics by the 
     medical specialty board recognized by the American Board of 
     Medical Specialties for family practice or pediatrics or is 
     certified in general practice or pediatrics by the medical 
     specialty board recognized by the American Osteopathic 
     Association,'';
       (2) in subparagraph (B)(i), to read as follows:
       ``(i) is certified in family practice or obstetrics by the 
     medical specialty board recognized by the American Board of 
     Medical Specialties for family practice or obstetrics or is 
     certified in family practice or obstetrics by the medical 
     specialty board recognized by the American Osteopathic 
     Association,''; and
       (3) in both subparagraphs (A) and (B) --
       (A) by striking ``or'' at the end of clause (v);
       (B) by redesignating clause (vi) as clause (vii); and
       (C) by inserting after clause (v) the following new clause:
       ``(vi) delivers such services in the emergency department 
     of a hospital participating in the State plan approved under 
     this title, or''.

     SEC. 7103. ADDITIONAL REQUIREMENTS FOR MEDICAID MANAGED CARE 
                   PLANS.

       Section 1933 of the Social Security Act, as added by 
     section 7102(c)(2), is amended --
       (1) by redesignating subsections (d) and (e) as subsections 
     (e) and (f), respectively; and
       (2) by inserting after subsection (c) the following new 
     subsection:
       ``(d) Additional Requirements for Medicaid Managed Care 
     Plans.--
       ``(1) Demonstration of adequate capacity and services.--
       ``(A) In general.--Subject to subparagraph (C), each 
     medicaid managed care plan shall provide the State and the 
     Secretary with adequate assurances (as determined by the 
     Secretary) that the plan, with respect to a service area --
       ``(i) has the capacity to serve the expected enrollment in 
     such service area;
       ``(ii) offers an appropriate range of services for the 
     population expected to be enrolled in such service area, 
     including transportation services and translation services 
     consisting of the principal languages spoken in the service 
     area;
       ``(iii) maintains sufficient numbers of providers of 
     services included in the contract with the State to ensure 
     that services are available to individuals receiving medical 
     assistance and enrolled in the plan to the same extent that 
     such services are available to individuals enrolled in the 
     plan who are not recipients of medical assistance under the 
     State plan under this title;
       ``(iv) maintains extended hours of operation with respect 
     to primary care services that are beyond those maintained 
     during a normal business day;
       ``(v) provides preventive and primary care services in 
     locations that are readily accessible to members of the 
     community; and

[[Page H10545]]

       ``(vi) provides information concerning educational, social, 
     health, and nutritional services offered by other programs 
     for which enrollees may be eligible.
       ``(vii) complies with such other requirements relating to 
     access to care as the Secretary or the State may impose.
       ``(B) Proof of adequate primary care capacity and 
     services.--Subject to subparagraph (C), a medicaid managed 
     care plan that contracts with a reasonable number of primary 
     care providers (as determined by the Secretary) and whose 
     primary care membership includes a reasonable number (as so 
     determined) of the following providers will be deemed to have 
     satisfied the requirements of subparagraph (A):
       ``(i) Rural health clinics, as defined in section 
     1905(l)(1).
       ``(ii) Federally-qualified health centers, as defined in 
     section 1905(l)(2)(B).
       ``(iii) Clinics which are eligible to receive payment for 
     services provided under title X of the Public Health Service 
     Act.
       ``(C) Sufficient providers of specialized services.--
     Notwithstanding subparagraphs (A) and (B), a medicaid managed 
     care plan may not be considered to have satisfied the 
     requirements of subparagraph (A) if the plan does not have a 
     sufficient number (as determined by the Secretary) of 
     providers of specialized services, including perinatal and 
     pediatric specialty care, to ensure that such services are 
     available and accessible.
       ``(2) Written provider participation agreements for certain 
     providers.--Each medicaid managed care plan that enters into 
     a written provider participation agreement with a provider 
     described in paragraph (1)(B) shall --
       ``(A) include terms and conditions that are no more 
     restrictive than the terms and conditions that the medicaid 
     managed care plan includes in its agreements with other 
     participating providers with respect to --
       ``(i) the scope of covered services for which payment is 
     made to the provider;
       ``(ii) the assignment of enrollees by the plan to the 
     provider;
       ``(iii) the limitation on financial risk or availability of 
     financial incentives to the provider;
       ``(iv) accessibility of care;
       ``(v) professional credentialing and recredentialing;
       ``(vi) licensure;
       ``(vii) quality and utilization management;
       ``(viii) confidentiality of patient records;
       ``(ix) grievance procedures; and
       ``(x) indemnification arrangements between the plans and 
     providers; and
       ``(B) provide for payment to the provider on a basis that 
     is comparable to the basis on which other providers are 
     paid.''.

     SEC. 7104. PREVENTING FRAUD IN MEDICAID MANAGED CARE.

       (a) In General.--Section 1933 of the Social Security Act, 
     as added by section 7102(c)(2) and amended by section 7103, 
     is amended --
       (1) by redesignating subsection (f) as subsection (g); and
       (2) by inserting after subsection (e) the following new 
     subsection:
       ``(f) Anti-Fraud Provisions.--
       ``(1) Provisions applicable to eligible managed care 
     providers.--
       ``(A) Prohibiting affiliations with individuals debarred by 
     Federal agencies.--
       ``(i) In general.--An eligible managed care provider may 
     not knowingly--

       ``(I) have a person described in clause (iii) as a 
     director, officer, partner, or person with beneficial 
     ownership of more than 5 percent of the plan's equity; or
       ``(II) have an employment, consulting, or other agreement 
     with a person described in clause (iii) for the provision of 
     items and services that are significant and material to the 
     organization's obligations under its contract with the State.

       ``(ii) Effect of noncompliance.--If a State finds that an 
     eligible managed care provider is not in compliance with 
     subclause (I) or (II) of clause (i), the State --

       ``(I) shall notify the Secretary of such noncompliance;
       ``(II) may continue an existing agreement with the provider 
     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 provider 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.

       ``(iii) Persons described.--A person is described in this 
     clause if such person --

       ``(I) is debarred or suspended by the Federal Government, 
     pursuant to the Federal acquisition regulation, from 
     Government contracting and subcontracting;
       ``(II) is an affiliate (within the meaning of the Federal 
     acquisition regulation) of a person described in clause (i); 
     or
       ``(III) is excluded from participation in any program under 
     title XVIII or any State health care program, as defined in 
     section 1128(h).

       ``(B) Restrictions on marketing.--
       ``(i) Distribution of materials.--

       ``(I) In general.--An eligible managed care provider may 
     not distribute marketing materials within any State--

       ``(aa) without the prior approval of the State; and
       ``(bb) that contain false or materially misleading 
     information.

       ``(II) Prohibition.--The State may not enter into or renew 
     a contract with an eligible managed care provider for the 
     provision of services to individuals enrolled under the State 
     plan under this title if the State determines that the 
     provider intentionally distributed false or materially 
     misleading information in violation of subclause (I)(bb).

       ``(ii) Service market.--An eligible managed care provider 
     shall distribute marketing materials to the entire service 
     area of such provider.
       ``(iii) Prohibition of tie-ins.--An eligible managed care 
     provider, or any agency of such provider, may not seek to 
     influence an individual's enrollment with the provider in 
     conjunction with the sale of any other insurance.
       ``(iv) Prohibiting marketing fraud.--Each eligible managed 
     care provider shall comply with such procedures and 
     conditions as the Secretary prescribes in order to ensure 
     that, before an individual is enrolled with the provider, the 
     individual is provided accurate and sufficient information to 
     make an informed decision whether or not to enroll.
       ``(2) Provisions applicable only to medicaid managed care 
     plans.--
       ``(A) State conflict-of-interest safeguards in medicaid 
     risk contracting.--A medicaid managed care plan may not enter 
     into a contract with any State under section 1932(a)(1)(B) 
     unless 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 
     plans or to the default enrollment process described in 
     section 1932(a)(1)(D)(iv) 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.
       ``(B) Requiring disclosure of financial information.--In 
     addition to any requirements applicable under section 
     1902(a)(27) or 1902(a)(35), a medicaid managed care plan 
     shall --
       ``(i) report to the State (and to the Secretary upon the 
     Secretary's request) such financial information as the State 
     or the Secretary may require to demonstrate that --

       ``(I) the plan has the ability to bear the risk of 
     potential financial losses and otherwise has a fiscally sound 
     operation;
       ``(II) the plan uses the funds paid to it by the State and 
     the Secretary for activities consistent with the requirements 
     of this title and the contract between the State and plan; 
     and
       ``(III) the plan does not place an individual physician, 
     physician group, or other health care provider at substantial 
     risk (as determined by the Secretary) for services not 
     provided by such physician, group, or health care provider, 
     by providing adequate protection (as determined by the 
     Secretary) to limit the liability of such physician, group, 
     or health care provider, through measures such as stop loss 
     insurance or appropriate risk corridors;

       ``(ii) agree that the Secretary and the State (or any 
     person or organization designated by either) shall have the 
     right to audit and inspect any books and records of the plan 
     (and of any subcontractor) relating to the information 
     reported pursuant to clause (i) and any information required 
     to be furnished under section paragraphs (27) or (35) of 
     section 1902(a);
       ``(iii) make available to the Secretary and the State a 
     description of each transaction described in subparagraphs 
     (A) through (C) of section 1318(a)(3) of the Public Health 
     Service Act between the plan and a party in interest (as 
     defined in section 1318(b) of such Act); and
       ``(iv) agree to make available to its enrollees upon 
     reasonable request --

       ``(I) the information reported pursuant to clause (i); and
       ``(II) the information required to be disclosed under 
     sections 1124 and 1126.

       ``(C) Adequate provision against risk of insolvency.--
       ``(i) Establishment of standards.--The Secretary shall 
     establish standards, including appropriate equity standards, 
     under which each medicaid managed care plan shall make 
     adequate provision against the risk of insolvency.
       ``(ii) Consideration of other standards.--In establishing 
     the standards described in clause (i), the Secretary shall 
     consider - solvency standards applicable to eligible 
     organizations with a risk-sharing contract under section 
     1876.
       (iii) Model Contract on solvency.--At the earliest 
     practicable time after the date of enactment of this section, 
     the Secretary shall issue guidelines and regulations 
     concerning solvency standards for risk contracting entities 
     and subcontractors of such risk contracting entities. Such 
     guidelines and regulations shall take into account 
     characteristics that may differ among risk contracting 
     entities including whether such an entity is at risk for 
     inpatient hospital services.
       ``(D) Requiring report on net earnings and additional 
     benefits.--Each medicaid managed care plan shall submit a 
     report to the State and the Secretary not later than 12 
     months after the close of a contract year containing --
       ``(i) the most recent audited financial statement of the 
     plan's net earnings, in accordance with guidelines 
     established by the Secretary in consultation with the States, 


[[Page H10546]]

     and consistent with generally accepted accounting principles; 
     and
       ``(ii) a description of any benefits that are in addition 
     to the benefits required to be provided under the contract 
     that were provided during the contract year to members 
     enrolled with the plan and entitled to medical assistance 
     under the State plan under this title.''.

     SEC. 7105. ASSURING ADEQUACY OF PAYMENTS TO MEDICAID MANAGED 
                   CARE PLANS AND PROVIDERS.

       Title XIX of the Social Security Act, as amended by 
     sections 7001, 7101(a), and 7102(c), is further amended--
       (1) by redesignating section 1934 as section 1935; and
       (2) by inserting after section 1933 the following new 
     section:


  ``assuring adequacy of payments to medicaid managed care plans and 
                               providers

       ``Sec. 1934. As a condition of approval of a State plan 
     under this title, a State shall--
       ``(1) find, determine, and make assurances satisfactory to 
     the Secretary that--
       ``(A) the rates it pays medicaid managed care plans for 
     individuals eligible under the State plan are reasonable and 
     adequate to assure access to services meeting professionally 
     recognized quality standards, taking into account--
       ``(i) the items and services to which the rate applies,
       ``(ii) the eligible population, and
       ``(iii) the rate the State pays providers for suchitems and 
     services; and
       ``(B) the methodology used to adjust the rate adequately 
     reflects the varying risks associated with individuals 
     actually enrolling in each medicaid managed care plan; and
       ``(2) report to the Secretary, at least annually, on--
       ``(A) the rates the States pays to medicaid managed care 
     plans, and
       ``(B) the rates medicaid managed care plans pay for 
     hospital services (and such other information as medicaid 
     managed care plans are required to submit to the State 
     pursuant to section 1933(c)(5)(E).''.

     SEC. 7106. SANCTIONS FOR NONCOMPLIANCE BY ELIGIBLE MANAGED 
                   CARE PROVIDERS.

       (a) Sanctions Described.--Title XIX of such Act (42 U.S.C. 
     1396 et seq.), as previously amended, is further amended--
       (1) by redesignating section 1934 as section 1935; and
       (2) by inserting after section 1934 the following new 
     section:


    ``sanctions for noncompliance by eligible managed care providers

       ``Sec. 1935. (a) Use of Intermediate Sanctions by the State 
     To Enforce Requirements.--Each State shall establish 
     intermediate sanctions, which may include any of the types 
     described in subsection (b) other than the termination of a 
     contract with an eligible managed care provider, which the 
     State may impose against an eligible managed care provider 
     with a contract under section 1932(a)(1)(B) if the provider--
       ``(1) fails substantially to provide medically necessary 
     items and services that are required (under law or under such 
     provider's contract with the State) to be provided to an 
     enrollee covered under the contract, if the failure has 
     adversely affected (or has a substantial likelihood of 
     adversely affecting) the enrollee;
       ``(2) imposes premiums on enrollees in excess of the 
     premiums permitted under this title;
       ``(3) acts to discriminate among enrollees on the basis of 
     their health status or requirements for health care services, 
     including expulsion or refusal to reenroll an individual, 
     except as permitted by sections 1932 and 1933, or engaging in 
     any practice that would reasonably be expected to have the 
     effect of denying or discouraging enrollment with the 
     provider by eligible individuals whose medical condition or 
     history indicates a need for substantial future medical 
     services;
       ``(4) misrepresents or falsifies information that is 
     furnished
       ``(A) to the Secretary or the State under section 1932 or 
     1933; or
       ``(B) to an enrollee, potential enrollee, or a health care 
     provider under such sections; or
       ``(5) fails to comply with the requirements of section 
     1876(i)(8).
       ``(b) Intermediate Sanctions.--The sanctions described in 
     this subsection are as follows:
       ``(1) Civil money penalties as follows:
       ``(A) Except as provided in subparagraph (B), (C), or (D), 
     not more than $25,000 for each determination under subsection 
     (a).
       ``(B) With respect to a determination under paragraph (3) 
     or (4)(A) of subsection (a), not more than $100,000 for each 
     such determination.
       ``(C) With respect to a determination under subsection 
     (a)(2), double the excess amount charged in violation of such 
     subsection (and the excess amount charged shall be deducted 
     from the penalty and returned to the individual concerned).
       ``(D) Subject to subparagraph (B), with respect to a 
     determination under subsection (a)(3), $15,000 for each 
     individual not enrolled as a result of a practice described 
     in such subsection.
       ``(2) The appointment of temporary management to oversee 
     the operation of the eligible managed care provider and to 
     assure the health of the provider's enrollees, if there is a 
     need for temporary management while--
       ``(A) there is an orderly termination or reorganization of 
     the eligible managed care provider; or
       ``(B) improvements are made to remedy the violations found 
     under subsection (a), except that temporary management under 
     this paragraph may not be terminated until the State has 
     determined that the eligible managed care provider has the 
     capability to ensure that the violations shall not recur.
       ``(3) Permitting individuals enrolled with the eligible 
     managed care provider to terminate enrollment without cause, 
     and notifying such individuals of such right to terminate 
     enrollment.
       ``(c) Treatment of Chronic Substandard Providers.--In the 
     case of an eligible managed care provider which has 
     repeatedly failed to meet the requirements of section 1932 or 
     1933, the State shall (regardless of what other sanctions are 
     provided) impose the sanctions described in paragraphs (2) 
     and (3) of subsection (b).
       ``(d) Authority To Terminate Contract.--In the case of an 
     eligible managed care provider which has failed to meet the 
     requirements of section 1932 or 1933, the State shall have 
     the authority to terminate its contract with such provider 
     under section 1932(a)(1)(B) and to enroll such provider's 
     enrollees with other eligible managed care providers (or to 
     permit such enrollees to receive medical assistance under the 
     State plan under this title other than through an eligible 
     managed care provider).
       ``(e) Availability of Sanctions to the Secretary.--
       ``(1) Intermediate sanctions.--In addition to the sanctions 
     described in paragraph (2) and any other sanctions available 
     under law, the Secretary may provide for any of the sanctions 
     described in subsection (b) if the Secretary determines 
     that--
       ``(A) an eligible managed care provider with a contract 
     under section 1932(a)(1)(B) fails to meet any of the 
     requirements of section 1932 or 1933; and
       ``(B) the State has failed to act appropriately to address 
     such failure.
       ``(2) Denial of payments to the state.--The Secretary may 
     deny payments to the State for medical assistance furnished 
     under the contract under section 1932(a)(1)(B) for 
     individuals enrolled after the date the Secretary notifies an 
     eligible managed care provider of a determination under 
     subsection (a) and until the Secretary is satisfied that the 
     basis for such determination has been corrected and is not 
     likely to recur.
       ``(f) Due Process for Eligible Managed Care Providers.--
       ``(1) Availability of hearing prior to termination of 
     contract.--A State may not terminate a contract with an 
     eligible managed care provider under section 1932(a)(1)(B) 
     unless the provider is provided with a hearing prior to the 
     termination.
       ``(2) Notice to enrollees of termination hearing.--A State 
     shall notify all individuals enrolled with an eligible 
     managed care provider which is the subject of a hearing to 
     terminate the provider's contract with the State of the 
     hearing and that the enrollees may immediately disenroll with 
     the provider for cause.
       ``(3) Other protections for eligible managed care providers 
     against sanctions imposed by state.--Before imposing any 
     sanction against an eligible managed care provider other than 
     termination of the provider's contract, the State shall 
     provide the provider with notice and such other due process 
     protections as the State may provide, except that a State may 
     not provide an eligible managed care provider with a 
     pretermination hearing before imposing the sanction described 
     in subsection (b)(2).
       ``(4) Imposition of civil monetary penalties by 
     secretary.--The provisions of section 1128A (other than 
     subsections (a) and (b)) shall apply with respect to a civil 
     money penalty imposed by the Secretary under subsection 
     (b)(1) in the same manner as such provisions apply to a 
     penalty or proceeding under section 1128A.''.
       (b) Conforming Amendment Relating to Termination of 
     Enrollment for Cause.--Section 1933(b)(2)(B) of the Social 
     Security Act, as added by this part, is amended by inserting 
     after ``coercion'' the following: ``, or pursuant to the 
     imposition against the eligible managed care provider of the 
     sanction described in section 1935(b)(3),''.

     SEC. 7107. REPORT ON PUBLIC HEALTH SERVICES.

       (a) In General.--Not later than January 1, 1994, the 
     Secretary of Health and Human Services (in this subtitle 
     referred to as the ``Secretary'') shall report to the 
     Committee on Finance of the Senate and the Committee on 
     Commerce of the House of Representatives on the effect of 
     risk contracting entities (as defined in section 1932(a)(3) 
     of the Social Security Act) and primary care case management 
     entities (as defined in section 1932(a)(1) of such Act) on 
     the delivery of and payment for the services listed in 
     subsection (f)(2)(C)(ii) of section 1932 of such Act.
       (b) Contents of Report.--The report referred to in 
     subsection (a) shall include --
       (1) information on the extent to which enrollees with risk 
     contracting entities and primary care case management 
     programs seek services at local health departments, public 
     hospitals, and other facilities that provide care without 
     regard to a patient's ability to pay;
       (2) information on the extent to which the facilities 
     described in paragraph (1) provide services to enrollees with 
     risk contracting entities and primary care case management 
     programs without receiving payment;

[[Page H10547]]

       (3) information on the effectiveness of systems implemented 
     by facilities described in paragraph (1) for educating such 
     enrollees on services that are available through the risk 
     contracting entities or primary care case management programs 
     with which such enrollees are enrolled;
       (4) to the extent possible, identification of the types of 
     services most frequently sought by such enrollees at such 
     facilities; and
       (5) recommendations about how to ensure the timely delivery 
     of the services listed in subsection (f)(2)(C)(ii) of section 
     1931 of the Social Security Act to enrollees of risk 
     contracting entities and primary care case management 
     entities and how to ensure that local health departments, 
     public hospitals, and other facilities are adequately 
     compensated for the provision of such services to such 
     enrollees.

     SEC. 7108. REPORT ON PAYMENTS TO HOSPITALS.

       (a) In General.--Not later than October 1 of each year, 
     beginning with October 1, 1996, the Secretary and the 
     Comptroller General shall analyze and submit a report to the 
     Committee on Finance of the Senate and the Committee on 
     Commerce of the House of Representatives on rates paid for 
     hospital services under coordinated care programs described 
     in section 1932 of the Social Security Act.
       (b) Contents of Report.--The information in the report 
     described in subsection (a) shall--
       (1) be organized by State, type of hospital, type of 
     service, and
       (2) include a comparison of rates paid for hospital 
     services under coordinated care programs with rates paid for 
     hospital services furnished to individuals who are entitled 
     to benefits under a State plan under title XIX of the Social 
     Security Act and are not enrolled in such coordinated care 
     programs.
       (c) Reports by States.--Each State shall transmit to the 
     Secretary, at such time and in such manner as the Secretary 
     determines appropriate, the information on hospital rates 
     submitted to such State under section 1932(b)(3)(P) of such 
     Act.

     SEC. 7109. CONFORMING AMENDMENTS.

       (a) Exclusion of Certain Individuals and Entities From 
     Participation in Program.--Section 1128(b)(6)(C) of the 
     Social Security Act (42 U.S.C. 1320a-7(b)(6)(C)) is amended--
       (1) in clause (i), by striking ``a health maintenance 
     organization (as defined in section 1903(m))'' and inserting 
     ``an eligible managed care provider, as defined in section 
     1933(a)(1),''; and
       (2) in clause (ii), by inserting ``section 1115 or'' after 
     ``approved under''.
       (b) State Plan Requirements.--Section 1902 of such Act (42 
     U.S.C. 1396a) is amended--
       (1) in subsection (a)(30)(C), by striking ``section 
     1903(m)'' and inserting ``section 1932(a)(1)(B)''; and
       (2) in subsection (a)(57), by striking ``hospice program, 
     or health maintenance organization (as defined in section 
     1903(m)(1)(A))'' and inserting ``or hospice program'';
       (3) in subsection (e)(2)(A), by striking ``or with an 
     entity described in paragraph (2)(B)(iii), (2)(E), (2)(G), or
       (6) of section 1903(m) under a contract described in 
     section 1903(m)(2)(A);
       (4) in subsection (p)(2)--
       (A) by striking ``a health maintenance organization (as 
     defined in section 1903(m))'' and inserting ``an eligible 
     managed care provider, as defined in section 1933(a)(1),'';
       (B) by striking ``an organization'' and inserting ``a 
     provider''; and
       (C) by striking ``any organization'' and inserting ``any 
     provider''; and
       (5) in subsection (w)(1), by striking ``sections 
     1903(m)(1)(A) and'' and inserting ``section''.
       (c) Payment to States.--Section 1903(w)(7)(A)(viii) of such 
     Act (42 U.S.C. 1396b(w)(7)(A)(viii)) is amended to read as 
     follows:
       ``(viii) Services of an eligible managed care provider with 
     a contract under section 1932(a)(1)(B).''.
       (d) Use of Enrollment Fees and Other Charges.--Section 1916 
     of such Act (42 U.S.C. 1396o) is amended in subsections 
     (a)(2)(D) and (b)(2)(D) by striking ``a health maintenance 
     organization (as defined in section 1903(m))'' and inserting 
     ``an eligible managed care provider, as defined in section 
     1933(a)(1),'' each place it appears.
       (e) Extension of Eligibility for Medical Assistance.--
     Section 1925(b)(4)(D)(iv) of such Act (42 U.S.C. 1396r-
     6(b)(4)(D)(iv)) is amended to read as follows:
       ``(iv) Enrollment with eligible managed care provider.--
     Enrollment of the caretaker relative and dependent children 
     with an eligible managed care provider, as defined in section 
     1933(a)(1), less than 50 percent of the membership (enrolled 
     on a prepaid basis) of which consists of individuals who are 
     eligible to receive benefits under this title (other than 
     because of the option offered under this clause). The option 
     of enrollment under this clause is in addition to, and not in 
     lieu of, any enrollment option that the State might offer 
     under subparagraph (A)(i) with respect to receiving services 
     through an eligible managed care provider in accordance with 
     sections 1932, 1933, and 1934.''.
       (f) Assuring Adequate Payment Levels for Obstetrical and 
     Pediatric Services.--Section 1926(a) of such Act (42 U.S.C. 
     1396r-7(a)) is amended in paragraphs (1) and (2) by striking 
     ``health maintenance organizations under section 1903(m)'' 
     and inserting ``eligible managed care providers under 
     contracts entered into under section 1932(a)(1)(B)'' each 
     place it appears.
       (g) Payment for Covered Outpatient Drugs.--Section 
     1927(j)(1) of such Act (42 U.S.C. 1396r-8(j)(1)) is amended 
     by striking ``* * * Health Maintenance Organizations, 
     including those organizations that contract under section 
     1903(m),'' and inserting ``health maintenance organizations 
     and medicaid managed care plans, as defined in section 
     1933(a)(2),''.
       (h) Demonstration Projects To Study Effect of Allowing 
     States To Extend Medicaid Coverage for Certain Families.--
     Section 4745(a)(5)(A) of the Omnibus Budget Reconciliation 
     Act of 1990 (42 U.S.C. 1396a note) is amended by striking 
     ``(except section 1903(m)'' and inserting ``(except sections 
     1932, 1933, and 1934)''.

     SEC. 7110. EFFECTIVE DATE; STATUS OF WAIVERS.

       (a) Effective Date.--Except as provided in subsection (b), 
     the amendments made by this subtitle shall apply to medical 
     assistance furnished--
       (1) during quarters beginning on or after October 1, 1996; 
     or
       (2) in the case of assistance furnished under a contract 
     described in section 7102(b), during quarters beginning after 
     the earlier of--
     A) the date of the expiration of the contract; or
       (B) the expiration of the 1-year period which begins on the 
     date of the enactment of this Act.
       (b) Application to Waivers.--
       (1) Existing waivers.--If any waiver granted to a State 
     under section 1115 or 1915 of the Social Security Act (42 
     U.S.C. 1315, 1396n) or otherwise which relates to the 
     provision of medical assistance under a State plan under 
     title XIX of such Act (42 U.S.C. 1396 et seq.), is in effect 
     or approved by the Secretary of Health and Human Services as 
     of the applicable effective date described in subsection (a), 
     the amendments made by this subtitle shall not apply with 
     respect to the State before the expiration (determined 
     without regard to any extensions) of the waiver to the extent 
     such amendments are inconsistent with the terms of the 
     waiver.
       (2) Secretarial evaluation and report for existing waivers 
     and extensions.--
       (A) Prior to approval.--On and after the applicable 
     effective date described in subsection (a), the Secretary, 
     prior to extending any waiver granted under section 1115 or 
     1915 of the Social Security Act (42 U.S.C. 1315, 1396n) or 
     otherwise which relates to the provision of medical 
     assistance under a State plan under title XIX of the such Act 
     (42 U.S.C. 1396 et seq.), shall--
       (i) conduct an evaluation of--

       (I) the waivers existing under such sections or other 
     provision of law as of the date of the enactment of this Act; 
     and
       (II) any applications pending, as of the date of the 
     enactment of this Act, for extensions of waivers under such 
     sections or other provision of law; and

       (ii) submit a report to the Congress recommending whether 
     the extension of a waiver under such sections or provision of 
     law should be conditioned on the State submitting the request 
     for an extension complying with the provisions of sections 
     1932, 1933, and 1934 of the Social Security Act (as added by 
     this subtitle).
       (B) Deemed approval.--If the Congress has not enacted 
     legislation based on a report submitted under subparagraph 
     (A)(ii) within 120 days after the date such report is 
     submitted to the Congress, the recommendations contained in 
     such report shall be deemed to be approved by the Congress.
     Subtitle C--Additional Reforms of Medicaid Acute Care Program

     SEC. 7201. PERMITTING INCREASED FLEXIBILITY IN MEDICAID COST-
                   SHARING.

       (a) In General.--Subsections (a)(3) and (b)(3) of section 
     1916 of the Social Security Act (42 U.S.C. 1396o) are amended 
     by striking everything that follows ``other care and 
     services'' and inserting the following: ``will be established 
     pursuant to a public schedule of charges and will be adjusted 
     to reflect the income, resources, and family size of the 
     individual provided the item or service.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to items and services furnished on or after the 
     first day of the first calendar quarter beginning after the 
     date of the enactment of this Act.

     SEC. 7202. LIMITS ON REQUIRED COVERAGE OF ADDITIONAL 
                   TREATMENT SERVICES UNDER EPSDT.

       (a) Regulations.--The Secretary of Health and Human 
     Services shall define, by regulation promulgated after 
     consultation with States and organizations representing 
     health care providers, those treatment services (in addition 
     to those otherwise covered under a State plan under title XIX 
     of the Social Security Act) that must be covered under 
     section 1905(r)(5) of such Act.
       (b) Construction.--Nothing in subsection (a) shall be 
     construed as limiting the scope of such treatment services a 
     State may cover under such section.

     SEC. 7203. DELAY IN APPLICATION OF NEW REQUIREMENTS.

       (a) Delay in Implementation.--
       (1) In general.--Notwithstanding any other provision of 
     law, no change in law--
       (A) which has the effect of imposing a requirement on a 
     State under a State plan under title XIX of the Social 
     Security Act, and
       (B) with respect to the Secretary of Health and Human 
     Services is required to issue regulations to carry out such 
     requirement,


[[Page H10548]]

     shall take effect until the date the Secretary promulgates 
     such regulation as a final regulation.
       (2) State option.--Except as otherwise provided by the 
     Secretary, a State may elect to have a change in a law 
     described in paragraph (1) apply with respect to the State 
     during the period (or portion thereof) in which the change 
     would have taken effect but for paragraph (1).
       (b) Prohibition of Changes in Final Regulations During a 
     Fiscal Year.--
       (1) In general.--Except as provided in paragraph (2), any 
     change in a regulation of the Secretary of Health and Human 
     Services relating to the medicaid program under title XIX of 
     the Social Security Act shall not become effective until the 
     beginning of the fiscal year following the fiscal year in 
     which the change was promulgated.
       (2) State option.--Except as otherwise provided by the 
     Secretary, a State may elect to have a change in a regulation 
     described in paragraph (1) apply with respect to the State 
     during the period (or portion thereof) in which the change 
     would have taken effect but for paragraph (1).
       (c) Sense of Congress Regarding Federal Payment for New 
     Medicaid Mandates.--It is the sense of Congress that if a 
     State is required by future legislation to provide for 
     additional services, eligible individuals, or otherwise incur 
     additional costs under its medicaid program under title XIX 
     of the Social Security Act, the Federal Government shall 
     provide for full payment of any such additional costs for at 
     least the first two years in which such requirement applies.

     SEC. 7204. DEADLINE ON ACTION ON WAIVERS.

       (a) In General.--In considering applications for medicaid 
     waivers--
       (1) the application shall be deemed granted unless the 
     Secretary of Health and Human Services, within ninety days 
     after the date of the submission of the application of the 
     Secretary, either denies the application 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, and
       (2) after the date the Secretary receives such additional 
     information, the application shall be deemed granted unless 
     the Secretary within ninety days of such date, denies such 
     application.
       (b) Medicaid Waivers.--In this section, the term ``medicaid 
     waiver'' means the request of a State for a waiver of a 
     provision of title XIX of the Social Security Act (or of 
     another provision of law that applies to State plans under 
     such title), and includes such a waiver under the authority 
     of section 1115 or section 1915 of the Social Security Act or 
     under section 222 of the Social Security Amendments of 1972 
     and section 402(a) of the Social Security Amendments of 1967.
       Subtitle D--National Commission on Medicaid Restructuring

     SEC. 7301. ESTABLISHMENT OF COMMISSION.

       (a) In General.--There is hereby established the National 
     Commission on Medicaid Restructuring (in this subtitle 
     referred to as the ``Commission'').
       (b) Composition.--The Commission shall be composed as 
     follows:
       (1) 2 federal officials.--The President shall appoint 2 
     Federal officials, one of whom the President shall designate 
     as chairperson of the Commission.
       (2) 4 members of congress.--(A) The Speaker of the House of 
     Representatives shall appoint one Member of the House as a 
     member.
       (B) The minority leader of the House of Representatives 
     shall appoint one Member of the House as a member.
       (C) The majority leader of the Senate shall appoint one 
     Member of the Senate as a member.
       (D) The minority leader of the Senate shall appoint one 
     Member of the Senate as a member.
       (3) 6 state government representatives.--(A) The majority 
     leaders of the House of Representatives and the Senate shall 
     jointly appoint 3 individuals who are governors, State 
     legislators, or State medicaid officials.
       (B) The minority leaders of the House of Representatives 
     and the Senate shall jointly appoint 3 individuals who are 
     governors, State legislators, or State medicaid officials.
       (4) 6 experts.--(A) The majority leaders of the House of 
     Representatives and the Senate shall jointly appoint 4 
     individuals who are not officials of the Federal or State 
     governments and who have expertise in a health-related field, 
     such as medicine, public health, or delivery and financing of 
     health care services.
       (B) The President shall appoint 2 individuals who are not 
     officials of the Federal or State governments and who have 
     expertise in a health-related field, such as medicine, public 
     health, or delivery and financing of health care services.
       (c) Initial Appointment.--Members of the Commission shall 
     first be appointed by not later than February 1, 1996.
       (d) Compensation and Expenses.--
       (1) Compensation.--Each member of the Commission shall 
     serve without compensation.
       (2) Travel expenses.--Members of the Commission shall be 
     allowed travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter I of chapter 57 of title 5, United States 
     Code, while away from their homes or regular places of 
     business in the performance of services for the Commission.

     SEC. 7302. DUTIES OF COMMISSION.

       (a) Study of Medicaid Program.--
       (1) In general.--The Commission shall study and make 
     recommendations to the Congress, the President, and the 
     Secretary regarding the need for changes (in addition to the 
     changes effected under this title) in the laws and 
     regulations regarding the medicaid program under title XIX of 
     the Social Security Act.
       (2) Specific concerns.--The Commission shall specifically 
     address each of the following:
       (A) Changes needed to ensure adequate access to health care 
     for low-income individuals.
       (B) Promotion of quality care.
       (C) Deterrence of fraud and abuse.
       (D) Providing States with additional felxibility in 
     implementing their medicaid plans.
       (E) Methods of containing Federal and State costs.
       (b) Reports.--
       (1) First report.--The Commission shall issue a first 
     report to Congress by not later than December 31, 1996.
       (2) Subsequent reports.--The Commission shall issue 
     subsequent reports to Congress by not later than December 31, 
     1997, and December 31, 1998.

     SEC. 7303. ADMINISTRATION.

       (a) Appointment of Staff.--
       (1) Executive director.--The Commission shall have an 
     Executive Director who shall be appointed by the Chairperson 
     with the approval of the Commission. The Executive Director 
     shall be paid at a rate not to exceed the rate of basic pay 
     payable for level III of the Executive Schedule.
       (2) Staff.--With the approval of the Commission, the 
     Executive Director 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.
       (3) 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.
       (b) Provision of Administrative Support Services by HHS.--
     Upon the request of the Commission, the Secretary of Health 
     and Human Services shall provide to the Commission on a 
     reimbursable basis such administrative support services as 
     the Commission may request.

     SEC. 7304. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated to carry out this 
     subtitle $3,000,000 for fiscal year 1996, $4,000,000 for each 
     of fiscal years 1997 and 1998, and $2,000,000 for fiscal year 
     1999.

     SEC. 7305. TERMINATION.

       The Commission shall terminate on December 31, 1998.
      Subtitle E--Restrictions on Disproportionate Share Payments

     SEC. 7401. REFORMING DISPROPORTIONATE SHARE PAYMENTS UNDER 
                   STATE MEDICAID PROGRAMS.

       (a) Targeting Payments.--Section 1923 of the Social 
     Security Act (42 U.S.C.1396r-3) is amended--
       (1) in subsection (a)(1)--
       (A) by redesignating subparagraphs (A) and (B) as clauses 
     (i) and (ii),
       (B) by striking ``(1)'' and inserting ``(1)(A)'',
       (C) in clause (i) (as so redesignated) by striking 
     ``(b)(1)'' and inserting ``(b)(1)(A)'', and
       (D) by adding at the end the following:
       ``(B) A State plan under this title shall not be considered 
     to meet the requirement of section 1902(a)(13)(A) (insofar as 
     it requires payments to hospitals to take into account the 
     situation of hospitals that serve a disproportionate number 
     of low-income patients with special needs), as of July 1, 
     1996, unless the State has submitted to the Secretary, by not 
     later than such date, an amendment to such plan that utilizes 
     the definition of such hospitals specified in subsection 
     (b)(1)(B) in lieu of the definition established by the State 
     under subparagraph (a)(i).'';
       (2) in subsection (a)(2)(A)--
       (A) by inserting ``(i)'' after ``(2)(A)'',
       (B) by striking ``paragraph (1)'' and inserting ``paragraph 
     (1)(A)(i)'', and
       (C) by adding at the end the following:
       ``(ii) In order to be considered to have met such 
     requirement of section 1902(a)(13)(A) as of July 1, 1996, the 
     State must submit to the Secretary by not later than April 1, 
     1996, the State plan amendment described in paragraph (1)(B), 
     consistent with subsection (c), effective for inpatient 
     hospital services furnished on or after July 1, 1996.'';
       (3) in subsection (b)--
       (A) in the heading, by striking ``Hospitals Deemed 
     Disproportionate Share'' and inserting ``Disproportionate 
     Share Hospitals'',
       (B) in paragraph (1)--
       (i) by redesignating subparagraphs (A) and (B) as clauses 
     (i) and (ii),
       (ii) by striking ``(1) For purposes of subsection (a)(1)'' 
     and inserting ``(1)(A) For purposes of subsection 
     (a)(1)(A)'', and

[[Page H10549]]

       (iii) by adding at the end the following:
       ``(B) For purposes of subsection (a)(1)(B), a hospital that 
     meets the requirements of subsection (d) is a 
     disproportionate share hospital only if--
       ``(i) in the case of a hospital that is not described in 
     subsection (d)(2)(A)(i), the hospital's low-income 
     utilization rate (as defined in paragraph (3)) exceeds 25 
     percent; or
       ``(ii) in the case of a hospital that is described in 
     subsection (d)(2)(A)(i)--
       ``(I) the hospital meets the requirement of clause (i), or
       ``(II) the hospital's medicaid inpatient utilization rate 
     (as defined in paragraph (2)) exceeds 20 percent.'';
       (C) in paragraph (2) by striking ``(1)(A)'' and inserting 
     ``(1)'',
       (D) in paragraph (3) by striking ``(1)(B)'' and inserting 
     ``(1)'', and
       (E) by striking paragraph (4);
       (4) in subsection (c)--
       (A) in paragraph (2), by striking ``subparagraph (A) or (B) 
     of subsection (b)(1)'' and inserting ``clause (i) or (ii) of 
     subsection (b)(1)(A)'',
       (B) by striking paragraph (3), and
       (C) in the matter following paragraph (3)--
       (i) by striking ``(1)(B)'' each place it appears and 
     inserting ``(1)(A)(ii)'', and
       (ii) by striking ``(2)(A)'' each place it appears and 
     inserting ``(2)(A)(i)'' ; and
       (5) in subsection (e)--
       (A) in paragraph (1)(C), by striking ``meets the 
     requirement of subsection (d)(3)'' and inserting ``makes 
     payments under this section only to hospitals described in 
     subsection (b)(1)(B)'', and
       (B) in paragraph (2)--
       (i) by inserting ``and'' at the end of subparagraph (B), 
     and
       (ii) by striking subparagraph (C).
       (b) Direct Payment by State.--Section 1923(a) of such Act 
     (42 U.S.C. 1396r-4(a)), as amended by subsection (a), is 
     further amended--
       (1) in paragraph (1), by adding at the end the following
       ``(C) A State plan under this title shall not be considered 
     to meet the requirement of section 1902(a)(13)(A) (insofar as 
     it requires payments to hospitals to take into account the 
     situation of hospitals that serve a disproportionate number 
     of low-income patients with special needs), as of July 1, 
     1996, unless the State provides that any payments made under 
     this section with respect to individuals who are--
       ``(i) entitled to benefits under the State plan, and
       ``(ii) enrolled with a health maintenance organization or 
     other managed care plan,

     are, at the option of the hospital, made directly to such 
     hospital by the State.''; and
       (2) in paragraph (2)(A)(ii), by striking ``amendment 
     described in paragraph (1)(B)'' and inserting `` amendments 
     described in subparagraphs (B) and (C) of paragraph (1)''.
       (c) Adjustment to National DSH Limit, State Allocations.--
     The Secretary of Health and Human Services shall make 
     appropriate adjustments in--
       (1) the national DSH payment limit established under 
     section 1923(f)(1)(B) of the Social Security Act, and
       (2) the State DSH allotments established under section 
     1923(f)(2) of such Act,

     to reflect the amendments made by subsection (a).
       (d) Effective Date.--The amendments made by this section 
     shall apply to payments to States under section 1903(a) of 
     the Social Security Act for payments to hospitals made under 
     State plans after--
       (1) July 1, 1996, or
       (2) in the case of a State with a State legislature that is 
     not scheduled to have a regular legislative session in 1996, 
     July 1, 1997.
                      Subtitle F--Fraud Reduction

     SEC. 7501. MONITORING PAYMENTS FOR DUAL ELIGIBLES.

       The Administrator of the Health Care Financing 
     Administration shall develop mechanisms to better monitor and 
     prevent inappropriate payments under the medicaid program in 
     the case of individuals who are dually eligible for benefits 
     under such program and under the medicare program.

     SEC. 7502. IMPROVED IDENTIFICATION SYSTEMS.

       The Administrator of the Health Care Financing 
     Administration shall develop improved mechanisms, such as 
     picture identification documents and smart documents, to 
     provide methods of improved identification and tracking of 
     beneficiaries and providers that perpetrate fraud against the 
     medicaid program.
                          TITLE VIII--MEDICARE

     SEC. 8000. SHORT TITLE; REFERENCES IN TITLE; TABLE OF 
                   CONTENTS.

       (a) Short Title of Title.--This title may be cited as the 
     ``Medicare Preservation Act of 1995''.
       (b) 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.
       (c) 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), respectively.
       (d) Table of Contents.--The table of contents of this title 
     is as follows:

                          TITLE VIII--MEDICARE

Sec. 8000. Short title; references in title; table of contents.

                  Subtitle A--Medicare Choice Program

          Part 1--Increasing Choice Under the Medicare Program

Sec. 8001. Increasing choice under medicare.
Sec. 8002. Medicare Choice program.

            ``Part C--Provisions Relating to Medicare Choice

``Sec. 1851. Requirements for Medicare Choice organizations.
``Sec. 1852. Requirements relating to benefits, provision of services, 
              enrollment, and premiums.
``Sec. 1853. Patient protection standards.
``Sec. 1854. Provider-sponsored organizations.
``Sec. 1855. Payments to Medicare Choice organizations.
``Sec. 1856. Establishment of standards for Medicare Choice 
              organizations and products.
``Sec. 1857. Medicare Choice certification.
``Sec. 1858. Contracts with Medicare Choice organizations.
``Sec. 1859. Demonstration project for high deductible/medisave 
              products.
Sec. 8003. Reports.
Sec. 8004. Transitional rules for current medicare HMO program.

   Part 2--Special Rules for Medicare Choice Medical Savings Accounts

Sec. 8011. Medicare choice MSA's.
Sec. 8012. Certain rebates excluded from gross income.

      Part 3--Special Antitrust Rule for Provider Service Networks

Sec. 8021. Application of antitrust rule of reason to provider service 
              networks.

                          Part 4--Commissions

Sec. 8031. Medicare Payment Review Commission.
Sec. 8032. Commission on the Effect of the Baby Boom Generation on the 
              Medicare Program.

           Part 5--Preemption of State Anti-Managed Care Laws

Sec. 8041. Preemption of State law restrictions on managed care 
              arrangements.
Sec. 8042. Preemption of State laws restricting utilization review 
              programs.

          Subtitle B--Provisions Relating to Regulatory Relief

    Part 1--Provisions Relating to Physician Financial Relationships

Sec. 8101. Repeal of prohibitions based on compensation arrangements.
Sec. 8102. Revision of designated health services subject to 
              prohibition.
Sec. 8103. Delay in implementation until promulgation of regulations.
Sec. 8104. Exceptions to prohibition.
Sec. 8105. Repeal of reporting requirements.
Sec. 8106. Preemption of State law.
Sec. 8107. Effective date.

                        Part 2--Antitrust Reform

Sec. 8111. Publication of antitrust guidelines on activities of health 
              plans.
Sec. 8112. Issuance of health care certificates of public advantage.
Sec. 8113. Study of impact on competition.
Sec. 8114. Antitrust exemption.
Sec. 8115. Requirements.
Sec. 8116. Definition.

                       Part 3--Malpractice Reform


          SUBPART A--UNIFORM STANDARDS FOR MALPRACTICE CLAIMS

Sec. 8121. Applicability.
Sec. 8122. Requirement for initial resolution of action through 
              alternative dispute resolution.
Sec. 8123. Optional application of practice guidelines.
Sec. 8124. Treatment of noneconomic and punitive damages.
Sec. 8125. Periodic payments for future losses.
Sec. 8126. Treatment of attorney's fees and other costs.
Sec. 8127. Uniform statute of limitations.
Sec. 8128. Special provision for certain obstetric services.
Sec. 8129. Jurisdiction of Federal courts.
Sec. 8130. Preemption.


   SUBPART B--REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION 
                             SYSTEMS (ADR)

Sec. 8131. Basic requirements.
Sec. 8132. Certification of State systems; applicability of alternative 
              Federal system.
Sec. 8133. Reports on implementation and effectiveness of alternative 
              dispute resolution systems.


                         SUBPART C--DEFINITIONS

Sec. 8141. Definitions.

     Part 4--Payment Areas for Physicians' Services Under Medicare

Sec. 8151. Modification of payment areas used to determine payments for 
              physicians' services under medicare.

         Subtitle C--Medicare Payments to Health Care Providers

               Part 1--Provisions Affecting All Providers

Sec. 8201. One-year freeze in payments to providers.

[[Page H10550]]


                  Part 2--Provisions Affecting Doctors

Sec. 8211. Updating fees for physicians' services.
Sec. 8212. Use of real GDP to adjust for volume and intensity.

                 Part 3--Provisions Affecting Hospitals

Sec. 8221. Reduction in update for inpatient hospital services.
Sec. 8222. Elimination of formula-driven overpayments for certain 
              outpatient hospital services.
Sec. 8223. Establishment of prospective payment system for outpatient 
              services.
Sec. 8224. Reduction in medicare payments to hospitals for inpatient 
              capital-related costs.
Sec. 8225. Moratorium on PPS exemption for long-term care hospitals.

              Part 4--Provisions Affecting Other Providers

Sec. 8231. Revision of payment methodology for home health services.
Sec. 8232. Limitation of home health coverage under part A.
Sec. 8233. Reduction in fee schedule for durable medical equipment.
Sec. 8234. Nursing home billing.
Sec. 8235. Freeze in payments for clinical diagnostic laboratory tests.

       Part 5--Graduate Medical Education and Teaching Hospitals

Sec. 8241. Teaching hospital and graduate medical education trust fund.
Sec. 8242. Reduction in payment adjustments for indirect medical 
              education.

       Subtitle D--Provisions Relating to Medicare Beneficiaries

Sec. 8301. Part B premium.
Sec. 8302. Full cost of medicare part B coverage payable by high-income 
              individuals.
Sec. 8303. Expanded coverage of preventive benefits.

                  Subtitle E--Medicare Fraud Reduction

Sec. 8401. Increasing beneficiary awareness of fraud and abuse.
Sec. 8402. Beneficiary incentives to report fraud and abuse.
Sec. 8403. Elimination of home health overpayments.
Sec. 8404. Skilled nursing facilities.
Sec. 8405. Direct spending for anti-fraud activities under medicare.
Sec. 8406. Fraud reduction demonstration project.
Sec. 8407. Report on competitive pricing.

              Subtitle F--Improving Access to Health Care

                 Part 1--Assistance for Rural Providers


                       SUBPART A--RURAL HOSPITALS

Sec. 8501. Sole community hospitals.
Sec. 8502. Clarification of treatment of EAC and RPC hospitals.
Sec. 8503. Establishment of rural emergency access care hospitals.
Sec. 8504. Classification of rural referral centers.
Sec. 8505. Floor on area wage index.
Sec. 8506. Medical education.


            SUBPART B--RURAL PHYSICIANS AND OTHER PROVIDERS

Sec. 8511. Provider incentives.
Sec. 8512. National Health Service Corps loan repayments excluded from 
              gross income.
Sec. 8513. Telemedicine payment methodology.
Sec. 8514. Demonstration project to increase choice in rural areas.

                      Part 2--Medicare Subvention

Sec. 8521. Medicare program payments for health care services provided 
              in the military health services system.

                      Subtitle G--Other Provisions

Sec. 8601. Extension and expansion of existing secondary payer 
              requirements.
Sec. 8602. Repeal of medicare and medicaid coverage data bank.
Sec. 8603. Clarification of medicare coverage of items and services 
              associated with certain medical devices approved for 
              investigational use.
Sec. 8604. Additional exclusion from coverage.
Sec. 8605. Extending medicare coverage of, and application of hospital 
              insurance tax to, all State and local government 
              employees.

      Subtitle H--Monitoring Achievement of Medicare Reform Goals

Sec. 8701. Establishment of budgetary and program goals.
Sec. 8702. Medicare Reform Commission.

Subtitle I--Lock-Box Provisions for Medicare Part B Savings from Growth 
                               Reductions

Sec. 8801. Establishment of Medicare Growth Reduction Trust Fund for 
              part B savings.

                   Subtitle J--Clinical Laboratories

Sec. 8901. Exemption of physician office laboratories.
                  Subtitle A--Medicare Choice Program

          PART 1--INCREASING CHOICE UNDER THE MEDICARE PROGRAM

     SEC. 8001. INCREASING CHOICE UNDER MEDICARE.

       (a) In General.--Title XVIII is amended by inserting after 
     section 1804 the following new section:


                   ``providing for choice of coverage

       ``Sec. 1805. (a) Choice of Coverage.--
       ``(1) In general.--Subject to the provisions of this 
     section, every individual who is entitled to benefits under 
     part A and enrolled under part B shall elect to receive 
     benefits under this title through one of the following:
       ``(A) Through fee-for-service system.--Through the 
     provisions of parts A and B.
       ``(B) Through a Medicare Choice product.--Through a 
     Medicare Choice product (as defined in paragraph (2)), which 
     may be--
       ``(i) a product offered by a provider-sponsored 
     organization,
       ``(ii) a product offered by an organization that is a 
     union, Taft-Hartley plan, or association, or
       ``(iii) a product providing for benefits on a fee-for-
     service or other basis.

     Such a product may be a high deductible/medisave product (and 
     a contribution into a Medicare Choice medical savings account 
     (MSA)) under the demonstration project provided under section 
     1859.
       ``(2) Medicare Choice product defined.--For purposes this 
     section and part C, the term `Medicare Choice product' means 
     health benefits coverage offered under a policy, contract, or 
     plan by a Medicare Choice organization (as defined in section 
     1851(a)) pursuant to and in accordance with a contract under 
     section 1858.
       ``(3) Terminology relating to options.--For purposes of 
     this section and part C--
       ``(A) Non-medicare-choice option.--An individual who has 
     made the election described in paragraph (1)(A) is considered 
     to have elected the `Non-Medicare Choice option'.
       ``(B) Medicare choice option.--An individual who has made 
     the election described in paragraph (1)(B) to obtain coverage 
     through a Medicare Choice product is considered to have 
     elected the `Medicare Choice option' for that product.
       ``(b) Special rules.--
       ``(1) Residence requirement.--Except as the Secretary may 
     otherwise provide, an individual is eligible to elect a 
     Medicare Choice product offered by a Medicare Choice 
     organization only if the organization in relation to the 
     product serves the geographic area in which the individual 
     resides.
       ``(2) Affiliation requirements for certain products.--
       ``(A) In general.--Subject to subparagraph (B), an 
     individual is eligible to elect a Medicare Choice product 
     offered by a limited enrollment Medicare Choice organization 
     (as defined in section 1852(c)(4)(D)) only if--
       ``(i) the individual is eligible under section 1852(c)(4) 
     to make such election, and
       ``(ii) in the case of a Medicare Choice organization that 
     is a union sponsor or Taft-Hartley sponsor (as defined in 
     section 1852(c)(4)), the individual elected under this 
     section a Medicare Choice product offered by the sponsor 
     during the first enrollment period in which the individual 
     was eligible to make such election with respect to such 
     sponsor.
       ``(B) No reelection after disenrollment for certain 
     products.--An individual is not eligible to elect a Medicare 
     Choice product offered by a Medicare Choice organization that 
     is a union sponsor or Taft-Hartley sponsor if the individual 
     previously had elected a Medicare Choice product offered by 
     the organization and had subsequently discontinued to elect 
     such a product offered by the organization.
       ``(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) Expedited implementation.--The Secretary shall 
     establish the process of electing coverage under this section 
     during the transition period (as defined in subsection 
     (e)(1)(B)) in such an expedited manner as will permit such an 
     election for Medicare Choice products in an area as soon as 
     such products become available in that area.
       ``(3) Coordination through medicare choice organizations.--
       ``(A) Enrollment.--Such process shall permit an individual 
     who wishes to elect a Medicare Choice product offered by a 
     Medicare Choice organization to make such election through 
     the filing of an appropriate election form with the 
     organization.
       ``(B) Disenrollment.--Such process shall permit an 
     individual, who has elected a Medicare Choice product offered 
     by a Medicare Choice organization and who wishes to terminate 
     such election, to terminate such election through the filing 
     of an appropriate election form with the organization.
       ``(4) 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 
     Non-Medicare Choice option.
       ``(ii) Seamless continuation of coverage.--The Secretary 
     shall establish procedures under which individuals who are 
     enrolled with a Medicare Choice organization at the time of 
     the initial election period and who fail to elect to receive 
     coverage other than through the organization are deemed to 
     have elected an appropriate Medicare Choice product offered 
     by the organization.
       ``(B) Continuing periods.--An individual who has made (or 
     deemed to have made) an election under this section is 
     considered to have continued to make such election until such 
     time as--

[[Page H10551]]

       ``(i) the individual changes the election under this 
     section, or
       ``(ii) a Medicare Choice product is discontinued, if the 
     individual had elected such product at the time of the 
     discontinuation.
       ``(5) Agreements with commissioner of social security to 
     promote efficient administration.--In order to promote the 
     efficient administration of this section and the Medicare 
     Choice program under part C, the Secretary may enter into an 
     agreement with the Commissioner of Social Security under 
     which the Commissioner performs administrative 
     responsibilities relating to enrollment and disenrollment in 
     Medicare Choice products under this section.
       ``(d) Provision of Beneficiary Information to Promote 
     Informed Choice.--
       ``(1) In general.--The Secretary shall provide for 
     activities under this subsection to disseminate broadly 
     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. Such information shall be made 
     available on such a timely basis (such as 6 months before the 
     date an individual would first attain eligibility for 
     medicare on the basis of age) as to permit individuals to 
     elect the Medicare Choice option during the initial election 
     period described in subsection (e)(1).
       ``(2) Use of nonfederal entities.--The Secretary shall, to 
     the maximum extent feasible, enter into contracts with 
     appropriate non-Federal entities to carry out activities 
     under this subsection.
       ``(3) Specific activities.--In carrying out this 
     subsection, the Secretary shall provide for at least the 
     following activities in all areas in which Medicare Choice 
     products are offered:
       ``(A) Information booklet.--
       ``(i) In general.--The Secretary shall publish an 
     information booklet and disseminate the booklet to all 
     individuals eligible to elect the Medicare Choice option 
     under this section during coverage election periods.
       ``(ii) Information included.--The booklet shall include 
     information presented in plain English and in a standardized 
     format regarding--

       ``(I) the benefits (including cost-sharing) and premiums 
     for the various Medicare Choice products in the areas 
     involved;
       ``(II) the quality of such products, including consumer 
     satisfaction information; and
       ``(III) rights and responsibilities of medicare 
     beneficiaries under such products.

       ``(iii) Periodic updating.--The booklet shall be updated on 
     a regular basis (not less often than once every 12 months) to 
     reflect changes in the availability of Medicare Choice 
     products and the benefits and premiums for such products.
       ``(B) Toll-free number.--The Secretary shall maintain a 
     toll-free number for inquiries regarding Medicare Choice 
     options and the operation of part C.
       ``(C) General information in medicare handbook.--The 
     Secretary shall include information about the Medicare Choice 
     option provided under this section in the annual notice of 
     medicare benefits under section 1804.
       ``(e) Coverage Election Periods.--
       ``(1) Initial choice upon eligibility to make election.--
       ``(A) In general.--In the case of an individual who first 
     becomes entitled to benefits under part A and enrolled under 
     part B after the beginning of the transition period (as 
     defined in subparagraph (B)), 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 the 
     first time the individual both is entitled to benefits under 
     part A and enrolled under part B. Such period shall be 
     specified in a manner so that, in the case of an individual 
     who elects a Medicare Choice product during the period, 
     coverage under the product becomes effective as of the first 
     date on which the individual may receive such coverage.
       ``(B) Transition period defined.--In this subsection, the 
     term `transition period' means, with respect to an individual 
     in an area, the period beginning on the first day of the 
     first month in which a Medicare Choice product is first made 
     available to individuals in the area and ending with the 
     month preceding the beginning of the first annual, 
     coordinated election period under paragraph (3).
       ``(2) During transition period.--Subject to paragraph (6)--
       ``(A) Continuous open enrollment into a medicare choice 
     option.--During the transition period, an individual who is 
     eligible to make an election under this section and who has 
     elected the non-Medicare Choice option may change such 
     election to a Medicare Choice option at any time.
       ``(B) Open disenrollment before end of transition period.--
     During the transition period, an individual who has elected a 
     Medicare Choice option for a Medicare Choice product may 
     change such election to another Medicare Choice product or to 
     the non-Medicare Choice option.
       ``(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 annual, coordinated 
     election periods.
       ``(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 1998), 
     the month of October before such year.
       ``(C) Medicare Choice health fair during october, 1996.--In 
     the month of October, 1996, the Secretary shall provide for a 
     nationally coordinated educational and publicity campaign to 
     inform individuals, who are eligible to elect Medicare Choice 
     products, about such products and the election process 
     provided under this section (including the annual, 
     coordinated election periods that occur in subsequent years).
       ``(4) Special 90-day disenrollment option.--
       ``(A) In general.--In the case of the first time an 
     individual elects a Medicare Choice option under this 
     section, the individual may discontinue such election through 
     the filing of an appropriate notice during the 90-day period 
     beginning on the first day on which the individual's coverage 
     under the Medicare Choice product under such option becomes 
     effective.
       ``(B) Effect of discontinuation of election.--An individual 
     who discontinues an election under this paragraph shall be 
     deemed at the time of such discontinuation to have elected 
     the Non-Medicare Choice option.
       ``(5) Special election periods.--An individual may 
     discontinue an election of a Medicare Choice product offered 
     by a Medicare Choice organization other than during an 
     annual, coordinated election period and make a new election 
     under this section if--
       ``(A) the organization's or product's certification under 
     part C has been terminated or the organization has terminated 
     or otherwise discontinued providing the product;
       ``(B) in the case of an individual who has elected a 
     Medicare Choice product offered by a Medicare Choice 
     organization, the individual is no longer eligible to elect 
     the product 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 membership in a 
     qualified association in the case of a product offered by a 
     qualified association or termination of the individual's 
     enrollment on the basis described in clause (i) or (ii) 
     section 1852(c)(3)(B));
       ``(C) the individual demonstrates (in accordance with 
     guidelines established by the Secretary) that--
       ``(i) the organization offering the product substantially 
     violated a material provision of the organization's contract 
     under part C in relation to the individual and the product; 
     or
       ``(ii) the organization (or an agent or other entity acting 
     on the organization's behalf) materially misrepresented the 
     product's provisions in marketing the product to the 
     individual; or
       ``(D) the individual meets such other conditions as the 
     Secretary may provide.
       ``(f) Effectiveness of Elections.--
       ``(1) During initial coverage election period.--An election 
     of coverage made during the initial coverage election period 
     under subsection (e)(1)(A) 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 transition; 90-day disenrollment option.--An 
     election of coverage made under subsection (e)(2) and an 
     election to discontinue a Medicare Choice option under 
     subsection (e)(4) at any time shall take effect with the 
     first calendar month following the date on which the election 
     is made.
       ``(3) Annual, coordinated election period and medisave 
     election.--An election 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 of coverage made during 
     any other period under subsection (e)(5) 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) Effect of Election of Medicare Choice Option.--
     Subject to the provisions of section 1855(f), payments under 
     a contract with a Medicare Choice organization under section 
     1858(a) with respect to an individual electing a Medicare 
     Choice product 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.
       ``(h) Demonstration Projects.--The Secretary shall conduct 
     demonstration projects to test alternative approaches to 
     coordinated open enrollments in different markets, including 
     different annual enrollment periods and models of rolling 
     open enrollment periods. The Secretary may waive previous 
     provisions of this section in order to carry out such 
     projects.''.

     SEC. 8002. MEDICARE CHOICE PROGRAM.

       (a) In General.--Title XVIII is amended by redesignating 
     part C as part D and by inserting after part B the following 
     new part:

            ``Part C--Provisions Relating to Medicare Choice


            ``requirements for medicare choice organizations

       ``Sec. 1851. (a) Medicare Choice Organization Defined.--In 
     this part, subject to the succeeding provisions of this 
     section, the term `Medicare Choice organization' means a 
     public or private entity that is certified 

[[Page H10552]]

     under section 1857 as meeting the requirements and standards 
     of this part for such an organization.
       ``(b) Organized and Licensed Under State Law.--
       ``(1) In general.--A Medicare Choice organization shall be 
     organized and licensed under State law to offer health 
     insurance or health benefits coverage in each State in which 
     it offers a Medicare Choice product.
       ``(2) Exception for union and taft-hartley sponsors.--
     Paragraph (1) shall not apply to an Medicare Choice 
     organization that is a union sponsor or Taft-Hartley sponsor 
     (as defined in section 1852(c)(4)).
       ``(3) Exception for provider-sponsored organizations.--
     Subject to paragraph (5), paragraph (1) shall not apply to a 
     Medicare Choice organization that is a provider-sponsored 
     organization (as defined in section 1854(a)).
       ``(4) Exception for qualified associations.--Paragraph (1) 
     shall not apply to a Medicare Choice organization that is a 
     qualified association (as defined in section 1852(c)(4)(B)).
       ``(5) Limitation.--Effective on and after January 1, 2000, 
     paragraph (1) shall only apply (and paragraph (3) shall no 
     longer apply) to a Medicare Choice organization in a State if 
     the standards for licensure of the organization under the law 
     of the State are identical to the standards established under 
     section 1856(b).
       ``(c) Prepaid Payment.--A Medicare Choice organization 
     shall be compensated (except for deductibles, coinsurance, 
     and copayments) for the provision of health care services to 
     enrolled members 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.
       ``(d) Assumption of Full Financial Risk.--The Medicare 
     Choice organization shall assume full financial risk on a 
     prospective basis for the provision of the health care 
     services (other than hospice care) for which benefits are 
     required to be provided under section 1852(a)(1), except that 
     the organization--
       ``(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,
       ``(2) may obtain insurance or make other arrangements 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,
       ``(3) may obtain insurance or make other arrangements 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.

     In the case of a Medicare Choice organization that is a union 
     sponsor or Taft-Hartley sponsor (as defined in section 
     1852(c)(4)) or a qualified association (as defined in section 
     1852(c)(4)(B)), this subsection shall not apply with respect 
     to Medicare Choice products offered by such organization and 
     issued by an organization to which subsection (b)(1) applies 
     or by a provider-sponsored organization (as defined in 
     section 1854(a)).
       ``(e) Provision Against Risk of Insolvency.--
       ``(1) In general.--Each Medicare Choice organization shall 
     meet standards under section 1856 relating to the financial 
     solvency and capital adequacy of the organization. Such 
     standards shall take into account the nature and type of 
     Medicare Choice products offered by the organization.
       ``(2) Treatment of taft-hartley sponsors.--An entity that 
     is a Taft-Hartley sponsor is deemed to meet the requirement 
     of paragraph (1).
       ``(3) Treatment of certain qualified associations.--An 
     entity that is a qualified association is deemed to meet the 
     requirement of paragraph (1) with respect to Medicare Choice 
     products offered by such association and issued by an 
     organization to which subsection (b)(1) applies or by a 
     provider-sponsored organization.
       ``(f) Organizations Treated as MedicarePlus Organizations 
     During Transition.--Any of the following organizations shall 
     be considered to qualify as a MedicarePlus organization for 
     contract years beginning before January 1, 1997:
       ``(1) Health maintenance organizations.--An organization 
     that is organized under the laws of any State and that is a 
     qualified health maintenance organization (as defined in 
     section 1310(d) of the Public Health Service Act), an 
     organization recognized under State law as a health 
     maintenance organization, or a similar organization regulated 
     under State law for solvency in the same manner and to the 
     same extent as such a health maintenance organization.
       ``(2) Licensed insurers.--An organization that is organized 
     under the laws of any State and--
       ``(A) is licensed by a State agency as an insurer for the 
     offering of health benefit coverage, or
       ``(B) is licensed by a State agency as a service benefit 
     plan,

     but only for individuals residing in an area in which the 
     organization is licensed to offer health insurance coverage.
       ``(3) Current risk-contractors.--An organization that is an 
     eligible organization (as defined in section 1876(b)) and 
     that has a risk-sharing contract in effect under section 1876 
     as of the date of the enactment of this section.


``requirements relating to benefits, provision of services, enrollment, 
                              and premiums

       ``Sec. 1852. (a) Benefits Covered.--
       ``(1) In general.--Each Medicare Choice product offered 
     under this part shall provide benefits for at least the items 
     and services for which benefits are available under parts A 
     and B consistent with the standards for coverage of such 
     items and services applicable under this title.
       ``(2) Organization as secondary payer.--Notwithstanding any 
     other provision of law, a Medicare Choice organization may 
     (in the case of the provision of items and services to an 
     individual under this part 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 law 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.
       ``(3) Satisfaction of requirement.--A Medicare Choice 
     product offered by a Medicare Choice organization satisfies 
     paragraph (1) with respect to benefits for items and services 
     if the following requirements are met:
       ``(A) Fee for service providers.--In the case of benefits 
     furnished through a provider that does not have a contract 
     with the organization, the product provides for at least the 
     dollar amount of payment for such items and services as would 
     otherwise be provided under parts A and B.
       ``(B) Participating providers.--In the case of benefits 
     furnished through a provider that has such a contract, the 
     individual's liability for payment for such items and 
     services does not exceed (after taking into account any 
     deductible, which does not exceed any deductible under parts 
     A and B) the lesser of the following:
       ``(i) Non-medicare choice liability.--The amount of the 
     liability that the individual would have had (based on the 
     provider being a participating provider) if the individual 
     had elected the non-Medicare Choice option.
       ``(ii) Medicare coinsurance applied to product payment 
     rates.--The applicable coinsurance or copayment rate (that 
     would have applied under the non-Medicare Choice option) of 
     the payment rate provided under the contract.
       ``(b) Antidiscrimination.--A Medicare Choice organization 
     may not deny, limit, or condition the coverage or provision 
     of benefits under this part based on the health status, 
     claims experience, receipt of health care, medical history, 
     or lack of evidence of insurability, of an individual.
       ``(c) Guaranteed Issue and Renewal.--
       ``(1) In general.--Except as provided in this subsection, a 
     Medicare Choice organization shall provide that at any time 
     during which elections are accepted under section 1805 with 
     respect to a Medicare Choice product 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 
     Medicare Choice organization, in relation to a Medicare 
     Choice product it offers, has a capacity limit and the number 
     of eligible individuals who elect the product under section 
     1805 exceeds the capacity limit, the organization may limit 
     the election of individuals of the product under such section 
     but only if priority in election is provided--
       ``(A) first to such individuals as have elected the product 
     at the time of the determination, and
       ``(B) then to other such individuals in such a manner that 
     does not discriminate among the individuals (who seek to 
     elect the product) on a basis described in subsection (b).
       ``(3) Limitation on termination of election.--
       ``(A) In general.--Subject to subparagraph (B), a Medicare 
     Choice organization may not for any reason terminate the 
     election of any individual under section 1805 for a Medicare 
     Choice product it offers.
       ``(B) Basis for termination of election.--A Medicare Choice 
     organization may terminate an individual's election under 
     section 1805 with respect to a Medicare Choice product it 
     offers if--
       ``(i) any premiums required with respect to such product 
     are not paid on a timely basis (consistent with standards 
     under section 1856 that provide for a grace period for late 
     payment of premiums),
       ``(ii) the individual has engaged in disruptive behavior 
     (as specified in such standards), or
       ``(iii) the product is terminated with respect to all 
     individuals under this part.
     Any individual whose election is so terminated is deemed to 
     have elected the Non-Medicare Choice option (as defined in 
     section 1805(a)(3)(A)).

[[Page H10553]]

       ``(C) Organization obligation with respect to election 
     forms.--Pursuant to a contract under section 1858, each 
     Medicare Choice organization receiving an election form under 
     section 1805(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.
       ``(4) Special rules for limited enrollment Medicare Choice 
     organizations.--
       ``(A) Taft-hartley sponsors.--
       ``(i) In general.--Subject to subparagraph (D), a Medicare 
     Choice organization that is a Taft-Hartley sponsor (as 
     defined in clause (ii)) shall limit eligibility of enrollees 
     under this part for Medicare Choice products it offers to 
     individuals who are entitled to obtain benefits through such 
     products under the terms of an applicable collective 
     bargaining agreement.
       ``(ii) Taft-Hartley sponsor.--In this part and section 
     1805, the term `Taft-Hartley sponsor' means, in relation to a 
     group health plan that is established or maintained by two or 
     more employers or jointly by one or more employers and one or 
     more employee organizations, the association, committee, 
     joint board of trustees, or other similar group of 
     representatives of parties who establish or maintain the 
     plan.
       ``(B) Qualified associations.--
       ``(i) In general.--Subject to subparagraph (D), a Medicare 
     Choice organization that is a qualified association (as 
     defined in clause (iii)) shall limit eligibility of 
     individuals under this part for products it offers to 
     individuals who are members of the association (or who are 
     spouses of such individuals).
       ``(ii) Limitation on termination of coverage.--Such a 
     qualifying association offering a Medicare Choice product to 
     an individual may not terminate coverage of the individual on 
     the basis that the individual is no longer a member of the 
     association except pursuant to a change of election during an 
     open election period occurring on or after the date of the 
     termination of membership.
       ``(iii) Qualified association.--In this part and section 
     1805, the term `qualified association' means an association, 
     religious fraternal organization, or other organization 
     (which may be a trade, industry, or professional association, 
     a chamber of commerce, or a public entity association) that 
     the Secretary finds--

       ``(I) has been formed for purposes other than the sale of 
     any health insurance and does not restrict membership based 
     on the health status, claims experience, receipt of health 
     care, medical history, or lack of evidence of insurability, 
     of an individual,
       ``(II) does not exist solely or principally for the purpose 
     of selling insurance, and
       ``(III) has at least 1,000 individual members or 200 
     employer members.

     Such term includes a subsidiary or corporation that is wholly 
     owned by one or more qualified organizations.
       ``(C) Unions.--
       ``(i) In general.--Subject to subparagraph (D), a union 
     sponsor (as defined in clause (ii)) shall limit eligibility 
     of enrollees under this part for Medicare Choice products it 
     offers to individuals who are members of the sponsor and 
     affiliated with the sponsor through an employment 
     relationship with any employer or are the spouses of such 
     members.
       ``(ii) Union sponsor.--In this part and section 1805, the 
     term `union sponsor' means an employee organization in 
     relation to a group health plan that is established or 
     maintained by the organization other than pursuant to a 
     collective bargaining agreement.
       ``(D) Limitation.--Rules of eligibility to carry out the 
     previous subparagraphs of this paragraph shall not have the 
     effect of denying eligibility to individuals on the basis of 
     health status, claims experience, receipt of health care, 
     medical history, or lack of evidence of insurability.
       ``(E) Limited enrollment Medicare Choice organization.--In 
     this part and section 1805, the term `limited enrollment 
     Medicare Choice organization' means a Medicare Choice 
     organization that is a union sponsor, a Taft-Hartley sponsor, 
     or a qualified association.
       ``(F) Employer, etc..--In this paragraph, the terms 
     `employer', `employee organization', and `group health plan' 
     have the meanings given such terms for purposes of part 6 of 
     subtitle B of title I of the Employee Retirement Income 
     Security Act of 1974.
       ``(d) Submission and Charging of Premiums.--
       ``(1) In general.--Each Medicare Choice 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 premiums for coverage under 
     each Medicare Choice product it offers under this part in 
     each payment area (as determined for purposes of section 
     1855) in which the product is being offered; and
       ``(B) the enrollment capacity in relation to the product in 
     each such area.
       ``(2) Amounts of premiums charged.--The amount of the 
     monthly premium charged by a Medicare Choice organization for 
     a Medicare Choice product offered in a payment area to an 
     individual under this part shall be equal to the amount (if 
     any) by which--
       ``(A) the amount of the monthly premium for the product for 
     the period involved, as established under paragraph (3) and 
     submitted under paragraph (1), exceeds
       ``(B) \1/12\ of the annual Medicare Choice capitation rate 
     specified in section 1855(b)(2) for the area and period 
     involved.
       ``(3) Uniform premium.--The premiums charged by a Medicare 
     Choice organization under this part may not vary among 
     individuals who reside in the same payment area.
       ``(4) Terms and conditions of imposing premiums.--Each 
     Medicare Choice organization shall permit the payment of 
     monthly premiums on a monthly basis and may terminate 
     election of individuals for a Medicare Choice product for 
     failure to make premium payments only in accordance with 
     subsection (c)(3)(B).
       ``(5) Relation of premiums and cost-sharing to benefits.--
     In no case may the portion of a Medicare Choice 
     organization's premium rate and the actuarial value of its 
     deductibles, coinsurance, and copayments charged (to the 
     extent attributable to the minimum benefits described in 
     subsection (a)(1) and not counting any amount attributable to 
     balance billing) to individuals who are enrolled under this 
     part with the organization exceed the actuarial value of the 
     coinsurance and deductibles that would be applicable on the 
     average to individuals enrolled under this part with the 
     organization (or, if the Secretary finds that adequate data 
     are not available to determine that actuarial value, the 
     actuarial value of the coinsurance and deductibles applicable 
     on the average to individuals in the area, in the State, or 
     in the United States, eligible to enroll under this part with 
     the organization, or other appropriate data) and entitled to 
     benefits under part A and enrolled under part B if they were 
     not members of a Medicare Choice organization.
       ``(e) Requirement for Additional Benefits, Part B Premium 
     Discount Rebates, or Both.--
       ``(1) Requirement.--
       ``(A) In general.--Each Medicare Choice organization (in 
     relation to a Medicare Choice product it offers) shall 
     provide that if there is an excess amount (as defined in 
     subparagraph (B)) for the product 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), a monetary rebate 
     (paid on a monthly basis) of the part B monthly premium, or a 
     combination thereof, in an total 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 product, is the 
     amount (if any) by which--
       ``(i) the average of the capitation payments made to the 
     organization under this part for the product at the beginning 
     of contract year, exceeds
       ``(ii) the actuarial value of the minimum benefits 
     described in subsection (a)(1) under the product for 
     individuals under this part, as determined based upon an 
     adjusted community rate described in paragraph (5) (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 product, is the excess amount reduced to reflect any 
     amount withheld and reserved for the organization for the 
     year under paragraph (3).
       ``(D) Uniform application.--This paragraph shall be applied 
     uniformly for all enrollees for a product in a service area.
       ``(E) Construction.--Nothing in this subsection shall be 
     construed as preventing a Medicare Choice 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) Limitation on amount of part b premium discount 
     rebate.--In no case shall the amount of a part B premium 
     discount rebate under paragraph (1)(A) exceed, with respect 
     to a month, the amount of premiums imposed under part B (not 
     taking into account section 1839(b) (relating to penalty for 
     late enrollment) or 1839(h) (relating to affluence testing)), 
     for the individual for the month. Except as provided in the 
     previous sentence, a Medicare Choice organization is not 
     authorized to provide for cash or other monetary rebates as 
     an inducement for enrollment or otherwise.
       ``(3) Stabilization fund.--A Medicare Choice organization 
     may provide that a part of the value of an excess actuarial 
     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 and rebates offered in those 
     subsequent periods by the organization in accordance with 
     such paragraph. Any of such value of amount reserved which is 
     not provided as additional benefits described in paragraph 
     (1)(A) to individuals electing the Medicare Choice product in 
     accordance with such paragraph prior to the end of such 
     periods, shall revert for the use of such trust funds.
       ``(4) 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 

[[Page H10554]]

     such an average based on the enrollment experience of other 
     contracts entered into under this part.
       ``(5) Adjusted community rate.--
       ``(A) In general.--For purposes of this subsection, subject 
     to subparagraph (B), the term `adjusted community rate' for a 
     service or services means, at the election of a Medicare 
     Choice organization, either--
       ``(i) the rate of payment for that service or services 
     which the Secretary annually determines would apply to an 
     individual electing a Medicare Choice product 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 organization (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 Medicare 
     Choice coverage, or individuals in the area, in the State, or 
     in the United States, eligible to elect Medicare Choice 
     coverage under this part and the utilization characteristics 
     of the rest of the population in the area, in the State, or 
     in the United States, respectively).
       ``(B) Special rule for provider-sponsored organizations.--
     In the case of a Medicare Choice organization that is a 
     provider-sponsored organization, the adjusted community rate 
     under subparagraph (A) for a Medicare Choice product 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 product.
       ``(f) Rules Regarding Physician Participation.--
       ``(1) Procedures.--Each Medicare Choice organization shall 
     establish reasonable procedures relating to the participation 
     (under an agreement between a physician and the organization) 
     of physicians under Medicare Choice products offered by the 
     organization under this part. Such procedures shall include--
       ``(A) providing notice of the rules regarding 
     participation,
       ``(B) providing written notice of participation decisions 
     that are adverse to physicians, and
       ``(C) providing a process within the organization for 
     appealing adverse decisions, including the presentation of 
     information and views of the physician regarding such 
     decision.
       ``(2) Consultation in medical policies.--A Medicare Choice 
     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) Limitations on physician incentive plans.--
       ``(A) In general.--Each Medicare Choice organization may 
     not operate any physician 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 physician or physician group as an 
     inducement to reduce or limit medically necessary services 
     provided with respect to a specific individual enrolled with 
     the organization.
       ``(ii) If the plan places a physician or physician group at 
     substantial financial risk (as determined by the Secretary) 
     for services not provided by the physician or physician 
     group, the organization--

       ``(I) provides stop-loss protection for the physician or 
     group that is adequate and appropriate, based on standards 
     developed by the Secretary that take into account the number 
     of physicians 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 
     physician or the physician group, and
       ``(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) Physician incentive plan defined.--In this paragraph, 
     the term `physician incentive plan' means any compensation 
     arrangement between a Medicare Choice organization and a 
     physician or physician group that may directly or indirectly 
     have the effect of reducing or limiting services provided 
     with respect to individuals enrolled with the organization 
     under this part.
       ``(4) Exception for certain fee-for-service plans.--The 
     previous provisions of this subsection shall not apply in the 
     case of a Medicare Choice organization in relation to a 
     Medicare Choice product if the organization does not have 
     agreements between physicians and the organization for the 
     provision of benefits under the product.
       ``(g) Provision of Information.--A Medicare Choice 
     organization shall provide the Secretary with such 
     information on the organization and each Medicare Choice 
     product it offers as may be required for the preparation of 
     the information booklet described in section 1805(d)(3)(A).
       ``(h) Coordinated Acute and Long-term Care Benefits under a 
     Medicare Choice Product.--Nothing in this part shall be 
     construed as preventing a State from coordinating benefits 
     under its medicaid program under title XIX with those 
     provided under a Medicare Choice product 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 
     program.


                     ``patient protection standards

       ``Sec. 1853. (a) Disclosure to Enrollees.--A Medicare 
     Choice organization shall disclose in clear, accurate, and 
     standardized form, information regarding all of the following 
     for each Medicare Choice product it offers:
       ``(1) Benefits under the Medicare Choice product offered, 
     including exclusions from coverage.
       ``(2) Rules regarding prior authorization or other review 
     requirements that could result in nonpayment.
       ``(3) Potential liability for cost-sharing for out-of-
     network services.
       ``(4) The number, mix, and distribution of participating 
     providers.
       ``(5) The financial obligations of the enrollee, including 
     premiums, deductibles, co-payments, and maximum limits on 
     out-of-pocket losses for items and services (both in and out 
     of network).
       ``(6) Statistics on enrollee satisfaction with the product 
     and organization, including rates of reenrollment.
       ``(7) Enrollee rights and responsibilities, including the 
     grievance process provided under subsection (f).
       ``(8) A statement that the use of the 911 emergency 
     telephone number is appropriate in emergency situations and 
     an explanation of what constitutes an emergency situation.
       ``(9) A description of the organization's quality assurance 
     program under subsection (d).
     Such information shall be disclosed to each enrollee under 
     this part at the time of enrollment and at least annually 
     thereafter.
       ``(b) Access to Services.--
       ``(1) In general.--A Medicare Choice organization offering 
     a Medicare Choice product may restrict the providers from 
     whom the benefits under the product are provided so long as--
       ``(A) the organization makes such benefits available and 
     accessible to each individual electing the product within the 
     product service area with reasonable promptness and in a 
     manner which assures continuity in the provision of benefits;
       ``(B) when medically necessary the organization makes such 
     benefits available and accessible 24 hours a day and 7 days a 
     week;
       ``(C) the product 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 and immediately 
     required because of an unforeseen illness, injury, or 
     condition, and
       ``(ii) it was not reasonable given the circumstances to 
     obtain the services through the organization; and
       ``(D) coverage is provided for emergency services (as 
     defined in paragraph (5)) without regard to prior 
     authorization or the emergency care provider's contractual 
     relationship with the organization.
       ``(2) Minimum payment levels where providing point-of-
     service coverage.--If a Medicare Choice product provides 
     benefits for items and services (not described in paragraph 
     (1)(C)) through a network of providers and also permits 
     payment to be made under the product for such items and 
     services not provided through such a network, the payment 
     level under the product with respect to such items and 
     services furnished outside the network shall be at least 70 
     percent (or, if the effective cost-sharing rate is 50 
     percent, at least 35 percent) of the lesser of--
       ``(A) the payment basis (determined without regard to 
     deductibles and cost-sharing) that would have applied for 
     such items and services under parts A and B, or
       ``(B) the amount charged by the entity furnishing such 
     items and services.
       ``(3) Protection of enrollees for certain out-of-network 
     services.--
       ``(A) Participating providers.--In the case of physicians' 
     services or renal dialysis services described in subparagraph 
     (C) which are furnished by a participating physician or 
     provider of services or renal dialysis facility to an 
     individual enrolled with a Medicare Choice organization under 
     this section, the applicable participation agreement is 
     deemed to provide that the physician or provider of services 
     or renal dialysis facility will accept as payment in full 
     from the organization the amount that would be payable to the 
     physician or provider of services or renal dialysis facility 
     under part B and from the individual under such part, if the 
     individual were not enrolled with such an organization under 
     this part.
       ``(B) Nonparticipating providers.--In the case of 
     physicians' services described in subparagraph (C) which are 
     furnished by a 

[[Page H10555]]

     nonparticipating physician, the limitations on actual charges 
     for such services otherwise applicable under part B (to 
     services furnished by individuals not enrolled with a 
     Medicare Choice organization under this section) shall apply 
     in the same manner as such limitations apply to services 
     furnished to individuals not enrolled with such an 
     organization.
       ``(C) Services described.--The physicians' services or 
     renal dialysis services described in this subparagraph are 
     physicians' services or renal dialysis services which are 
     furnished to an enrollee of a Medicare Choice organization 
     under this part by a physician, provider of services, or 
     renal dialysis facility who is not under a contract with the 
     organization.
       ``(4) Protection for needed services.--A Medicare Choice 
     organization that provides covered services through a network 
     of providers shall provide coverage of services provided by a 
     provider that is not part of the network if the service 
     cannot be provided by a provider that is part of the network 
     and the organization authorized the service directly or 
     through referral by the primary care physician who is 
     designated by the organization for the individual involved.
       ``(5) Emergency services.--In this subsection, the term 
     `emergency services' means--
       ``(A) health care items and services furnished in the 
     emergency department of a hospital, and
       ``(B) ancillary services routinely available to such 
     department,

     to the extent they are required to evaluate and treat an 
     emergency medical condition (as defined in paragraph (6)) 
     until the condition is stabilized.
       ``(6) Emergency medical condition.--In paragraph (5), the 
     term `emergency medical condition' means a medical condition, 
     the onset of which is sudden, that manifests itself by 
     symptoms of sufficient severity, including severe pain, 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--
       ``(A) placing the person's health in serious jeopardy,
       ``(B) serious impairment to bodily functions, or
       ``(C) serious dysfunction of any bodily organ or part.
       ``(7) Protection against balance billing.--The limitations 
     on billing that apply to a provider (including a physician) 
     under parts A and B in the case of an individual electing the 
     non-Medicare Choice option shall apply to an individual who 
     elects the Medicare Choice option in the case of any provider 
     that (under the Medicare Choice option) may bill the enrollee 
     directly for for services.
       ``(c) Confidentiality and Accuracy of Enrollee Records.--
     Each Medicare Choice organization shall establish 
     procedures--
       ``(1) to safeguard the privacy of individually identifiable 
     enrollee information, and
       ``(2) to maintain accurate and timely medical records for 
     enrollees.
       ``(d) Quality Assurance Program.--
       ``(1) In general.--Each Medicare Choice organization must 
     have arrangements, established in accordance with regulations 
     of the Secretary, for an ongoing quality assurance program 
     for health care services it provides to such individuals.
       ``(2) Elements of program.--The quality assurance program 
     shall--
       ``(A) stress health outcomes;
       ``(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 services;
       ``(D) monitors and evaluates high volume and high risk 
     services and the care of acute and chronic conditions;
       ``(E) evaluates the continuity and coordination of care 
     that enrollees receive;
       ``(F) has mechanisms to detect both underutilization and 
     overutilization of services;
       ``(G) after identifying areas for improvement, establishes 
     or alters practice parameters;
       ``(H) takes action to improve quality and assesses the 
     effectiveness of such action through systematic follow-up;
       ``(I) makes 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) is evaluated on an ongoing basis as to its 
     effectiveness; and
       ``(K) provide for external accreditation or review, by a 
     utilization and quality control peer review organization 
     under part B of title XI or other qualified independent 
     review organization, of the quality of services furnished by 
     the organization meets professionally recognized standards of 
     health care (including providing adequate access of enrollees 
     to services).
       ``(3) Exception for certain fee-for-service plans.--
     Paragraph (1) and subsection (c)(2) shall not apply in the 
     case of a Medicare Choice organization in relation to a 
     Medicare Choice product to the extent the organization 
     provides for coverage of benefits without restrictions 
     relating to utilization and without regard to whether the 
     provider has a contract or other arrangement with the plan 
     for the provision of such benefits.
       ``(4) Treatment of accreditation.--The Secretary shall 
     provide that a Medicare Choice organization is deemed to meet 
     the requirements of paragraphs (1) and (2) of this subsection 
     and subsection (c) if the organization is accredited (and 
     periodically reaccredited) by a private organization under a 
     process that the Secretary has determined assures that the 
     organization meets standards that are no less stringent than 
     the standards established under section 1856 to carry out 
     this subsection and subsection (c).
       ``(e) Coverage Determinations.--
       ``(1) Decisions on nonemergency care.--A Medicare Choice 
     organization shall make determinations regarding 
     authorization requests for nonemergency care on a timely 
     basis, depending on the urgency of the situation.
       ``(2) Appeals.--
       ``(A) In general.--Appeals from a determination of an 
     organization denying coverage shall be decided within 30 days 
     of the date of receipt of medical information, but not later 
     than 60 days after the date of the decision.
       ``(B) Physician decision on certain appeals.--Appeal 
     decisions relating to a determination to deny coverage based 
     on a lack of medical necessity shall be made only by a 
     physician.
       ``(C) Emergency cases.--Appeals from such a determination 
     involving a life-threatening or emergency situation shall be 
     decided on an expedited basis.
       ``(f) Grievances and Appeals.--
       ``(1) Grievance mechanism.--Each Medicare Choice 
     organization must provide meaningful procedures for hearing 
     and resolving grievances between the organization (including 
     any entity or individual through which the organization 
     provides health care services) and enrollees under this part.
       ``(2) Appeals.--An enrollee with an 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 subparagraph, 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) Coordination with secretary of labor.--The Secretary 
     shall consult with the Secretary of Labor so as to ensure 
     that the requirements of this subsection, as they apply in 
     the case of grievances referred to in paragraph (1) to which 
     section 503 of the Employee Retirement Income Security Act of 
     1974 applies, are applied in a manner consistent with the 
     requirements of such section 503.
       ``(g) Information on Advance Directives.--Each Medicare 
     Choice organization shall meet the requirement of section 
     1866(f) (relating to maintaining written policies and 
     procedures respecting advance directives).
       ``(h) Approval of Marketing Materials.--
       ``(1) Submission.--Each Medicare Choice organization may 
     not distribute marketing materials unless--
       ``(A) at least 45 days before the date of distribution the 
     organization has submitted the material to the Secretary for 
     review, and
       ``(B) the Secretary has not disapproved the distribution of 
     such material.
       ``(2) Review.--The standards established under section 1856 
     shall include guidelines for the review of all such material 
     submitted and under such guidelines the Secretary shall 
     disapprove such material if the material is materially 
     inaccurate or misleading or otherwise makes a material 
     misrepresentation.
       ``(3) Deemed approval (1-stop shopping).--In the case of 
     material 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 materials under 
     paragraph (1)(B) with respect to a Medicare Choice product in 
     an area, the Secretary is deemed not to have disapproved such 
     distribution in all other areas covered by the product and 
     organization.
       ``(4) Prohibition of certain marketing practices.--Each 
     Medicare Choice organization shall conform to fair marketing 
     standards in relation to Medicare Choice products offered 
     under this part, included in the standards established under 
     section 1856. Such standards shall include a prohibition 
     against an organization (or agent of such an organization) 
     completing any portion of any election form under section 
     1805 on behalf of any individual.
       ``(i) Additional Standardized Information on Quality, 
     Outcomes, and Other Factors.--
       ``(1) In general.--In addition to any other information 
     required to be provided under this part, each Medicare Choice 
     organization shall provide the Secretary (at a time, not 

[[Page H10556]]

     less frequently than annually, and in an electronic, 
     standardized form and manner specified by the Secretary) such 
     information as the Secretary determines to be necessary, 
     consistent with this part, to evaluate the performance of the 
     organization in providing benefits to enrollees.
       ``(2) Information to be included.--Subject to paragraph 
     (3), information to be provided under this subsection shall 
     include at least the following:
       ``(A) Information on the characteristics of enrollees that 
     may affect their need for or use of health services and the 
     determination of risk-adjusted payments under section 1855.
       ``(B) Information on the types of treatments and outcomes 
     of treatments with respect to the clinical health, functional 
     status, and well-being of enrollees.
       ``(C) Information on health care expenditures and the 
     volume and prices of procedures.
       ``(D) Information on the flexibility permitted by plans to 
     enrollees in their selection of providers.
       ``(3) Special treatment.--The Secretary may waive the 
     provision of such information under paragraph (2), or require 
     such other information, as the Secretary finds appropriate in 
     the case of a newly established Medicare Choice organization 
     for which such information is not available.
       ``(j) Demonstration Projects.--The Secretary shall provide 
     for demonstration projects to determine the effectiveness, 
     cost, and impact of alternative methods of providing 
     comparative information about the performance of Medicare 
     Choice organizations and products and the performance of 
     medicare supplemental policies in relation to such products. 
     Such projects shall include information about health care 
     outcomes resulting from coverage under different products and 
     policies.


                   ``provider-sponsored organizations

       ``Sec. 1854. (a) Provider-Sponsored Organization Defined.--
       ``(1) In general.--In this part, the term `provider-
     sponsored organization' means a public or private entity that 
     (in accordance with standards established under subsection 
     (b)) is a provider, or group of affiliated providers, that 
     provides a substantial proportion (as defined by the 
     Secretary under such standards) of the health care items and 
     services under the contract under this part directly through 
     the provider or affiliated group of providers.
       ``(2) Substantial proportion.--In defining what is a 
     `substantial proportion' for purposes of paragraph (1), the 
     Secretary--
       ``(A) shall take into account the need for such an 
     organization to assume responsibility for a substantial 
     proportion of services in order to assure financial stability 
     and 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) each provider is a participant in a lawful 
     combination under which each provider shares, directly or 
     indirectly, substantial financial risk in connection with 
     their operations,
       ``(C) both providers are part of a controlled group of 
     corporations under section 1563 of the Internal Revenue Code 
     of 1986, or
       ``(D) 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.
       ``(b) Preemption of State Insurance Licensing 
     Requirements.--
       ``(1) In general.--This section supersedes any State law 
     which--
       ``(A) requires that a provider-sponsored organization meet 
     requirements for insurers of health services or health 
     maintenance organizations doing business in the State with 
     respect to initial capitalization and establishment of 
     financial reserves against insolvency, or
       ``(B) imposes requirements that would have the effect of 
     prohibiting the organization from complying with the 
     applicable requirements of this part,

     insofar as such the law applies to individuals enrolled with 
     the organization under this part.
       ``(2) Exception for identical standards.--Paragraph (1) 
     shall not apply with respect to any State law to the extent 
     that such law provides the application of standards that are 
     identical to the standards established for provider-sponsored 
     organizations under this part.
       ``(3) Construction.--Nothing in this subsection shall be 
     construed as affecting the operation of section 514 of the 
     Employee Retirement Income Security Act of 1974.


              ``payments to medicare choice organizations

       ``Sec. 1855. (a) Payments.--
       ``(1) In general.--Under a contract under section 1858 the 
     Secretary shall pay to each Medicare Choice organization, 
     with respect to coverage of an individual under this part in 
     a payment area for a month, an amount equal to the monthly 
     adjusted Medicare Choice capitation rate (as provided under 
     subsection (b)) with respect to that individual for that 
     area.
       ``(2) Annual announcement.--The Secretary shall annually 
     determine, and shall announce (in a manner intended to 
     provide notice to interested parties) not later than 
     September 7 before the calendar year concerned--
       ``(A) the annual Medicare Choice capitation rate for each 
     payment area for the year, and
       ``(B) the factors to be used in adjusting such rates under 
     subsection (b) for payments for months in that year.
       ``(3) Advance notice of methodological changes.--At least 
     45 days before making the announcement under paragraph (2) 
     for a year, the Secretary shall provide for notice to 
     Medicare Choice organizations of proposed changes to be made 
     in the methodology or benefit coverage assumptions from the 
     methodology and assumptions used in the previous announcement 
     and shall provide such organizations an opportunity to 
     comment on such proposed changes.
       ``(4) Explanation of assumptions.--In each announcement 
     made under paragraph (2) for a year, the Secretary shall 
     include an explanation of the assumptions (including any 
     benefit coverage assumptions) and changes in methodology used 
     in the announcement in sufficient detail so that Medicare 
     Choice organizations can compute monthly adjusted Medicare 
     Choice capitation rates for classes of individuals located in 
     each payment area which is in whole or in part within the 
     service area of such an organization.
       ``(b) Monthly Adjusted Medicare Choice Capitation Rate.--
       ``(1) In general.--For purposes of this section, the 
     `monthly adjusted Medicare Choice capitation rate' under this 
     subsection, for a month in a year for an individual in a 
     payment area (specified under paragraph (3)) and in a class 
     (established under paragraph (4)), is \1/12\ of the annual 
     Medicare Choice capitation rate specified in paragraph (2) 
     for that area for the year, adjusted to reflect the actuarial 
     value of benefits under this title with respect to 
     individuals in such class compared to the national average 
     for individuals in all classes.
       ``(2) Annual medicare choice capitation rates.--
       ``(A) In general.--For purposes of this section, the annual 
     Medicare Choice capitation rate for a payment area for a year 
     is equal to the annual Medicare Choice capitation rate for 
     the area for the previous year (or, in the case of 1996, the 
     average annual per capita rate of payment described in 
     section 1876(a)(1)(C) for the area for 1995) increased by the 
     per capita growth rate for that area and year (as determined 
     under subsection (c)).
       ``(B) Special rules for 1996.--
       ``(i) Floor at 85 percent of national average.--In no case 
     shall the annual Medicare Choice capitation rate for a 
     payment area for 1996 be less than 85 percent of the national 
     average of such rates for such year for all payment areas 
     (weighted to reflect the number of medicare beneficiaries in 
     each such area).
       ``(ii) Removal of medical education and disproportionate 
     share hospital payments from calculation of adjusted average 
     per capita cost.--In determining the annual Medicare Choice 
     capitation rate for 1996, the average annual per capita rate 
     of payment described in section 1876(a)(1)(C) for 1995 shall 
     be determined as though the Secretary had excluded from such 
     rate any amounts which the Secretary estimated would have 
     been payable under this title during the year for--

       ``(I) payment adjustments under section 1886(d)(5)(F) for 
     hospitals serving a disproportionate share of low-income 
     patients; and
       ``(II) the indirect costs of medical education under 
     section 1886(d)(5)(B) or for direct graduate medical 
     education costs under section 1886(h).

       ``(3) Payment area defined.--
       ``(A) In general.--In this section, the term `payment area' 
     means--
       ``(i) a metropolitan statistical area, or
       ``(ii) all areas of a State outside of such an area.
       ``(B) Special rule for esrd beneficiaries.--Such term 
     means, in the case of the population group described in 
     paragraph (5)(C), each State.
       ``(4) Classes.--
       ``(A) In general.--For purposes of this section, the 
     Secretary shall define appropriate classes of enrollees, 
     consistent with paragraph (5), based on age, gender, welfare 
     status, institutionalization, 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 classes, if such changes will improve the 
     determination of actuarial equivalence.
       ``(B) Research.--The Secretary shall conduct such research 
     as may be necessary to provide for greater accuracy in the 
     adjustment of capitation rates under this subsection. Such 
     research may include research into the addition or 
     modification of classes under subparagraph (A). The Secretary 
     shall submit to Congress a report on such research by not 
     later than January 1, 1997.
       ``(5) Division of medicare population.--In carrying out 
     paragraph (4) and this section, 

[[Page H10557]]

     the Secretary shall recognize the following separate 
     population groups:
       ``(A) Aged.--Individuals 65 years of age or older who are 
     not described in subparagraph (C).
       ``(B) Disabled.--Disabled individuals who are under 65 
     years of age and not described in subparagraph (C).
       ``(C) Individuals with end stage renal disease.--
     Individuals who are determined to have end stage renal 
     disease.
       ``(c) Per Capita Growth Rates.--
       ``(1) For 1996.--
       ``(A) In general.--For purposes of this section and subject 
     to subparagraph (B), the per capita growth rates for 1996, 
     for a payment area assigned to a service utilization cohort 
     under subsection (d), shall be the following:
       ``(i) Below average service utilization cohort.--For areas 
     assigned to the below average service utilization cohort, 
     10.0 percent.
       ``(ii) Above average service utilization cohort.--For areas 
     assigned to the above average service utilization cohort, 5.6 
     percent.
       ``(iii) Highest service utilization cohort.--For areas 
     assigned to the highest service utilization cohort, 3.2 
     percent.
       ``(B) Budget neutral adjustment.--The Secretary shall 
     adjust the per capita growth rates specified in subparagraph 
     (A) for all the areas by such uniform factor as may be 
     necessary to assure that the total capitation payments under 
     this section during 1996 are the same as the amount such 
     payments would have been if the per capita growth rate for 
     all such areas for 1996 were equal to the national average 
     per capita growth rate, specified in paragraph (3) for 1996.
       ``(2) For subsequent years.--
       ``(A) In general.--For purposes of this section and subject 
     to subparagraph (B), the Secretary shall compute a per capita 
     growth rate for each year after 1996, for each payment area 
     as assigned to a service utilization cohort under subsection 
     (d), consistent with the following rules:
       ``(i) Below average service utilization cohort set at 143 
     percent of national average per capita growth rate.--The per 
     capita growth rate for areas assigned to the below average 
     service utilization cohort for the year shall be 143 percent 
     of the national average per capita growth rate for the year 
     (as specified under paragraph (3)).
       ``(ii) Above average service utilization cohort set at 80 
     percent of national average per capita growth rate.--The per 
     capita growth rate for areas assigned to the above average 
     service utilization cohort for the year shall be 80 percent 
     of the national average per capita growth rate for the year.
       ``(iii) Highest service utilization cohort set at 40 
     percent of national average per capita growth rate.--The per 
     capita growth rate for areas assigned to the highest service 
     utilization cohort for the year shall be 40 percent of the 
     national average per capita growth rate for the year.
       ``(B) Average per capita growth rate at national average to 
     assure budget neutrality.--The Secretary shall compute per 
     capita growth rates for a year under subparagraph (A) in a 
     manner so that the weighted average per capita growth rate 
     for all areas for the year (weighted to reflect the number of 
     medicare beneficiaries in each area) is equal to the national 
     average per capita growth rate under paragraph (3) for the 
     year.
       ``(3) National average per capita growth rates.--In this 
     subsection, the `national average per capita growth rate' 
     for--
       ``(A) 1996 is 7.0 percent,
       ``(B) 1997 is 6.5 percent,
       ``(C) 1998 is 6.5 percent,
       ``(D) 1999 is 6.5 percent,
       ``(E) 2000 is 6.5 percent,
       ``(F) 2001 is 6.5 percent,
       ``(G) 2002 is 6.0 percent, and
       ``(H) each subsequent year is 6.0 percent.
       ``(d) Assignment of Payment Areas to Service Utilization 
     Cohorts.--
       ``(1) In general.--For purposes of determining per capita 
     growth rates under subsection (c) for areas for a year, the 
     Secretary shall assign each payment area to a service 
     utilization cohort (based on the service utilization index 
     value for that area determined under paragraph (2)) as 
     follows:
       ``(A) Below average service utilization cohort.--Areas with 
     a service utilization index value of less than 1.00 shall be 
     assigned to the below average service utilization cohort.
       ``(B) Above average service utilization cohort.--Areas with 
     a service utilization index value of at least 1.00 but less 
     than 1.20 shall be assigned to the above average service 
     utilization cohort.
       ``(C) Highest service utilization cohort.--Areas with a 
     service utilization index value of at least 1.20 shall be 
     assigned to the highest service utilization cohort.
       ``(2) Determination of service utilization index values.--
     In order to determine the per capita growth rate for a 
     payment area for each year (beginning with 1996), the 
     Secretary shall determine for such area and year a service 
     utilization index value, which is equal to--
       ``(A) the annual Medicare Choice capitation rate under this 
     section for the area for the year in which the determination 
     is made (or, in the case of 1996, the average annual per 
     capita rate of payment (described in section 1876(a)(1)(C)) 
     for the area for 1995); divided by
       ``(B) the input-price-adjusted annual national Medicare 
     Choice capitation rate (as determined under paragraph (3)) 
     for that area for the year in which the determination is 
     made.
       ``(3) Determination of input-price-adjusted rates.--
       ``(A) In general.--For purposes of paragraph (2), the 
     `input-price-adjusted annual national Medicare Choice 
     capitation rate' for a 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--
       ``(i) the national standardized Medicare Choice 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 of such 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 medicare choice capitation 
     rate.--In this paragraph, the `national standardized Medicare 
     Choice capitation rate' for a year is equal to--
       ``(i) the sum (for all payment areas) of the product of (I) 
     the annual Medicare Choice capitation rate for that year for 
     the area under subsection (b)(2), and (II) the average number 
     of medicare beneficiaries residing in that area in the year; 
     divided by
       ``(ii) the total average number of medicare beneficiaries 
     residing in all the payment areas for that year.
       ``(C) Special rules for 1996.--In applying this paragraph 
     for 1996--
       ``(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) 
     for such types of services shall be--

       ``(I) for part A services, the ratio (expressed as a 
     percentage) of the average annual per capita rate of payment 
     for the area for part A for 1995 to the total average annual 
     per capita rate of payment for the area for parts A and B for 
     1995, and

       ``(II) for part B services, 100 percent minus the ratio 
     described in subclause (I);

       ``(iii) for the 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, 70 percent shall be adjusted by the index described 
     in clause (iii);

       ``(v) the index values shall be computed based only on the 
     beneficiary population described in subsection (b)(5)(A).

     The Secretary may continue to apply the rules described in 
     this subparagraph (or similar rules) for 1997.
       ``(e) Payment Process.--
       ``(1) In general.--Subject to section 1859(f), the 
     Secretary shall make monthly payments under this section in 
     advance and in accordance with the rate determined under 
     subsection (a) to the plan for each individual enrolled with 
     a Medicare Choice organization under this part.
       ``(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.--
       ``(i) In general.--Subject to clause (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 
     Medicare Choice organization under a product 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 disclosure 
     statement described in section 1853(a) at the time the 
     individual enrolled with the organization.
       ``(f) Payments From Trust Fund.--The payment to a Medicare 
     Choice organization under this section for individuals 
     enrolled under this part with the organization, and payments 
     to a Medicare Choice MSA under subsection (f)(1)(B), 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 

[[Page H10558]]

     weight that benefits under part A and under part B represents 
     of the actuarial value of the total benefits under this 
     title.
       ``(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 Medicare Choice product 
     offered by a Medicare Choice organization--
       ``(A) payment for such services until the date of the 
     individual's discharge shall be made under this title through 
     the Medicare Choice product or Non-Medicare Choice option (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 Medicare 
     Choice 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 Medicare 
     Choice organization, and
       ``(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.


  ``establishment of standards for medicare choice organizations and 
                                products

       ``Sec. 1856. (a) Interim Standards.--
       ``(1) In general.--The Secretary shall issue regulations 
     regarding standards for Medicare Choice organizations and 
     products within 180 days after the date of the enactment of 
     this section. Such regulations shall be issued on an interim 
     basis, but shall become effective upon publication and shall 
     be effective through the end of 1999.
       ``(2) Solicitation of views.--In developing standards under 
     this subsection relating to solvency of Medicare Choice 
     organizations, the Secretary shall solicit the views of the 
     American Academy of Actuaries.
       ``(3) Effect on state regulations.--Regulations under this 
     subsection shall not preempt State regulations for Medicare 
     Choice organizations for products not offered under this 
     part.
       ``(b) Permanent Standards.--
       ``(1) In general.--The Secretary shall develop permanent 
     standards under this subsection.
       ``(2) Consultation.--In developing standards under this 
     subsection, the Secretary shall consult with the National 
     Association of Insurance Commissioners, associations 
     representing the various types of Medicare Choice 
     organizations, and medicare beneficiaries.
       ``(3) Effectiveness.--The standards under this subsection 
     shall take effect for periods beginning on or after January 
     1, 2000.
       ``(c) Solvency.--In establishing interim and permanent 
     standards under this section relating to solvency of 
     organizations, the Secretary shall recognize the multiple 
     means of demonstrating solvency, including--
       ``(1) reinsurance purchased through a recognized commerce 
     company or through a capitive company owned directly or 
     indirectly by 3 or more provider-sponsored organizations,
       ``(2) unrestricted surplus,
       ``(3) guarantees, and
       ``(4) letters of credit.

     In such standards, the Secretary may treat as admitted assets 
     the assets used by a provider-sponsored organization in 
     delivering covered services.
       ``(d) Application of New Standards to Entities with a 
     Contract.--In the case of a Medicare Choice 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).
       ``(e) Relation to State Laws.--The standards established 
     under this section shall supersede any State law. The 
     standard or regulation with respect to Medicare Choice 
     products which are offered by Medicare Choice organizations 
     and are issued by organizations to which section 1851(b)(1) 
     applies, to the extent such law or regulation is inconsistent 
     with such standards.


                    ``medicare choice certification

       ``Sec. 1857. (a) In General.--
       ``(1) Establishment.--The Secretary shall establish a 
     process for the certification of organizations and products 
     offered by organizations as meeting the applicable standards 
     for Medicare Choice organizations and Medicare Choice 
     products established under section 1856.
       ``(2) Involvement of secretary of labor.--Such process 
     shall be established and operated in cooperation with the 
     Secretary of Labor with respect to union sponsors and Taft-
     Hartley sponsors.
       ``(3) Use of private accreditation processes.--
       ``(A) In general.--The process under this subsection shall, 
     to the maximum extent practicable, provide that Medicare 
     Choice organizations and products that are licensed or 
     certified through a qualified private accreditation process 
     that the Secretary finds applies standards that are no less 
     stringent than the requirements of this part are deemed to 
     meet the corresponding requirements of this part for such an 
     organization or product.
       ``(B) Periodic accreditation.--The use of an accreditation 
     under subparagraph (A) shall be valid only for such period as 
     the Secretary specifies.
       ``(4) User fees.--The Secretary may impose user fees on 
     entities seeking certification under this subsection in such 
     amounts as the Secretary deems sufficient to finance the 
     costs of such certification.
       ``(b) Notice to Enrollees in Case of Decertification.--If a 
     Medicare Choice organization or product is decertified under 
     this section, the organization shall notify each enrollee 
     with the organization and product under this part of such 
     decertification.
       ``(c) Qualified Associations.--In the case of Medicare 
     Choice products offered by a Medicare Choice organization 
     that is a qualified association (as defined in section 
     1854(c)(4)(C)) and issued by an organization to which section 
     1851(b)(1) applies or by a provider-sponsored organization 
     (as defined in section 1854(a)), nothing in this section 
     shall be construed as limiting the authority of States to 
     regulate such products.


             ``contracts with medicare choice organizations

       ``Sec. 1858. (a) In General.--The Secretary shall not 
     permit the election under section 1805 of a Medicare Choice 
     product offered by a Medicare Choice organization under this 
     part, and no payment shall be made under section 1856 to an 
     organization, unless the Secretary has entered into a 
     contract under this section with an organization with respect 
     to the offering of such product. Such a contract with an 
     organization may cover more than one Medicare Choice product. 
     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) Enrollment Requirements.--
       ``(A) Minimum enrollment requirement.--Subject to 
     subparagraphs (B) and (C), the Secretary may not enter into a 
     contract under this section with a Medicare Choice 
     organization (other than a union sponsor or Taft-Hartley 
     sponsor) 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.
       ``(B) Allowing transition.--The Secretary may waive the 
     requirement of subparagraph (A) during the first 3 contract 
     years with respect to an organization.
       ``(C) Treatment of areas with low managed care 
     penetration.--The Secretary may waive the requirement of 
     subparagraph (A) in the case of organizations operating in 
     areas in which there is a low proportion of medicare 
     beneficiaries who have made the Medicare Choice election.
       ``(2) Requirement for enrollment of non-medicare 
     beneficiaries.--
       ``(A) In general.--Each Medicare Choice organization with 
     which the Secretary enters into a contract under this section 
     shall have, for the duration of such contract, an enrolled 
     membership at least one-half of which consists of individuals 
     who are not entitled to benefits under this title or under a 
     State plan approved under title XIX.
       ``(B) Exception.--Subparagraph (A) shall not apply to--
       ``(i) an organization that has been certified by a national 
     organization recognized by the Secretary and has been found 
     to have met performance standards established by the 
     Secretary for at least 2 years, or
       ``(ii) a provider-sponsored organization for which 
     commercial payments to providers participating in the 
     organization exceed the payments to the organization under 
     this part.
       ``(C) Modification and waiver.--The Secretary may modify or 
     waive the requirement imposed by subparagraph (A)--
       ``(i) to the extent that more than 50 percent of the 
     population of the area served by the organization consists of 
     individuals who are entitled to benefits under this title or 
     under a State plan approved under title XIX, or
       ``(ii) in the case of an organization that is owned and 
     operated by a governmental entity, only with respect to a 
     period of three years beginning on the date the organization 
     first enters into a contract under this section, and only if 
     the organization has taken and is making reasonable efforts 
     to enroll individuals who are not entitled to benefits under 
     this title or under a State plan approved under title XIX.
       ``(D) Enforcement.--If the Secretary determines that an 
     organization has failed to comply with the requirements of 
     this paragraph, the Secretary may provide for the suspension 
     of enrollment of individuals under this part or of payment to 
     the organization under this part for individuals newly 

[[Page H10559]]

     enrolled with the organization, after the date the Secretary 
     notifies the organization of such noncompliance.
       ``(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) on the Medicare Choice 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;
       ``(C) is operating in a manner that is not in the best 
     interests of the individuals covered under the contract; or
       ``(D) 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.
       ``(4) Previous terminations.--The Secretary may not enter 
     into a contract with a Medicare Choice 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) No 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 Medicare Choice 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 contract.
       ``(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 organization under this part.
       ``(3) Disclosure.--
       ``(A) In general.--Each Medicare Choice 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 
     entities.
       ``(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 between the 
     organization and a 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 controls, is controlled by, 
     or is under common 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 Medicare 
     Choice 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 Medicare Choice 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 Medicare Choice 
     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.
       ``(f) Additional Contract Terms.--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.
       ``(g) Intermediate Sanctions.--
       ``(1) In general.--If the Secretary determines that a 
     Medicare Choice 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 premiums on individuals enrolled under this 
     part in excess of the 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(f)(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, or
       ``(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 satisfied that the basis for 
     such determination has been corrected and is not likely to 
     recur.
       ``(3) Other intermediate sanctions.--In the case of a 
     Medicare Choice 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:
       ``(A) civil money penalties of not more than $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;

[[Page H10560]]

       ``(B) civil money penalties of not more than $10,000 for 
     each week beginning after the initiation of procedures by the 
     Secretary under subsection (h) during which the deficiency 
     that is the basis of a determination under subsection (c)(2) 
     exists; and
       ``(C) suspension of enrollment of individuals under this 
     part after the date the Secretary notifies the organization 
     of a determination under subsection (c)(2) and until the 
     Secretary is satisfied that the deficiency that is the basis 
     for the determination has been corrected and is not likely to 
     recur.
       ``(4) Procedures for imposing sanctions.--The provisions of 
     section 1128A (other than subsections (a) and (b)) shall 
     apply to a civil money penalty under paragraph (1) or (2) in 
     the same manner as they apply to a civil money penalty or 
     proceeding under section 1128A(a).
       ``(h) Procedures for Imposing Sanctions.--The Secretary may 
     terminate a contract with a Medicare Choice organization 
     under this section or may impose the intermediate sanctions 
     described in subsection (g) on the organization in accordance 
     with formal investigation and compliance procedures 
     established by the Secretary under which--
       ``(1) the Secretary provides the organization with the 
     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);
       ``(2) the Secretary shall impose more severe sanctions on 
     organizations that have a history of deficiencies or that 
     have not taken steps to correct deficiencies the Secretary 
     has brought to their attention;
       ``(3) there are no unreasonable or unnecessary delays 
     between the finding of a deficiency and the imposition of 
     sanctions; and
       ``(4) the Secretary provides the organization with 
     reasonable notice and opportunity for hearing (including the 
     right to appeal an initial decision) before imposing any 
     sanction or terminating the contract.


     ``demonstration project for high deductible/medisave products

       ``Sec. 1859. (a) In General.--The Secretary shall permit, 
     on a demonstration project basis, the offering of high 
     deductible/medisave products under this part, subject to the 
     special rules provided under this section.
       ``(b) High Deductible/Medisave Product Defined.--
       ``(1) In general.--In this part, the term `high deductible/
     medisave product' means a Medicare Choice product that--
       ``(A) 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 product) equal to the amount of a deductible 
     (described in paragraph (2));
       ``(B) counts as such expenses (for purposes of such 
     deductible) at least all amounts that would have been payable 
     under parts A and B or by the enrollee if the enrollee had 
     elected to receive benefits through the provisions of such 
     parts; and
       ``(C) provides, after such deductible is met for a year and 
     for all subsequent expenses for benefits referred to in 
     subparagraph (A) 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. Such term does not include the Medicare 
     Choice MSA itself or any contribution into such account.
       ``(2) Deductible.--The amount of deductible under a high 
     deductible/medisave product--
       ``(A) for contract year 1997 shall be not more than 
     $10,000; and
       ``(B) for a subsequent contract year shall be not more than 
     the maximum amount of such deductible for the previous 
     contract year under this paragraph increased by the national 
     average per capita growth rate under section 1855(c)(3) for 
     the year.

     If the amount of the deductible under subparagraph (B) is not 
     a multiple of $50, the amount shall be rounded to the nearest 
     multiple of $50.
       ``(c) Special Rules Relating to Enrollment.--The rule under 
     section 1805 relating to election of medicare choice products 
     shall apply to election of high deductible/medisave products 
     offered under the demonstration project under this section, 
     except as follows:
       ``(1) Special rule for certain annuitants.--An individual 
     is not eligible to elect a high deductible/medisave product 
     under section 1805 if the individual is entitled to benefits 
     under chapter 89 of title 5, United States Code, as an 
     annuitant or spouse of an annuitant.
       ``(2) Transition period rule.--During the transition period 
     (as defined in section 1805(e)(1)(B)), an individual who has 
     elected a high deductible/medisave product may not change 
     such election to a Medicare Choice product that is not a high 
     deductible/medisave product unless the individual has had 
     such election in effect for 12 months.
       ``(3) No 90-day disenrollment option.--Paragraph (4)(A) of 
     section 1805(e) shall not apply to an individual who elects a 
     high deductible/medisave product.
       ``(4) Timing of election.--An individual may elect a high 
     deductible/medisave product only during an annual, 
     coordinated election period described in section 
     1805(e)(3)(B) or during the month of October, 1996.
       ``(5) Effectiveness of election.--An election of coverage 
     for a high deductible/medisave product made in a year shall 
     take effect as of the first day of the following year.
       ``(d) Special Rules Relating to Benefits.--
       ``(1) In general.--Paragraphs (1) and (3) of section 
     1852(a) shall not apply to high deductible/medisave products.
       ``(2) Premiums.--
       ``(A) Application of alternative premium.--In applying 
     section 1852(d)(2) in the case of a high deductible/medisave 
     product, instead of the amount specified in subparagraph (B) 
     there shall be substituted the monthly adjusted Medicare 
     Choice capitation rate specified in section 1855(b)(1) for 
     the individual and period involved.
       ``(B) Class adjusted premiums.--Notwithstanding section 
     1852(d)(3), a Medicare Choice organization shall establish 
     premiums for any high deductible/medisave product it offers 
     in a payment area based on each of the risk adjustment 
     categories established for purposes of determining the amount 
     of the payment to Medicare Choice organizations under section 
     1855(b)(1) and using the identical demographic and other 
     adjustments among such categories as are used for such 
     purposes.
       ``(C) Requirement for additional benefits not applicable.--
     Section 1852(e)(1)(A) shall not apply to a high deductible/
     medisave product.
       ``(e) Additional Disclosure.--In any disclosure made 
     pursuant to section 1853(a)(1) for a high deductible/medisave 
     product, the disclosure shall include a comparison of 
     benefits under such a product with benefits under other 
     Medicare Choice products.
       ``(f) Special Rules for Individuals Electing High 
     Deductible/Medisave Product.--
       ``(1) In general.--In the case of an individual who has 
     elected a high deductible/medisave product, notwithstanding 
     the provisions of section 1855--
       ``(A) the amount of the payment to the Medicare Choice 
     organization offering the high deductible/medisave product 
     shall not exceed the premium for the product, and
       ``(B) subject to paragraph (2), the difference between the 
     amount of payment that would otherwise be made and the amount 
     of payment to such organization shall be made directly into a 
     Medicare Choice MSA established (and, if applicable, 
     designated) by the individual under paragraph (2).
       ``(2) Establishment and designation of medicare choice 
     medical savings account as requirement for payment of 
     contribution.--In the case of an individual who has elected 
     coverage under a high deductible/medisave product, no payment 
     shall be made under paragraph (1)(B) 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 
     Medicare Choice MSA (as defined in section 137(b) of the 
     Internal Revenue Code of 1986), and
       ``(B) if the individual has established more than one 
     Medicare Choice MSA, has designated one of such accounts as 
     the individual's Medicare Choice 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 a high 
     deductible/medisave product effective beginning with a month 
     in a year, the amount of the contribution to the Medicare 
     Choice 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.
       ``(g) Special Contract Rules.--
       ``(1) Enrollment requirements waived.--Subsection (b) of 
     section 1858 shall not apply with respect to a contract that 
     relates only to one or more high deductible/medisave 
     products.
       ``(2) Effective date of contracts.--In no case shall a 
     contract under section 1858 which provides for coverage under 
     a high deductible/medisave account be effective before 
     January 1997 with respect to such coverage.''.
       (b) 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).
       (c) Use of 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 promulgate 
     regulations that take effect on an interim basis, after 
     notice and pending opportunity for public comment.
       (d) Advance Directives.--Section 1866(f)(1) (42 U.S.C. 
     1395cc(f)(1)) is amended--
       (1) in paragraph (1)--
       (A) by inserting ``1853(g),'' after ``1833(s),'', and
       (B) by inserting ``, Medicare Choice organization,'' after 
     ``provider of services'', and
       (2) by adding at the end the following new paragraph:
       ``(4) Nothing in this subsection shall be construed to 
     require the provision of information regarding assisted 
     suicide, euthanasia, or mercy killing.''.

[[Page H10561]]

       (e) Conforming Amendment.--Section 1866(a)(1)(O) (42 U.S.C. 
     1395cc(a)(1)(O)) is amended by inserting before the semicolon 
     at the end the following: ``and in the case of hospitals to 
     accept as payment in full for inpatient hospital services 
     that are covered under this title and are furnished to any 
     individual enrolled under part C with a Medicare Choice 
     organization which does not have a contract establishing 
     payment amounts for services furnished to members of the 
     organization the amounts that would be made as a payment in 
     full under this title if the individuals were not so 
     enrolled''.

     SEC. 8003. REPORTS.

       (a) Alternative Payment Approaches.--By not later than 18 
     months after the date of the enactment of this Act, the 
     Secretary of Health and Human Services (in this title 
     referred to as the ``Secretary'') shall submit to Congress a 
     report on alternative provider payment approaches under the 
     medicare program, including--
       (1) combined hospital and physician payments per admission,
       (2) partial capitation models for subsets of medicare 
     benefits, and
       (3) risk-sharing arrangements in which the Secretary 
     defines the risk corridor and shares in gains and losses.

     Such report shall include recommendations for implementing 
     and testing such approaches and legislation that may be 
     required to implement and test such approaches.
       (b) Coverage of Retired Workers.--
       (1) In general.--The Secretary shall work with employers 
     and health benefit plans to develop standards and payment 
     methodologies to allow retired workers to continue to 
     participate in employer health plans instead of participating 
     in the medicare program. Such standards shall also cover 
     workers covered under the Federal Employees Health Benefits 
     Program under chapter 89 of title 5, United States Code.
       (2) Report.--Not later than 18 months after the date of the 
     enactment of this Act, the Secretary shall submit to Congress 
     a report on the development of such standards and payment 
     methodologies. The report shall include recommendations 
     relating to such legislation as may be necessary.

     SEC. 8004. TRANSITIONAL RULES FOR CURRENT MEDICARE HMO 
                   PROGRAM.

       (a) Transition from Current Contracts.--
       (1) Limitation on new contracts.--The Secretary of Health 
     and Human Services (in this section referred to as the 
     ``Secretary'') shall not enter into any risk-sharing or cost 
     reimbursement contract under section 1876 of the Social 
     Security Act with an eligible organization for any contract 
     year beginning on or after the date standards for Medicare 
     Choice organizations and products are first established under 
     section 1856(a) of such Act with respect to Medicare Choice 
     organizations that are insurers or health maintenance 
     organizations unless such a contract had been in effect under 
     section 1876 of such Act for the organization for the 
     previous contract year.
       (2) Termination of current contracts.--
       (A) Risk-sharing contracts.--Notwithstanding any other 
     provision of law, the Secretary shall not extend or continue 
     any risk-sharing contract with an eligible organization under 
     section 1876 of the Social Security Act (for which a contract 
     was entered into consistent with paragraph (1)(A)) for any 
     contract year beginning on or after 1 year after the date 
     standards described in paragraph (1)(A) are established.
       (B) Cost reimbursement contracts.--The Secretary shall not 
     extend or continue any reasonable cost reimbursement contract 
     with an eligible organization under section 1876 of the 
     Social Security Act for any contract year beginning on or 
     after January 1, 1998.
       (b) Conforming Payment Rates Under Risk-Sharing 
     Contracts.--Notwithstanding any other provision of law, the 
     Secretary shall provide that payment amounts under risk-
     sharing contracts under section 1876(a) of the Social 
     Security Act for months in a year (beginning with January 
     1996) shall be computed--
       (1) with respect to individuals entitled to benefits under 
     both parts A and B of title XVIII of such Act, by 
     substituting payment rates under section 1855(a) of such Act 
     for the payment rates otherwise established under section 
     1876(a) of such Act, and
       (2) with respect to individuals only entitled to benefits 
     under part B of such title, by substituting an appropriate 
     proportion of such rates (reflecting the relative proportion 
     of payments under such title attributable to such part) for 
     the payment rates otherwise established under section 1876(a) 
     of such Act.

     For purposes of carrying out this paragraph for payment for 
     months in 1996, the Secretary shall compute, announce, and 
     apply the payment rates under section 1855(a) of such Act 
     (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 not in accordance with such rates.

   PART 2--SPECIAL RULES FOR MEDICARE CHOICE MEDICAL SAVINGS ACCOUNTS

     SEC. 8011. MEDICARE CHOICE MSA'S.

       (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 137 as section 138 and by inserting 
     after section 136 the following new section:

     ``SEC. 137. MEDICARE CHOICE MSA'S.

       ``(a) Exclusion.--Gross income shall not include any 
     payment to the Medicare Choice MSA of an individual by the 
     Secretary of Health and Human Services under section 
     1859(f)(1)(B) of the Social Security Act.
       ``(b) Medicare Choice MSA.--For purposes of this section--
       ``(1) Medicare choice msa.--The term `Medicare Choice MSA' 
     means a trust created or organized in the United States 
     exclusively for the purpose of paying the qualified medical 
     expenses of the account holder, but only if the written 
     governing instrument creating the trust meets the following 
     requirements:
       ``(A) Except in the case of a trustee-to-trustee transfer 
     described in subsection (d)(4), no contribution will be 
     accepted unless it is made by the Secretary of Health and 
     Human Services under section 1859(f)(1)(B) of the Social 
     Security Act.
       ``(B) The trustee is a bank (as defined in section 408(n)), 
     an insurance company (as defined in section 816), or another 
     person who demonstrates to the satisfaction of the Secretary 
     that the manner in which such person will administer the 
     trust will be consistent with the requirements of this 
     section.
       ``(C) No part of the trust assets will be invested in life 
     insurance contracts.
       ``(D) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(E) The interest of an individual in the balance in his 
     account is nonforfeitable.
       ``(F) Trustee-to-trustee transfers described in subsection 
     (d)(4) may be made to and from the trust.
       ``(2) Qualified medical expenses.--
       ``(A) In general.--The term `qualified medical expenses' 
     means, with respect to an account holder, amounts paid by 
     such holder--
       ``(i) for medical care (as defined in section 213(d)) for 
     the account holder, but only to the extent such amounts are 
     not compensated for by insurance or otherwise, or
       ``(ii) for long-term care insurance for the account holder.
       ``(B) Health insurance may not be purchased from account.--
     Subparagraph (A)(i) shall not apply to any payment for 
     insurance.
       ``(3) Account holder.--The term `account holder' means the 
     individual on whose behalf the Medicare Choice MSA is 
     maintained.
       ``(4) Certain rules to apply.--Rules similar to the rules 
     of subsections (g) and (h) of section 408 shall apply for 
     purposes of this section.
       ``(c) Tax Treatment of Accounts.--
       ``(1) In general.--A Medicare Choice MSA is exempt from 
     taxation under this subtitle unless such MSA has ceased to be 
     a Medicare Choice MSA by reason of paragraph (2). 
     Notwithstanding the preceding sentence, any such MSA is 
     subject to the taxes imposed by section 511 (relating to 
     imposition of tax on unrelated business income of charitable, 
     etc. organizations).
       ``(2) Account assets treated as distributed in the case of 
     prohibited transactions or account pledged as security for 
     loan.--Rules similar to the rules of paragraphs (2) and (4) 
     of section 408(e) shall apply to Medicare Choice MSA's, and 
     any amount treated as distributed under such rules shall be 
     treated as not used to pay qualified medical expenses.
       ``(d) Tax Treatment of Distributions.--
       ``(1) Inclusion of amounts not used for qualified medical 
     expenses.--No amount shall be included in the gross income of 
     the account holder by reason of a payment or distribution 
     from a Medicare Choice MSA which is used exclusively to pay 
     the qualified medical expenses of the account holder. Any 
     amount paid or distributed from a Medicare Choice MSA which 
     is not so used shall be included in the gross income of such 
     holder.
       ``(2) Penalty for distributions 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 Medicare Choice 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 the Medicare 
     Choice MSA as of the close of the calendar year preceding the 
     calendar year in which the taxable year begins, over
       ``(II) an amount equal to 60 percent of the deductible 
     under the catastrophic health plan covering the account 
     holder as of January 1 of the calendar year in which the 
     taxable year begins.

       ``(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 Medicare Choice MSA's of the account holder shall 
     be treated as 1 account,
       ``(ii) all payments and distributions not used exclusively 
     to pay the qualified medical expenses of the account holder 
     during any 

[[Page H10562]]

     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 
     distribution.
       ``(3) Withdrawal of erroneous contributions.--Paragraphs 
     (1) and (2) shall not apply to any payment or distribution 
     from a Medicare Choice 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.--Paragraphs (1) and (2) 
     shall not apply to any trustee-to-trustee transfer from a 
     Medicare Choice MSA of an account holder to another Medicare 
     Choice MSA of such account holder.
       ``(5) Coordination with medical expense deduction.--For 
     purposes of section 213, any payment or distribution out of a 
     Medicare Choice MSA for qualified medical expenses shall not 
     be treated as an expense paid for medical care.
       ``(e) Treatment of Account After Death of Account Holder.--
       ``(1) Treatment if designated beneficiary is spouse.--
       ``(A) In general.--In the case of an account holder's 
     interest in a Medicare Choice MSA which is payable to (or for 
     the benefit of) such holder's spouse upon the death of such 
     holder, such Medicare Choice MSA shall be treated as a 
     Medicare Choice MSA of such spouse as of the date of such 
     death.
       ``(B) Special rules if spouse not medicare eligible.--If, 
     as of the date of such death, such spouse is not entitled to 
     benefits under title XVIII of the Social Security Act, then 
     after the date of such death--
       ``(i) the Secretary of Health and Human Services may not 
     make any payments to such Medicare Choice MSA, other than 
     payments attributable to periods before such date,
       ``(ii) in applying subsection (b)(2) with respect to such 
     Medicare Choice MSA, references to the account holder shall 
     be treated as including references to any dependent (as 
     defined in section 152) of such spouse and any subsequent 
     spouse of such spouse, and
       ``(iii) in lieu of applying subsection (d)(2), the rules of 
     section 220(f)(2) shall apply.
       ``(2) Treatment if designated beneficiary is not spouse.--
     In the case of an account holder's interest in a Medicare 
     Choice MSA which is payable to (or for the benefit of) any 
     person other than such holder's spouse upon the death of such 
     holder--
       ``(A) such account shall cease to be a Medicare Choice MSA 
     as of the date of death, and
       ``(B) an amount equal to the fair market value of the 
     assets in such account on such date shall be includible--
       ``(i) if such person is not the estate of such holder, in 
     such person's gross income for the taxable year which 
     includes such date, or
       ``(ii) if such person is the estate of such holder, in such 
     holder's gross income for last taxable year of such holder.
       ``(f) Reports.--
       ``(1) In general.--The trustee of a Medicare Choice MSA 
     shall make such reports regarding such account to the 
     Secretary and to the account holder with respect to--
       ``(A) the fair market value of the assets in such Medicare 
     Choice MSA as of the close of each calendar year, and
       ``(B) contributions, distributions, and other matters,

     as the Secretary may require by regulations.
       ``(2) Time and manner of reports.--The reports required by 
     this subsection--
       ``(A) shall be filed at such time and in such manner as the 
     Secretary prescribes in such regulations, and
       ``(B) shall be furnished to the account holder--
       ``(i) not later than January 31 of the calendar year 
     following the calendar year to which such reports relate, and
       ``(ii) in such manner as the Secretary prescribes in such 
     regulations.''
       (b) Exclusion of Medicare Choice MSA's From Estate Tax.--
     Part IV of subchapter A of chapter 11 of such Code is amended 
     by adding at the end the following new section:

     ``SEC. 2057. MEDICARE CHOICE MSA'S.

       ``For purposes of the tax imposed by section 2001, the 
     value of the taxable estate shall be determined by deducting 
     from the value of the gross estate an amount equal to the 
     value of any Medicare Choice MSA (as defined in section 
     137(b)) included in the gross estate.''
       (c) Tax on Prohibited Transactions.--
       (1) Section 4975 of such Code (relating to tax on 
     prohibited transactions) is amended by adding at the end of 
     subsection (c) the following new paragraph:
       ``(5) Special rule for Medicare Choice MSA's.--An 
     individual for whose benefit a Medicare Choice MSA (within 
     the meaning of section 137(b)) is established shall be exempt 
     from the tax imposed by this section with respect to any 
     transaction concerning such account (which would otherwise be 
     taxable under this section) if, with respect to such 
     transaction, the account ceases to be a Medicare Choice MSA 
     by reason of the application of section 137(c)(2) to such 
     account.''
       (2) Paragraph (1) of section 4975(e) of such Code is 
     amended to read as follows:
       ``(1) Plan.--For purposes of this section, the term `plan' 
     means--
       ``(A) a trust described in section 401(a) which forms a 
     part of a plan, or a plan described in section 403(a), which 
     trust or plan is exempt from tax under section 501(a),
       ``(B) an individual retirement account described in section 
     408(a),
       ``(C) an individual retirement annuity described in section 
     408(b),
       ``(D) a medical savings account described in section 
     220(d),
       ``(E) a Medicare Choice MSA described in section 137(b), or
       ``(F) a trust, plan, account, or annuity which, at any 
     time, has been determined by the Secretary to be described in 
     any preceding subparagraph of this paragraph.''
       (d) Failure To Provide Reports on Medicare Choice MSA's.--
       (1) Subsection (a) of section 6693 of such Code (relating 
     to failure to provide reports on individual retirement 
     accounts or annuities) is amended to read as follows:
       ``(a) Reports.--
       ``(1) In general.--If a person required to file a report 
     under a provision referred to in paragraph (2) fails to file 
     such report at the time and in the manner required by such 
     provision, such person shall pay a penalty of $50 for each 
     failure unless it is shown that such failure is due to 
     reasonable cause.
       ``(2) Provisions.--The provisions referred to in this 
     paragraph are--
       ``(A) subsections (i) and (l) of section 408 (relating to 
     individual retirement plans),
       ``(B) section 220(h) (relating to medical savings 
     accounts), and
       ``(C) section 137(f) (relating to Medicare Choice MSA's).''
       (2) The section heading for section 6693 of such Code is 
     amended to read as follows:

     ``SEC. 6693. FAILURE TO FILE REPORTS ON INDIVIDUAL RETIREMENT 
                   PLANS AND CERTAIN OTHER TAX-FAVORED ACCOUNTS; 
                   PENALTIES RELATING TO DESIGNATED NONDEDUCTIBLE 
                   CONTRIBUTIONS.''

       (e) Clerical Amendments.--
       (1) 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. 137. Medicare Choice MSA's.
``Sec. 138. Cross references to other Acts.''

       (2) The table of sections for subchapter B of chapter 68 of 
     such Code is amended by striking the item relating to section 
     6693 and inserting the following new item:

``Sec. 6693. Failure to file reports on individual retirement plans and 
              certain other tax-favored accounts; penalties relating to 
              designated nondeductible contributions.''

       (3) The table of sections for part IV of subchapter A of 
     chapter 11 of such Code is amended by adding at the end the 
     following new item:

``Sec. 2057. Medicare Choice MSA's.''

       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.

     SEC. 8012. CERTAIN REBATES EXCLUDED FROM GROSS INCOME.

       (a) In General.--Section 105 of the Internal Revenue Code 
     of 1986 (relating to amounts received under accident and 
     health plans) is amended by adding at the end the following 
     new subsection:
       ``(j) Certain Rebates Under Social Security Act.--Gross 
     income does not include any rebate received under section 
     1852(e)(1)(A) of the Social Security Act during the taxable 
     year.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to amounts received after the date of the 
     enactment of this Act.

      PART 3--SPECIAL ANTITRUST RULE FOR PROVIDER SERVICE NETWORKS

     SEC. 8021. APPLICATION OF ANTITRUST RULE OF REASON TO 
                   PROVIDER SERVICE NETWORKS.

       (a) Rule of Reason Standard.--In any action under the 
     antitrust laws, or under any State law similar to the 
     antitrust laws--
       (1) the conduct of a provider service network in 
     negotiating, making, or performing a contract (including the 
     establishment and modification of a fee schedule and the 
     development of a panel of physicians), to the extent such 
     contract is for the purpose of providing health care services 
     to individuals under the terms of a Medicare Choice PSO 
     product, and
       (2) the conduct of any member of such network for the 
     purpose of providing such health care services under such 
     contract to such extent,

     shall not be deemed illegal per se. Such conduct shall be 
     judged on the basis of its reasonableness, taking into 
     account all relevant factors affecting competition, including 
     the effects on competition in properly defined markets.
       (b) Definitions.--For purposes of subsection (a):
       (1) Antitrust laws.--The term ``antitrust laws'' has the 
     meaning given it in subsection (a) of the first section of 
     the Clayton Act (15 U.S.C. 12), except that such term 
     includes section 5 of the Federal Trade Commission Act (15 
     U.S.C. 45) to the extent that such section 5 applies to 
     unfair methods of competition.
       (2) Health care provider.--The term ``health care 
     provider'' means any individual or entity that is engaged in 
     the delivery of health care services in a State and that 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.
       (3) Health care service.--The term ``health care service'' 
     means any service for which payment may be made under a 
     Medicare Choice PSO product including services related to the 
     delivery or administration of such service.

[[Page H10563]]

       (4) Medicare Choice program.--The term ``Medicare Choice 
     program'' means the program under part C of title XVIII of 
     the Social Security Act.
       (5) Medicare Choice PSO product.--The term ``Medicare 
     Choice PSO product'' means a Medicare Choice product offered 
     by a provider-sponsored organization under part C of title 
     XVIII of the Social Security Act.
       (6) Provider service network.--The term ``provider service 
     network'' means an organization that--
       (A) is organized by, operated by, and composed of members 
     who are health care providers and for purposes that include 
     providing health care services,
       (B) is funded in part by capital contributions made by the 
     members of such organization,
       (C) with respect to each contract made by such organization 
     for the purpose of providing a type of health care service to 
     individuals under the terms of a Medicare Choice PSO 
     product--
       (i) requires all members of such organization who engage in 
     providing such type of health care service to agree to 
     provide health care services of such type under such 
     contract,
       (ii) receives the compensation paid for the health care 
     services of such type provided under such contract by such 
     members, and
       (iii) provides for the distribution of such compensation,
       (D) has established, consistent with the requirements of 
     the Medicare Choice program for provider-sponsored 
     organizations, a program to review, pursuant to written 
     guidelines, the quality, efficiency, and appropriateness of 
     treatment methods and setting of services for all health care 
     providers and all patients participating in such product, 
     along with internal procedures to correct identified 
     deficiencies relating to such methods and such services,
       (E) has established, consistent with the requirements of 
     the Medicare Choice program for provider-sponsored 
     organizations, a program to monitor and control utilization 
     of health care services provided under such product, for the 
     purpose of improving efficient, appropriate care and 
     eliminating the provision of unnecessary health care 
     services,
       (F) has established a management program to coordinate the 
     delivery of health care services for all health care 
     providers and all patients participating in such product, for 
     the purpose of achieving efficiencies and enhancing the 
     quality of health care services provided, and
       (G) has established, consistent with the requirements of 
     the Medicare Choice program for provider-sponsored 
     organizations, a grievance and appeal process for such 
     organization designed to review and promptly resolve 
     beneficiary or patient grievances and complaints.

     Such term may include a provider-sponsored organization.
       (7) Provider-sponsored organization.--The term ``provider-
     sponsored organization'' means a Medicare Choice organization 
     under the Medicare Choice program that is a provider-
     sponsored organization (as defined in section 1854(a)(1) of 
     the Social Security Act).
       (8) State.--The term ``State'' has the meaning given it in 
     section 4G(2) of the Clayton Act (15 U.S.C. 15g(2)).
       (c) Issuance of Guidelines.--Not later than 120 days after 
     the date of the enactment of this Act, the Attorney General 
     and the Federal Trade Commission shall issue jointly 
     guidelines specifying the enforcement policies and analytical 
     principles that will be applied by the Department of Justice 
     and the Commission with respect to the operation of 
     subsection (a).

                          PART 4--COMMISSIONS

     SEC. 8031. MEDICARE PAYMENT REVIEW COMMISSION.

       (a) In General.--Title XVIII, as amended by section 
     8001(a), is amended by inserting after section 1805 the 
     following new section:


                  ``medicare payment review commission

       ``Sec. 1806. (a) Establishment.--There is hereby 
     established the Medicare Payment Review Commission (in this 
     section referred to as the `Commission').
       ``(b) Duties.--
       ``(1) General duties and reports.--The Commission shall 
     review, and make recommendations to Congress concerning, 
     payment policies under this title. By not later than June 1 
     of each year, the Commission shall submit a report to 
     Congress containing an examination of issues affecting the 
     medicare program, including the implications of changes in 
     health care delivery in the United States and in the market 
     for health care services on the medicare program. The 
     Commission may submit to Congress from time to time such 
     other reports as the Commission deems appropriate. The 
     Secretary shall respond to recommendations of the Commission 
     in notices of rulemaking proceedings under this title.
       ``(2) Specific duties relating to medicare choice 
     program.--Specifically, the Commission shall review, with 
     respect to the Medicare Choice program under part C--
       ``(A) the appropriateness of 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,
       ``(B) the appropriateness of the mechanisms used to adjust 
     payments for risk and the need to adjust such mechanisms to 
     take into account health status of beneficiaries,
       ``(C) the implications of risk selection both among 
     Medicare Choice organizations and between the Medicare Choice 
     option and the non-Medicare Choice option,
       ``(D) in relation to payment under part C, the development 
     and implementation of mechanisms to assure the quality of 
     care for those enrolled with Medicare Choice organizations,
       ``(F) the impact of the Medicare Choice program on access 
     to care for medicare beneficiaries, and
       ``(G) other major issues in implementation and further 
     development of the Medicare Choice program.
       ``(3) Specific duties relating to the fee-for-service 
     system.--Specifically, the Commission shall review payment 
     policies under parts A and B, including--
       ``(A) the factors affecting expenditures for services in 
     different sectors, including the process for updating 
     hospital, physician, and other fees,
       ``(B) payment methodologies; and
       ``(C) the impact of payment policies on access and quality 
     of care for medicare beneficiaries.
       ``(4) Specific duties relating to interaction of 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 
     under this title and assess the implications of changes in 
     the health services market on the medicare program.
       ``(c) Membership.--
       ``(1) Number and appointment.--The Commission shall be 
     composed of 15 members appointed by the Comptroller General.
       ``(2) Qualifications.--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, 
     physicians, and other providers of services, and other 
     related fields, who provide a mix of different professionals, 
     broad geographic representation, and a balance between urban 
     and rural representatives, including physicians and other 
     health professionals, employers, third party payors, 
     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.
       ``(3) Considerations in initial appointment.--To the extent 
     possible, in first appointing members to the Commission the 
     Comptroller General shall consider appointing individuals who 
     (as of the date of the enactment of this section) were 
     serving on the Prospective Payment Assessment Commission or 
     the Physician Payment Review Commission.
       ``(4) 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 
     appointed.
       ``(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.
       ``(5) 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.
       ``(6) 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.
       ``(7) 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);

[[Page H10564]]

       ``(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 schedule.
       ``(2) Data collection.--In order to carry out its 
     functions, the Commission shall collect and assess 
     information
       ``(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 recommendations.
       ``(3) Access of gao to information.--The Comptroller 
     General shall have unrestricted access to all deliberations, 
     records, and data of the Commission, immediately upon 
     request.
       ``(4) Periodic audit.--The Commission shall be subject to 
     periodic audit by the General Accounting Office.
       ``(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 appropriation shall be payable 
     from the Federal 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 Review 
     Commission''.
       (2) PPRC.--
       (A) In general.--Title XVIII is amended by striking section 
     1845 (42 U.S.C. 1395w-1).
       (B) Conforming amendments.--
       (i) Section 1834(b)(2) (42 U.S.C. 1395m(b)(2)) is amended 
     by striking ``Physician Payment Review Commission'' and 
     inserting ``Medicare Payment Review Commission''.
       (ii) Section 1842(b) (42 U.S.C. 1395u(b)) is amended by 
     striking ``Physician Payment Review Commission'' each place 
     it appears in paragraphs (2)(C), (9)(D), and (14)(C)(i) and 
     inserting ``Medicare Payment Review Commission''.
       (iii) Section 1848 (42 U.S.C. 1395w@4) is amended by 
     striking ``Physician Payment Review Commission'' and 
     inserting ``Medicare Payment Review Commission'' each place 
     it appears in paragraph (2)(A)(ii), (2)(B)(iii), and (5) of 
     subsection (c), subsection (d)(2)(F), paragraphs (1)(B), (3), 
     and (4)(A)of subsection (f), and paragraphs (6)(C) and (7)(C) 
     of subsection (g).
       (c) Effective Date; Transition.--
       (1) In general.--The Comptroller General shall first 
     provide for appointment of members to the Medicare Payment 
     Review Commission (in this subsection referred to as 
     ``MPRC'') by not later than March 31, 1996.
       (2) Transition.--Effective on a date (not later than 30 
     days after the date a majority of members of the MPRC have 
     first been appointed, 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''), and amendments made by subsection 
     (b), are terminated. The Comptroller General, to the maximum 
     extent feasible, shall provide for the transfer to the MPRC 
     of assets and staff of ProPAC and PPRC, without any loss of 
     benefits or seniority by virtue of such transfers. Fund 
     balances available to the ProPAC or PPRC for any period shall 
     be available to the MPRC for such period for like purposes.
       (3) Continuing responsibility for reports.--The MPRC 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 MPRC) by the 
     ProPAC and PPRC, and, for this purpose, any reference in law 
     to either such Commission is deemed, after the appointment of 
     the MPRC, to refer to the MPRC.

     SEC. 8032. COMMISSION ON THE EFFECT OF THE BABY BOOM 
                   GENERATION ON THE MEDICARE PROGRAM.

       (a) Establishment.--There is established a commission to be 
     known as the 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, and
       (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 consider the 
     following:
       (A) The amount and sources of Federal funds to finance the 
     medicare program, including the potential use of innovative 
     financing methods.
       (B) The most efficient and effective manner of 
     administering the program, including the appropriateness of 
     continuing the enforcement of medicare budget targets under 
     section 8701 for fiscal years after fiscal year 2002 and the 
     appropriate long-term growth rates for contributions electing 
     coverage under Medicare Choice under part C of title XVIII of 
     such Act.
       (C) Methods used by other nations to respond to comparable 
     demographic patterns in eligibility for health care benefits 
     for elderly and disabled individuals.
       (D) Modifying age-based eligibility to correspond to 
     changes in age-based eligibility under the OASDI program.
       (E) Trends in employment-related health care for retirees, 
     including the use of medical savings accounts and similar 
     financing devices.
       (c) Membership.--
       (1) Appointment.--The Commission shall be composed of 15 
     members appointed as follows:
       (A) The President shall appoint 3 members.
       (B) 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.
       (C) 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 party.
       (2) Chairman and vice chairman.--The Commission shall elect 
     a Chairman and Vice Chairman from among its members.
       (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 (e).
       (5) Meetings.--The Commission shall meet at the call of its 
     Chairman or a majority of its members.
       (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) 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.
       (e) 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.

[[Page H10565]]

       (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 subparagraph (A).
       (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 provide such 
     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 Code.
       (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) Acceptance of donations.--The Commission may accept, 
     use, and dispose of gifts or donations of services or 
     property.
       (10) 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.
       (f) Report.--Not later than May 1, 1997, 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 
     objective.
       (g) Termination.--The Commission shall terminate 60 days 
     after the date of submission of the report required in 
     subsection (f).
       (h) Authorization of Appropriations.--There are authorized 
     to be appropriated $1,500,000 to carry out this section. 
     Amounts appropriated to carry out this section shall remain 
     available until expended.

           PART 5--PREEMPTION OF STATE ANTI-MANAGED CARE LAWS

     SEC. 8041. PREEMPTION OF STATE LAW RESTRICTIONS ON MANAGED 
                   CARE ARRANGEMENTS.

       (a) Limitation on Restrictions on Network Plans.--Effective 
     as of January 1, 1997--
       (1) a State may not prohibit or limit a carrier or group 
     health plan providing health coverage from including 
     incentives for enrollees to use the services of participating 
     providers;
       (2) a State may not prohibit or limit such a carrier or 
     plan from limiting coverage of services to those provided by 
     a participating provider, except as provided in section 1013;
       (3) a State may not prohibit or limit the negotiation of 
     rates and forms of payments for providers by such a carrier 
     or plan with respect to health coverage;
       (4) a State may not prohibit or limit such a carrier or 
     plan from limiting the number of participating providers;
       (5) a State may not prohibit or limit such a carrier or 
     plan from requiring that services be provided (or authorized) 
     by a practitioner selected by the enrollee from a list of 
     available participating providers or, except for services of 
     a physician who specializes in obstetrics and gynecology, 
     from requiring enrollees to obtain referral in order to have 
     coverage for treatment by a specialist or health institution; 
     and
       (6) a State may not prohibit or limit the corporate 
     practice of medicine.
       (b) Definitions.--In this section:
       (1) Managed care coverage.--The term ``managed care 
     coverage'' means health coverage to the extent the coverage 
     is provided through a managed care arrangement (as defined in 
     paragraph (3)) that meets the applicable requirements of such 
     section.
       (2) Participating provider.--The term ``participating 
     provider'' means an entity or individual which provides, 
     sells, or leases health care services as part of a provider 
     network (as defined in paragraph (4)).
       (3) Managed care arrangement.--The term ``managed care 
     arrangement'' means, with respect to a group health plan or 
     under health insurance coverage, an arrangement under such 
     plan or coverage under which providers agree to provide items 
     and services covered under the arrangement to individuals 
     covered under the plan or who have such coverage.
       (4) Provider network.--The term ``provider network'' means, 
     with respect to a group health plan or health insurance 
     coverage, providers who have entered into an agreement 
     described in paragraph (3).

     SEC. 8042. PREEMPTION OF STATE LAWS RESTRICTING UTILIZATION 
                   REVIEW PROGRAMS.

       (a) In General.--Effective January 1, 1997, no State law or 
     regulation shall prohibit or regulate activities under a 
     utilization review program (as defined in subsection (b)).
       (b) Utilization Review Program Defined.--In this section, 
     the term ``utilization review program'' means a system of 
     reviewing the medical necessity and appropriateness of 
     patient services (which may include inpatient and outpatient 
     services) using specified guidelines. Such a system may 
     include preadmission certification, the application of 
     practice guidelines, continued stay review, discharge 
     planning, preauthorization of ambulatory procedures, and 
     retrospective review.
       (c) Exemption of Laws Preventing Denial of Lifesaving 
     Medical Treatment Pending Transfer to Another Health Care 
     Provider.--Nothing in this subtitle shall be construed to 
     invalidate any State law that has the effect of preventing 
     involuntary denial of life-preserving medical treatment when 
     such denial would cause the involuntary death of the patient 
     pending transfer of the patient to a health care provider 
     willing to provide such treatment.
          Subtitle B--Provisions Relating to Regulatory Relief

    PART 1--PROVISIONS RELATING TO PHYSICIAN FINANCIAL RELATIONSHIPS

     SEC. 8101. REPEAL OF PROHIBITIONS BASED ON COMPENSATION 
                   ARRANGEMENTS.

       (a) In General.--Section 1877(a)(2) (42 U.S.C. 
     1395nn(a)(2)) is amended by striking ``is--'' and all that 
     follows through ``equity,'' and inserting the following: ``is 
     (except as provided in subsection (c)) an ownership or 
     investment interest in the entity through equity,''.
       (b) Conforming Amendments.--Section 1877 (42 U.S.C. 1395nn) 
     is amended as follows:
       (1) In subsection (b)--
       (A) in the heading, by striking ``to Both Ownership and 
     Compensation Arrangement Provisions'' and inserting ``Where 
     Financial Relationship Exists''; and
       (B) by redesignating paragraph (4) as paragraph (7).
       (2) In subsection (c)--
       (A) by amending the heading to read as follows: ``Exception 
     for Ownership or Investment Interest in Publicly Traded 
     Securities and Mutual Funds''; and
       (B) in the matter preceding paragraph (1), by striking 
     ``subsection (a)(2)(A)'' and inserting ``subsection (a)(2)''.
       (3) In subsection (d)--
       (A) by striking the matter preceding paragraph (1);
       (B) in paragraph (3), by striking ``paragraph (1)'' and 
     inserting ``paragraph (4)''; and
       (C) by redesignating paragraphs (1), (2), and (3) as 
     paragraphs (4), (5), and (6), and by transferring and 
     inserting such paragraphs after paragraph (3) of subsection 
     (b).
       (4) By striking subsection (e).
       (5) In subsection (f)(2), as amended by section 152(a) of 
     the Social Security Act Amendments of 1994--
       (A) in the matter preceding paragraph (1), by striking 
     ``ownership, investment, and compensation'' and inserting 
     ``ownership and investment'';
       (B) in paragraph (2), by striking ``subsection (a)(2)(A)'' 
     and all that follows through ``subsection (a)(2)(B)),'' and 
     inserting ``subsection (a)(2),''; and
       (C) in paragraph (2), by striking ``or who have such a 
     compensation relationship with the entity''.
       (6) In subsection (h)--
       (A) by striking paragraphs (1), (2), and (3);
       (B) in paragraph (4)(A), by striking clauses (iv) and (vi);
       (C) in paragraph (4)(B), by striking ``rules.--'' and all 
     that follows through ``(ii) Faculty'' and inserting ``rules 
     for faculty; and
       (D) by adding at the end of paragraph (4) the following new 
     subparagraph:
       ``(C) Member of a group.--A physician is a `member' of a 
     group if the physician is an owner or a bona fide employee, 
     or both, of the group.''.

     SEC. 8102. REVISION OF DESIGNATED HEALTH SERVICES SUBJECT TO 
                   PROHIBITION.

       (a) In General.--Section 1877(h)(6) (42 U.S.C. 
     1395nn(h)(6)) is amended by striking subparagraphs (B) 
     through (K) and inserting the following:
       ``(B) Items and services furnished by a community pharmacy 
     (as defined in paragraph (1)).
       ``(C) Magnetic resonance imaging and computerized 
     tomography services.
       ``(D) Outpatient physical therapy services.''.
       (b) Community Pharmacy Defined.--Section 1877(h) (42 U.S.C. 
     1395nn(h)), as amended by section 8101(b)(6), is amended by 
     inserting before paragraph (4) the following new paragraph:
       ``(1) Community pharmacy.--The term `community pharmacy' 
     means any entity licensed or certified to dispense 
     prescription drugs by the State in which the entity is 
     located (including an entity which dispenses such drugs by 
     mail order).''.
       (c) Conforming Amendments.--
       (1) Section 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended 
     in the matter preceding subparagraph (A) by striking 
     ``services'' and all that 

[[Page H10566]]

     follows through ``supplies)--'' and inserting ``services--''.
       (2) Section 1877(h)(5)(C) (42 U.S.C. 1395nn(h)(5)(C)) is 
     amended--
       (A) by striking ``, a request by a radiologist for 
     diagnostic radiology services, and a request by a radiation 
     oncologist for radiation therapy,'' and inserting ``and a 
     request by a radiologist for magnetic resonance imaging or 
     for computerized tomography'', and
       (B) by striking ``radiologist, or radiation oncologist'' 
     and inserting ``or radiologist''.

     SEC. 8103. DELAY IN IMPLEMENTATION UNTIL PROMULGATION OF 
                   REGULATIONS.

       (a) In General.--Section 13562(b) of OBRA-1993 (42 U.S.C. 
     1395nn note) is amended--
       (1) in paragraph (1), by striking ``paragraph (2)'' and 
     inserting ``paragraphs (2) and (3)''; and
       (2) by adding at the end the following new paragraph:
       ``(3) Promulgation of regulations.--Notwithstanding 
     paragraphs (1) and (2), the amendments made by this section 
     shall not apply to any referrals made before the effective 
     date of final regulations promulgated by the Secretary of 
     Health and Human Services to carry out such amendments.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall take effect as if included in the enactment of OBRA-
     1993.

     SEC. 8104. EXCEPTIONS TO PROHIBITION.

       (a) Revisions to Exception for In-office Ancillary 
     Services.--
       (1) Repeal of site-of-service requirement.--Section 1877 
     (42 U.S.C. 1395nn) is amended--
       (A) by amending subparagraph (A) of subsection (b)(2) to 
     read as follows:
       ``(A) that are furnished personally by the referring 
     physician, personally by a physician who is a member of the 
     same group practice as the referring physician, or personally 
     by individuals who are under the general supervision of the 
     physician or of another physician in the group practice, 
     and'', and
       (B) by adding at the end of subsection (h) the following 
     new paragraph:
       ``(7) General supervision.--An individual is considered to 
     be under the `general supervision' of a physician if the 
     physician (or group practice of which the physician is a 
     member) is legally responsible for the services performed by 
     the individual and for ensuring that the individual meets 
     licensure and certification requirements, if any, applicable 
     under other provisions of law, regardless of whether or not 
     the physician is physically present when the individual 
     furnishes an item or service.''.
       (2) Clarification of treatment of physician owners of group 
     practice.--Section 1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) 
     is amended by striking ``physician or such group practice'' 
     and inserting ``physician, such group practice, or the 
     physician owners of such group practice''.
       (3) Conforming amendment.--Section 1877(b)(2) (42 U.S.C. 
     1395nn(b)(2)) is amended by amending the heading to read as 
     follows: ``Ancillary services furnished personally or through 
     group practice.--''.
       (b) Clarification of Exception for Services Furnished in a 
     Rural Area.--Paragraph (5) of section 1877(b) (42 U.S.C. 
     1395nn(b)), as transferred by section 8101(b)(3)(C), is 
     amended by striking ``substantially all'' and inserting ``not 
     less than 75 percent''.
       (c) Revision of Exception for Certain Managed Care 
     Arrangements.--Section 1877(b)(3) (42 U.S.C. 1395nn(b)(3)) is 
     amended--
       (1) in the heading by inserting ``managed care 
     arrangements'' after ``Prepaid plans'';
       (2) in the matter preceding subparagraph (A), by striking 
     ``organization--'' and inserting ``organization, directly or 
     through contractual arrangements with other entities, to 
     individuals enrolled with the organization--'';
       (3) in subparagraph (A), by inserting ``or part C'' after 
     ``section 1876'';
       (4) by striking ``or'' at the end of subparagraph (C);
       (5) by striking the period at the end of subparagraph (D) 
     and inserting a comma; and
       (6) by adding at the end the following new subparagraphs:
       ``(E) with a contract with a State to provide services 
     under the State plan under title XIX (in accordance with 
     section 1903(m)) or a State MediGrant plan under title XXI; 
     or
       ``(F) which--
       ``(i) provides health care items or services directly or 
     through one or more subsidiary entities or arranges for the 
     provision of health care items or services substantially 
     through the services of health care providers under contract 
     with the organization, and
       ``(ii)(I) assumes financial risk for the provision of 
     health services through mechanisms (such as capitation, risk 
     pools, withholds, and per diem payments) or offers its 
     network of contract health providers to an entity (including 
     self-insured employers and indemnity plans) which assumes 
     financial risk for the provision of such health services, or
       ``(II) has in effect a written agreement with the provider 
     of services under which the provider is at significant 
     financial risk (whether through a withhold, capitation, 
     incentive pool, per diem payments, or similar risk sharing 
     arrangement) for the cost or utilization of services that the 
     provider is obligated to provide.''.
       (d) New Exception for Shared Facility Services.--
       (1) In general.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
     amended by section 8101(b)(3)(C), is amended--
       (A) by redesignating paragraphs (4) through (7) as 
     paragraphs (5) through (8); and
       (B) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) Shared facility services.--In the case of a 
     designated health service consisting of a shared facility 
     service of a shared facility--
       ``(A) that is furnished--
       ``(i) personally by the referring physician who is a shared 
     facility physician or personally by an individual directly 
     employed or under the general supervision of such a 
     physician,
       ``(ii) by a shared facility in a building in which the 
     referring physician furnishes substantially all of the 
     services of the physician that are unrelated to the 
     furnishing of shared facility services, and
       ``(iii) to a patient of a shared facility physician; and
       ``(B) that is billed by the referring physician or a group 
     practice of which the physician is a member.''.
       (2) Definitions.--Section 1877(h) (42 U.S.C. 1395nn(h)), as 
     amended by section 8101(b)(6) and section 8102(b), is amended 
     by inserting after paragraph (1) the following new paragraph:
       ``(2) Shared facility related definitions.--
       ``(A) Shared facility service.--The term `shared facility 
     service' means, with respect to a shared facility, a 
     designated health service furnished by the facility to 
     patients of shared facility physicians.
       ``(B) Shared facility.--The term `shared facility' means an 
     entity that furnishes shared facility services under a shared 
     facility arrangement.
       ``(C) Shared facility physician.--The term `shared facility 
     physician' means, with respect to a shared facility, a 
     physician (or a group practice of which the physician is a 
     member) who has a financial relationship under a shared 
     facility arrangement with the facility.
       ``(D) Shared facility arrangement.--The term `shared 
     facility arrangement' means, with respect to the provision of 
     shared facility services in a building, a financial 
     arrangement--
       ``(i) which is only between physicians who are providing 
     services (unrelated to shared facility services) in the same 
     building,
       ``(ii) in which the overhead expenses of the facility are 
     shared, in accordance with methods previously determined by 
     the physicians in the arrangement, among the physicians in 
     the arrangement, and
       ``(iii) which, in the case of a corporation, is wholly 
     owned and controlled by shared facility physicians.''.
       (e) New Exception for Services Furnished in Communities 
     With No Alternative Providers.--Section 1877(b) (42 U.S.C. 
     1395nn(b)), as amended by section 8101(b)(3)(C) and 
     subsection (d)(1), is amended--
       (1) by redesignating paragraphs (5) through (8) as 
     paragraphs (6) through (9); and
       (2) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) No alternative providers in area.--In the case of a 
     designated health service furnished in any area with respect 
     to which the Secretary determines that individuals residing 
     in the area do not have reasonable access to such a 
     designated health service for which subsection (a)(1) does 
     not apply.''.
       (f) New Exception for Services Furnished in Ambulatory 
     Surgical Centers.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
     amended by section 8101(b)(3)(C), subsection (d)(1), and 
     subsection (e)(1), is amended--
       (1) by redesignating paragraphs (6) through (9) as 
     paragraphs (7) through (10); and
       (2) by inserting after paragraph (5) the following new 
     paragraph:
       ``(6) Services furnished in ambulatory surgical centers.--
     In the case of a designated health service furnished in an 
     ambulatory surgical center described in section 
     1832(a)(2)(F)(i).''.
       (g) New Exception for Services Furnished in Renal Dialysis 
     Facilities.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
     amended by section 8101(b)(3)(C), subsection (d)(1), 
     subsection (e)(1), and subsection (f), is amended--
       (1) by redesignating paragraphs (7) through (10) as 
     paragraphs (8) through (11); and
       (2) by inserting after paragraph (6) the following new 
     paragraph:
       ``(7) Services furnished in renal dialysis facilities.--In 
     the case of a designated health service furnished in a renal 
     dialysis facility under section 1881.''.
       (h) New Exception for Services Furnished in a Hospice.--
     Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by section 
     8101(b)(3)(C), subsection (d)(1), subsection (e)(1), 
     subsection (f), and subsection (g), is amended--
       (1) by redesignating paragraphs (8) through (11) as 
     paragraphs (9) through (12); and
       (2) by inserting after paragraph (7) the following new 
     paragraph:
       ``(8) Services furnished by a hospice program.--In the case 
     of a designated health service furnished by a hospice program 
     under section 1861(dd)(2).''.
       (i) New Exception for Services Furnished in a Comprehensive 
     Outpatient Rehabilitation Facility.--Section 1877(b) (42 
     U.S.C. 1395nn(b)), as amended by section 8101(b)(3)(C), 
     subsection (d)(1), subsection (e)(1), subsection (f), 
     subsection (g), and subsection (h), is amended--
       (1) by redesignating paragraphs (9) through (12) as 
     paragraphs (10) through (13); and

[[Page H10567]]

       (2) by inserting after paragraph (8) the following new 
     paragraph:
       ``(9) Services furnished in a comprehensive outpatient 
     rehabilitation facility.--In the case of a designated health 
     service furnished in a comprehensive outpatient 
     rehabilitation facility (as defined in section 
     1861(cc)(2)).''.
       (i) Definition of Referral.--Section 1877(h)(5)(A) (42 
     U.S.C. 1395nn(h)(5)(A)) is amended--
       (1) by striking ``an item or service'' and inserting ``a 
     designated health service'', and
       (2) by striking ``the item or service'' and inserting ``the 
     designated health service''.

     SEC. 8105. REPEAL OF REPORTING REQUIREMENTS.

       Section 1877 (42 U.S.C. 1395nn) is amended--
       (1) by striking subsection (f); and
       (2) by striking subsection (g)(5).

     SEC. 8106. PREEMPTION OF STATE LAW.

       Section 1877 (42 U.S.C. 1395nn) is amended by adding at the 
     end the following new subsection:
       ``(i) Preemption of State Law.--This section preempts State 
     law to the extent State law is inconsistent with this 
     section.''.

     SEC. 8107. EFFECTIVE DATE.

       Except as provided in section 8103(b), the amendments made 
     by this part shall apply to referrals made on or after August 
     14, 1995, regardless of whether or not regulations are 
     promulgated to carry out such amendments.

                        PART 2--ANTITRUST REFORM

     SEC. 8111. PUBLICATION OF ANTITRUST GUIDELINES ON ACTIVITIES 
                   OF HEALTH PLANS.

       (a) In General.--The Attorney General shall provide for the 
     development and publication of explicit guidelines on the 
     application of antitrust laws to the activities of health 
     plans. The guidelines shall be designed to facilitate 
     development and operation of plans, consistent with the 
     antitrust laws.
       (b) Review Process.--The Attorney General shall establish a 
     review process under which the administrator or sponsor of a 
     health plan (or organization that proposes to administer or 
     sponsor a health plan) may submit a request to the Attorney 
     General to obtain a prompt opinion (but in no event later 
     than 90 days after the Attorney General receives the request) 
     from the Department of Justice on the plan's conformity with 
     the Federal antitrust laws.

     SEC. 8112. ISSUANCE OF HEALTH CARE CERTIFICATES OF PUBLIC 
                   ADVANTAGE.

       (a) Issuance and Effect of Certificate.--The Attorney 
     General, after consultation with the Secretary, shall issue 
     in accordance with this section a certificate of public 
     advantage to each eligible health care collaborative activity 
     that complies with the requirements in effect under this 
     section on or after the expiration of the 1-year period that 
     begins on the date of the enactment of this Act (without 
     regard to whether or not the Attorney General has promulgated 
     regulations to carry out this section by such date). Such 
     activity, and the parties to such activity, shall not be 
     liable under any of the antitrust laws for conduct described 
     in such certificate and engaged in by such activity if such 
     conduct occurs while such certificate is in effect.
       (b) Requirements Applicable to Issuance of Certificates.--
       (1) Standards to be met.--The Attorney General shall issue 
     a certificate to an eligible health care collaborative 
     activity if the Attorney General finds that--
       (A) the benefits that are likely to result from carrying 
     out the activity outweigh the reduction in competition (if 
     any) that is likely to result from the activity, and
       (B) such reduction in competition is necessary to obtain 
     such benefits.
       (2) Factors to be considered.--
       (A) Weighing of benefits against reduction in 
     competition.--For purposes of making the finding described in 
     paragraph (1)(A), the Attorney General shall consider whether 
     the activity is likely--
       (i) to maintain or to increase the quality of health care 
     by providing new services not currently offered in the 
     relevant market,
       (ii) to increase access to health care,
       (iii) to achieve cost efficiencies that will be passed on 
     to health care consumers, such as economies of scale, reduced 
     transaction costs, and reduced administrative costs, that 
     cannot be achieved by the provision of available services and 
     facilities in the relevant market,
       (iv) to preserve the operation of health care facilities 
     located in underserved geographical areas,
       (v) to improve utilization of health care resources, and
       (vi) to reduce inefficient health care resource 
     duplication.
       (B) Necessity of reduction in competition.--For purposes of 
     making the finding described in paragraph (1)(B), the 
     Attorney General shall consider--
       (i) the ability of the providers of health care services 
     that are (or likely to be) affected by the health care 
     collaborative activity and the entities responsible for 
     making payments to such providers to negotiate societally 
     optimal payment and service arrangements,
       (ii) the effects of the health care collaborative activity 
     on premiums and other charges imposed by the entities 
     described in clause (i), and
       (iii) the availability of equally efficient, less 
     restrictive alternatives to achieve the benefits that are 
     intended to be achieved by carrying out the activity.
       (c) Establishment of Criteria and Procedures.--Subject to 
     subsections (d) and (e), not later than 1 year after the date 
     of the enactment of this Act, the Attorney General and the 
     Secretary shall establish jointly by rule the criteria and 
     procedures applicable to the issuance of certificates under 
     subsection (a). The rules shall specify the form and content 
     of the application to be submitted to the Attorney General to 
     request a certificate, the information required to be 
     submitted in support of such application, the procedures 
     applicable to denying and to revoking a certificate, and the 
     procedures applicable to the administrative appeal (if such 
     appeal is authorized by rule) of the denial and the 
     revocation of a certificate. Such information may include the 
     terms of the health care collaborative activity (in the case 
     of an activity in existence as of the time of the 
     application) and implementation plan for the collaborative 
     activity.
       (d) Eligible Health Care Collaborative Activity.--To be an 
     eligible health care collaborative activity for purposes of 
     this section, a health care collaborative activity shall 
     submit to the Attorney General an application that complies 
     with the rules in effect under subsection (c) and that 
     includes--
       (1) an agreement by the parties to the activity that the 
     activity will not foreclose competition by entering into 
     contracts that prevent health care providers from providing 
     health care in competition with the activity,
       (2) an agreement that the activity will submit to the 
     Attorney General annually a report that describes the 
     operations of the activity and information regarding the 
     impact of the activity on health care and on competition in 
     health care, and
       (3) an agreement that the parties to the activity will 
     notify the Attorney General and the Secretary of the 
     termination of the activity not later than 30 days after such 
     termination occurs.
       (e) Review of Applications for Certificates.--Not later 
     than 90 days after an eligible health care collaborative 
     activity submits to the Attorney General an application that 
     complies with the rules in effect under subsection (c) and 
     with subsection (d), the Attorney General shall issue or deny 
     the issuance of such certificate. If, before the expiration 
     of such 90-day period, the Attorney General may extend the 
     time for issuance for good cause.
       (f) Revocation of Certificate.--Whenever the Attorney 
     General finds that a health care collaborative activity with 
     respect to which a certificate is in effect does not meet the 
     standards specified in subsection (b), the Attorney General 
     shall revoke such certificate.
       (g) Written Reasons; Judicial Review.--
       (1) Denial and revocation of certificates.--If the Attorney 
     General denies an application for a certificate or revokes a 
     certificate, the Attorney General shall include in the notice 
     of denial or revocation a statement of the reasons relied 
     upon for the denial or revocation of such certificate.
       (2) Judicial review.--
       (A) After administrative proceeding.--(i) If the Attorney 
     General denies an application submitted or revokes a 
     certificate issued under this section after an opportunity 
     for hearing on the record, then any party to the health care 
     collaborative activity involved may commence a civil action, 
     not later than 60 days after receiving notice of the denial 
     or revocation, in an appropriate district court of the United 
     States for review of the record of such denial or revocation.
       (ii) As part of the Attorney General's answer, the Attorney 
     General shall file in such court a certified copy of the 
     record on which such denial or revocation is based. The 
     findings of fact of the Attorney General may be set aside 
     only if found to be unsupported by substantial evidence in 
     such record taken as a whole.
       (B) Denial or revocation without administrative 
     proceeding.--If the Attorney General denies an application 
     submitted or revokes a certificate issued under this section 
     without an opportunity for hearing on the record, then any 
     party to the health care collaborative activity involved may 
     commence a civil action, not later than 60 days after 
     receiving notice of the denial or revocation, in an 
     appropriate district court of the United States for de novo 
     review of such denial or revocation.
       (h) Exemption.--A person shall not be liable under any of 
     the antitrust laws for conduct necessary--
       (1) to prepare, agree to prepare, or attempt to agree to 
     prepare an application to request a certificate under this 
     section, or
       (2) to attempt to enter into any health care collaborative 
     activity with respect to which such a certificate is in 
     effect.
       (i) Definitions.--In this section:
       (1) The term ``certificate'' means a certificate of public 
     advantage authorized to be issued under subsection (a).
       (2) The term ``health care collaborative activity'' means 
     an agreement (whether existing or proposed) between 2 or more 
     providers of health care services that is entered into solely 
     for the purpose of sharing in the provision and coordination 
     of health care services and that involves substantial 
     integration and financial risk-sharing between the parties, 
     but does not include the exchanging of information, the 
     entering into of any agreement, or the engagement in any 
     other conduct that is not reasonably required to carry out 
     such agreement.
       (3) The term ``health care services'' includes services 
     related to the delivery or administration of health care 
     services.

[[Page H10568]]

       (4) The term ``liable'' means liable for any civil or 
     criminal violation of the antitrust laws.
       (5) The term ``provider of health care services'' means any 
     individual or entity that is engaged in the delivery of 
     health care services in a State and that 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.

     SEC. 8113. STUDY OF IMPACT ON COMPETITION.

       The Attorney General, in consultation with the Chairman of 
     the Federal Trade Commission, annually shall submit to the 
     Congress a report as part of the annual budget oversight 
     proceedings concerning the Antitrust Division of the 
     Department of Justice. The report shall enable the Congress 
     to determine how enforcement of antitrust laws is affecting 
     the formation of efficient, cost-saving joint ventures and if 
     the certificate of public advantage procedure set forth in 
     section 8112 has resulted in undesirable reduction in 
     competition in the health care marketplace. The report shall 
     include an evaluation of the factors set forth in paragraphs 
     (2)(A) and (2)(B) of section 8112(b).

     SEC. 8114. ANTITRUST EXEMPTION.

       The antitrust laws shall not apply with respect to--
       (1) the merger of, or the attempt to merge, 2 or more 
     hospitals,
       (2) a contract entered into solely by 2 or more hospitals 
     to allocate hospital services, or
       (3) the attempt by only 2 or more hospitals to enter into a 
     contract to allocate hospital services,

     if each of such hospitals satisfies all of the requirements 
     of section 8115 at the time such hospitals engage in the 
     conduct described in paragraph (1), (2), or (3), as the case 
     may be.

     SEC. 8115. REQUIREMENTS.

       The requirements referred to in section 8114 are as 
     follows:
       (1) The hospital is located outside of a city, or in a city 
     that has less than 150,000 inhabitants, as determined in 
     accordance with the most recent data available from the 
     Bureau of the Census.
       (2) In the most recently concluded calendar year, the 
     hospital received more than 40 percent of its gross revenue 
     from payments made under Federal programs.
       (3) There is in effect with respect to the hospital a 
     certificate issued by the Health Care Financing 
     Administration specifying that such Administration has 
     determined that Federal expenditures would be reduced, 
     consumer costs would not increase, and access to health care 
     services would not be reduced, if the hospital and the other 
     hospitals that requested such certificate merge, or allocate 
     the hospital services specified in such request, as the case 
     may be.

     SEC. 8116. DEFINITION.

       For purposes of this subtitle, the term `antitrust laws' 
     has the meaning given such term in subsection (a) of the 
     first section of the Clayton Act (15 U.S.C. 12), except that 
     such term includes section 5 of the Federal Trade Commission 
     Act (15 U.S.C. 45) to the extent that such section 5 applies 
     with respect to unfair methods of competition.

                       PART 3--MALPRACTICE REFORM

          Subpart A--Uniform Standards for Malpractice Claims

     SEC. 8121. APPLICABILITY.

       Except as provided in section 8131, this subpart shall 
     apply to any medical malpractice liability action brought in 
     a Federal or State court, and to any medical malpractice 
     claim subject to an alternative dispute resolution system, 
     that is initiated on or after January 1, 1996.

     SEC. 8122. REQUIREMENT FOR INITIAL RESOLUTION OF ACTION 
                   THROUGH ALTERNATIVE DISPUTE RESOLUTION.

       (a) In General.--
       (1) State cases.--A medical malpractice liability action 
     may not be brought in any State court during a calendar year 
     unless the medical malpractice liability claim that is the 
     subject of the action has been initially resolved under an 
     alternative dispute resolution system certified for the year 
     by the Secretary under section 8132(a), or, in the case of a 
     State in which such a system is not in effect for the year, 
     under the alternative Federal system established under 
     section 8132(b).
       (2) Federal diversity actions.--A medical malpractice 
     liability action may not be brought in any Federal court 
     under section 1332 of title 28, United States Code, during a 
     calendar year unless the medical malpractice liability claim 
     that is the subject of the action has been initially resolved 
     under the alternative dispute resolution system referred to 
     in paragraph (1) that applied in the State whose law applies 
     in such action.
       (3) Claims against united states.--
       (A) Establishment of process for claims.--The Attorney 
     General shall establish an alternative dispute resolution 
     process for the resolution of tort claims consisting of 
     medical malpractice liability claims brought against the 
     United States under chapter 171 of title 28, United States 
     Code. Under such process, the resolution of a claim shall 
     occur after the completion of the administrative claim 
     process applicable to the claim under section 2675 of such 
     title.
       (B) Requirement for initial resolution under process.--A 
     medical malpractice liability action based on a medical 
     malpractice liability claim described in subparagraph (A) may 
     not be brought in any Federal court unless the claim has been 
     initially resolved under the alternative dispute resolution 
     process established by the Attorney General under such 
     subparagraph.
       (b) Initial Resolution of Claims Under ADR.--For purposes 
     of subsection (a), an action is ``initially resolved'' under 
     an alternative dispute resolution system if--
       (1) the ADR reaches a decision on whether the defendant is 
     liable to the plaintiff for damages; and
       (2) if the ADR determines that the defendant is liable, the 
     ADR reaches a decision on the amount of damages assessed 
     against the defendant.
       (c) Procedures for Filing Actions.--
       (1) Notice of intent to contest decision.--Not later than 
     60 days after a decision is issued with respect to a medical 
     malpractice liability claim under an alternative dispute 
     resolution system, each party affected by the decision shall 
     submit a sealed statement to a court of competent 
     jurisdiction indicating whether or not the party intends to 
     contest the decision.
       (2) Deadline for filing action.--A medical malpractice 
     liability action may not be brought by a party unless--
       (A) the party has filed the notice of intent required by 
     paragraph (1); and
       (B) the party files the action in a court of competent 
     jurisdiction not later than 90 days after the decision 
     resolving the medical malpractice liability claim that is the 
     subject of the action is issued under the applicable 
     alternative dispute resolution system.
       (3) Court of competent jurisdiction.--For purposes of this 
     subsection, the term ``court of competent jurisdiction'' 
     means--
       (A) with respect to actions filed in a State court, the 
     appropriate State trial court; and
       (B) with respect to actions filed in a Federal court, the 
     appropriate United States district court.
       (d) Legal Effect of Uncontested ADR Decision.--The decision 
     reached under an alternative dispute resolution system shall, 
     for purposes of enforcement by a court of competent 
     jurisdiction, have the same status in the court as the 
     verdict of a medical malpractice liability action adjudicated 
     in a State or Federal trial court. The previous sentence 
     shall not apply to a decision that is contested by a party 
     affected by the decision pursuant to subsection (c)(1).

     SEC. 8123. OPTIONAL APPLICATION OF PRACTICE GUIDELINES.

       (a) Development and Certification of Guidelines.--Each 
     State may develop, for certification by the Secretary, a set 
     of specialty clinical practice guidelines, based on 
     recommended guidelines from national specialty societies, to 
     be updated annually. In the absence of recommended guidelines 
     from such societies, each State may develop such guidelines 
     based on such criteria as the State considers appropriate 
     (including based on recommended guidelines developed by the 
     Agency for Health Care Policy and Research).
       (b) Provision of Health Care Under Guidelines.--
     Notwithstanding any other provision of law, in any medical 
     malpractice liability action arising from the conduct of a 
     health care provider or health care professional, if such 
     conduct was in accordance with a guideline developed by the 
     State in which the conduct occurred and certified by the 
     Secretary under subsection (a), the guideline--
       (1) may be introduced by any party to the action (including 
     a health care provider, health care professional, or 
     patient); and
       (2) if introduced, shall establish a rebuttable presumption 
     that the conduct was in accordance with the appropriate 
     standard of medical care, which may only be overcome by the 
     presentation of clear and convincing evidence on behalf of 
     the party against whom the presumption operates.

     SEC. 8124. TREATMENT OF NONECONOMIC AND PUNITIVE DAMAGES.

       (a) Limitation on Noneconomic Damages.--The total amount of 
     noneconomic damages that may be awarded to a claimant and the 
     members of the claimant's family for losses resulting from 
     the injury which is the subject of a medical malpractice 
     liability action may not exceed $500,000, regardless of the 
     number of parties against whom the action is brought or the 
     number of actions brought with respect to the injury.
       (b) No Award of Punitive Damages Against Manufacturer of 
     Medical Product.--In the case of a medical malpractice 
     liability action in which the plaintiff alleges a claim 
     against the manufacturer of a medical product, no punitive or 
     exemplary damages may be awarded against such manufacturer.
       (c) Joint and Several Liability for Noneconomic Damages.--
     The liability of each defendant for noneconomic damages shall 
     be several only and shall not be joint, and each defendant 
     shall be liable only for the amount of noneconomic damages 
     allocated to the defendant in direct proportion to the 
     defendant's percentage of responsibility (as determined by 
     the trier of fact).
       (d) Use of Punitive Damage Awards for Operation of ADR 
     Systems in States.--
       (1) In general.--The total amount of any punitive damages 
     awarded in a medical malpractice liability action shall be 
     paid to the State in which the action is brought (or, in a 
     case brought in Federal court, in the State in which the 
     health care services that caused the injury that is the 
     subject of the action were provided), and shall be used by 
     the State solely to implement and operate the State 
     alternative dispute resolution system certified by the 
     Secretary under section 8132 (except as provided in paragraph 
     (2)).

[[Page H10569]]

       (2) Use of remaining amounts for provider licensing and 
     disciplinary activities.--If the amount of punitive damages 
     paid to a State under paragraph (1) for a year is greater 
     than the State's costs of implementing and operating the 
     State alternative dispute resolution system during the year, 
     the balance of such punitive damages paid to the State shall 
     be used solely to carry out activities to assure the safety 
     and quality of health care services provided in the State, 
     including (but not limited to)--
       (A) licensing or certifying health care professionals and 
     health care providers in the State; and
       (B) carrying out programs to reduce malpractice-related 
     costs for providers volunteering to provide services in 
     medically underserved areas.
       (3) Maintenance of effort.--A State shall use any amounts 
     paid pursuant to paragraph (1) to supplement and not to 
     replace amounts spent by the State for implementing and 
     operating the State alternative dispute resolution system or 
     carrying out the activities described in paragraph (2).
       (e) Drugs and Devices.--
       (1)(A) Punitive damages shall not be awarded against a 
     manufacturer or product seller of a drug (as defined in 
     section 201(g)(1) of the Federal Food, Drug, and Cosmetic Act 
     (21 U.S.C. 321(g)(1)) or medical device (as defined in 
     section 201(h) of the Federal Food, Drug, and Cosmetic Act 
     (21 U.S.C. 321(h)) 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 was approved by the Food and Drug 
     Administration; or
       (ii) the drug 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 the claimant, or
       (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 product liability action for harm 
     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.

     SEC. 8125. PERIODIC PAYMENTS FOR FUTURE LOSSES.

       (a) In General.--In any medical malpractice liability 
     action in which the damages awarded for future economic loss 
     exceeds $100,000, a defendant may not be required to pay such 
     damages in a single, lump-sum payment, but may be permitted 
     to make such payments on a periodic basis. The periods for 
     such payments shall be determined by the court, based upon 
     projections of when such expenses are likely to be incurred.
       (b) Waiver.--A court may waive the application of 
     subsection (a) with respect to a defendant if the court 
     determines that it is not in the best interests of the 
     plaintiff to receive payments for damages on such a periodic 
     basis.

     SEC. 8126. TREATMENT OF ATTORNEY'S FEES AND OTHER COSTS.

       (a) Requiring Party Contesting ADR Ruling To Pay Attorney's 
     Fees and Other Costs.--
       (1) In general.--The court in a medical malpractice 
     liability action shall require the party that (pursuant to 
     section 8122(c)(1)) contested the ruling of the alternative 
     dispute resolution system with respect to the medical 
     malpractice liability claim that is the subject of the action 
     to pay to the opposing party the costs incurred by the 
     opposing party under the action, including attorney's fees, 
     fees paid to expert witnesses, and other litigation expenses 
     (but not including court costs, filing fees, or other 
     expenses paid directly by the party to the court, or any fees 
     or costs associated with the resolution of the claim under 
     the alternative dispute resolution system), but only if--
       (A) in the case of an action in which the party that 
     contested the ruling is the claimant, the amount of damages 
     awarded to the party under the action is less than the amount 
     of damages awarded to the party under the ADR system; and
       (B) in the case of an action in which the party that 
     contested the ruling is the defendant, the amount of damages 
     assessed against the party under the action is greater than 
     the amount of damages assessed under the ADR system.
       (2) Exceptions.--Paragraph (1) shall not apply if--
       (A) the party contesting the ruling made under the previous 
     alternative dispute resolution system shows that--
       (i) the ruling was procured by corruption, fraud, or undue 
     means,
       (ii) there was partiality or corruption under the system,
       (iii) there was other misconduct under the system that 
     materially prejudiced the party's rights, or
       (iv) the ruling was based on an error of law;
       (B) the party contesting the ruling made under the 
     alternative dispute resolution system presents new evidence 
     before the trier of fact that was not available for 
     presentation under the ADR system;
       (C) the medical malpractice liability action raised a novel 
     issue of law; or
       (D) the court finds that the application of such paragraph 
     to a party would constitute an undue hardship, and issues an 
     order waiving or modifying the application of such paragraph 
     that specifies the grounds for the court's decision.
       (3) Limit on attorneys' fees paid.--Attorneys' fees that 
     are required to be paid under paragraph (1) by the contesting 
     party shall not exceed the amount of the attorneys' fees 
     incurred by the contesting party in the action. If the 
     attorneys' fees of the contesting party are based on a 
     contingency fee agreement, the amount of attorneys' fees for 
     purposes of the preceding sentence shall not exceed the 
     reasonable value of those services.
       (4) Records.--In order to receive attorneys' fees under 
     paragraph (1), counsel of record in the medical malpractice 
     liability action involved shall maintain accurate, complete 
     records of hours worked on the action, regardless of the fee 
     arrangement with the client involved.
       (b) Contingency Fee Defined.--As used in this section, the 
     term ``contingency fee'' means any fee for professional legal 
     services which is, in whole or in part, contingent upon the 
     recovery of any amount of damages, whether through judgment 
     or settlement.

     SEC. 8127. UNIFORM STATUTE OF LIMITATIONS.

       (a) In General.--Except as provided in subsection (b), no 
     medical malpractice claim may be initiated after the 
     expiration of the 2-year period that begins on the date on 
     which the alleged injury that is the subject of such claim 
     was discovered, but in no event may such a claim be initiated 
     after the expiration of the 4-year period that begins on the 
     date on which the alleged injury that is the subject of such 
     claim occurred.
       (b) Exception for Minors.--In the case of an alleged injury 
     suffered by a minor who has not attained 6 years of age, a 
     medical malpractice claim may not be initiated after the 
     expiration of the 2-year period that begins on the date on 
     which the alleged injury that is the subject of such claim 
     was discovered or should reasonably have been discovered, but 
     in no event may such a claim be initiated after the date on 
     which the minor attains 12 years of age.

     SEC. 8128. SPECIAL PROVISION FOR CERTAIN OBSTETRIC SERVICES.

       (a) In General.--In the case of a medical malpractice claim 
     relating to services provided during labor or the delivery of 
     a baby, if the health care professional or health care 
     provider against whom the claim is brought did not previously 
     treat the claimant for the pregnancy, the trier of fact may 
     not find that such professional or provider committed 
     malpractice and may not assess damages against such 
     professional or provider unless the malpractice is proven by 
     clear and convincing evidence.
       (b) Applicability to Group Practices or Agreements Among 
     Providers.--For purposes of subsection (a), a health care 
     professional shall be considered to have previously treated 
     an individual for a pregnancy if the professional is a member 
     of a group practice whose members previously treated the 
     individual for the pregnancy or is providing services to the 
     individual during labor or the delivery of a baby pursuant to 
     an agreement with another professional.

     SEC. 8129. JURISDICTION OF FEDERAL COURTS.

       Nothing in this subpart shall be construed to establish any 
     jurisdiction over any medical malpractice liability action in 
     the district courts of the United States on the basis of 
     sections 1331 or 1337 of title 28, United States Code.

     SEC. 8130. PREEMPTION.

       (a) In General.--The provisions of this subpart shall 
     preempt any State law to the extent such law is inconsistent 
     with such provisions, except that the provisions of this 
     subpart shall not preempt any State law that provides for 
     defenses or places limitations on a person's liability in 
     addition to those contained in this part, places greater 
     limitations on the amount of attorneys' fees that can be 
     collected, or otherwise imposes greater restrictions than 
     those provided in this part.
       (b) Effect on Sovereign Immunity and Choice of Law or 
     Venue.--Nothing in this subpart shall be construed to--
       (1) waive or affect any defense of sovereign immunity 
     asserted by any State under any provision of law;
       (2) waive or affect any defense of sovereign immunity 
     asserted by the United States;
       (3) affect the applicability of any provision of the 
     Foreign Sovereign Immunities Act of 1976;
       (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 

[[Page H10570]]

     or to dismiss a claim of a foreign nation or of a citizen of 
     a foreign nation on the ground in inconvenient forum.

   Subpart B--Requirements for State Alternative Dispute Resolution 
                             Systems (ADR)

     SEC. 8131. BASIC REQUIREMENTS.

       (a) In General.--A State's alternative dispute resolution 
     system meets the requirements of this section if the system--
       (1) applies to all medical malpractice liability claims 
     under the jurisdiction of the courts of that State;
       (2) requires that a written opinion resolving the dispute 
     be issued not later than 6 months after the date by which 
     each party against whom the claim is filed has received 
     notice of the claim (other than in exceptional cases for 
     which a longer period is required for the issuance of such an 
     opinion), and that the opinion contain--
       (A) findings of fact relating to the dispute, and
       (B) a description of the costs incurred in resolving the 
     dispute under the system (including any fees paid to the 
     individuals hearing and resolving the claim), together with 
     an appropriate assessment of the costs against any of the 
     parties;
       (3) requires individuals who hear and resolve claims under 
     the system to meet such qualifications as the State may 
     require (in accordance with regulations of the Secretary);
       (4) is approved by the State or by local governments in the 
     State;
       (5) with respect to a State system that consists of 
     multiple dispute resolution procedures--
       (A) permits the parties to a dispute to select the 
     procedure to be used for the resolution of the dispute under 
     the system, and
       (B) if the parties do not agree on the procedure to be used 
     for the resolution of the dispute, assigns a particular 
     procedure to the parties;
       (6) provides for the transmittal to the State agency 
     responsible for monitoring or disciplining health care 
     professionals and health care providers of any findings made 
     under the system that such a professional or provider 
     committed malpractice, unless, during the 90-day period 
     beginning on the date the system resolves the claim against 
     the professional or provider, the professional or provider 
     brings an action contesting the decision made under the 
     system; and
       (7) provides for the regular transmittal to the 
     Administrator for Health Care Policy and Research of 
     information on disputes resolved under the system, in a 
     manner that assures that the identity of the parties to a 
     dispute shall not be revealed.
       (b) Application of Malpractice Liability Standards to 
     Alternative Dispute Resolution.--The provisions of subpart A 
     (other than section 8122) shall apply with respect to claims 
     brought under a State alternative dispute resolution system 
     or the alternative Federal system in the same manner as such 
     provisions apply with respect to medical malpractice 
     liability actions brought in the State.

     SEC. 8132. CERTIFICATION OF STATE SYSTEMS; APPLICABILITY OF 
                   ALTERNATIVE FEDERAL SYSTEM.

       (a) Certification.--
       (1) In general.--Not later than October 1 of each year 
     (beginning with 1995), the Secretary, in consultation with 
     the Attorney General, shall determine whether a State's 
     alternative dispute resolution system meets the requirements 
     of this subpart for the following calendar year.
       (2) Basis for certification.--The Secretary shall certify a 
     State's alternative dispute resolution system under this 
     subsection for a calendar year if the Secretary determines 
     under paragraph (1) that the system meets the requirements of 
     section 8131, including the requirement described in section 
     8124 that punitive damages awarded under the system are paid 
     to the State for the uses described in such section.
       (b) Applicability of Alternative Federal System.--
       (1) Establishment and applicability.--Not later than 
     October 1, 1995, the Secretary, in consultation with the 
     Attorney General, shall establish by rule an alternative 
     Federal ADR system for the resolution of medical malpractice 
     liability claims during a calendar year in States that do not 
     have in effect an alternative dispute resolution system 
     certified under subsection (a) for the year.
       (2) Requirements for system.--Under the alternative Federal 
     ADR system established under paragraph (1)--
       (A) paragraphs (1), (2), (6), and (7) of section 8131(a) 
     shall apply to claims brought under the system;
       (B) if the system provides for the resolution of claims 
     through arbitration, the claims brought under the system 
     shall be heard and resolved by arbitrators appointed by the 
     Secretary in consultation with the Attorney General; and
       (C) with respect to a State in which the system is in 
     effect, the Secretary may (at the State's request) modify the 
     system to take into account the existence of dispute 
     resolution procedures in the State that affect the resolution 
     of medical malpractice liability claims.
       (3) Treatment of States with alternative system in 
     effect.--If the alternative Federal ADR system established 
     under this subsection is applied with respect to a State for 
     a calendar year, the State shall make a payment to the United 
     States (at such time and in such manner as the Secretary may 
     require) in an amount equal to 110 percent of the costs 
     incurred by the United States during the year as a result of 
     the application of the system with respect to the State.

     SEC. 8133. REPORTS ON IMPLEMENTATION AND EFFECTIVENESS OF 
                   ALTERNATIVE DISPUTE RESOLUTION SYSTEMS.

       (a) In General.--Not later than 5 years after the date of 
     the enactment of this Act, the Secretary shall prepare and 
     submit to the Congress a report describing and evaluating 
     State alternative dispute resolution systems operated 
     pursuant to this subpart and the alternative Federal system 
     established under section 8132(b).
       (b) Contents of Report.--The Secretary shall include in the 
     report prepared and submitted under subsection (a)--
       (1) information on--
       (A) the effect of the alternative dispute resolution 
     systems on the cost of health care within each State,
       (B) the impact of such systems on the access of individuals 
     to health care within the State, and
       (C) the effect of such systems on the quality of health 
     care provided within the State; and
       (2) to the extent that such report does not provide 
     information on no-fault systems operated by States as 
     alternative dispute resolution systems pursuant to this part, 
     an analysis of the feasibility and desirability of 
     establishing a system under which medical malpractice 
     liability claims shall be resolved on a no-fault basis.

                         Subpart C--Definitions

     SEC. 8141. DEFINITIONS.

       As used in this part:
       (1) Alternative dispute resolution system.--The term 
     ``alternative dispute resolution system'' means a system that 
     is enacted or adopted by a State to resolve medical 
     malpractice claims other than through a medical malpractice 
     liability action.
       (2) Claimant.--The term ``claimant'' means any person who 
     brings a health care liability action and, in the case of an 
     individual who is deceased, incompetent, or a minor, the 
     person on whose behalf such an action is brought.
       (3) 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.
       (4) Economic damages.--The term ``economic damages'' means 
     damages paid to compensate an individual for losses for 
     hospital and other medical expenses, lost wages, lost 
     employment, and other pecuniary losses.
       (5) Health care professional.--The term ``health care 
     professional'' means any individual who provides health care 
     services in a State and who is required by State law or 
     regulation to be licensed or certified by the State to 
     provide such services in the State.
       (6) Health care provider.--The term ``health care 
     provider'' means any organization or institution that is 
     engaged in the delivery of health care services in a State 
     that 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.
       (7) Injury.--The term ``injury'' means any illness, 
     disease, or other harm that is the subject of a medical 
     malpractice claim.
       (8) Medical malpractice liability action.--The term 
     ``medical malpractice liability action'' means any civil 
     action brought pursuant to State law in which a plaintiff 
     alleges a medical malpractice claim against a health care 
     provider or health care professional, but does not include 
     any action in which the plaintiff's sole allegation is an 
     allegation of an intentional tort.
       (9) Medical malpractice claim.--The term ``medical 
     malpractice claim'' means any claim relating to the provision 
     of (or the failure to provide) health care services or the 
     use of a medical product, without regard to the theory of 
     liability asserted, and includes any third-party claim, 
     cross-claim, counterclaim, or contribution claim in a medical 
     malpractice liability action.
       (10) Medical product.--
       (A) In general.--The term ``medical product'' means, with 
     respect to the allegation of a claimant, a drug (as defined 
     in section 201(g)(1) of the Federal Food, Drug, and Cosmetic 
     Act (21 U.S.C. 321(g)(1)) or a medical device (as defined in 
     section 201(h) of the Federal Food, Drug, and Cosmetic Act 
     (21 U.S.C. 321(h)) if--
       (i) such drug or device was subject to premarket approval 
     under section 505, 507, or 515 of the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 355, 357, or 360e) or section 351 of 
     the Public Health Service Act (42 U.S.C. 262) with respect to 
     the safety of the formulation or performance of the aspect of 
     such drug or device which is the subject of the claimant's 
     allegation or the adequacy of the packaging or labeling of 
     such drug or device, and such drug or device is approved by 
     the Food and Drug Administration; or
       (ii) the drug or device is generally recognized as safe and 
     effective under regulations issued by the Secretary of Health 
     and Human Services under section 201(p) of the Federal Food, 
     Drug, and Cosmetic Act (21 U.S.C. 321(p)).
       (B) Exception in case of misrepresentation or fraud.--
     Notwithstanding subparagraph (A), the term ``medical 
     product'' shall not include any product described in such 
     subparagraph if the claimant shows that the product is 
     approved by the Food and Drug 

[[Page H10571]]

     Administration for marketing as a result of withheld 
     information, misrepresentation, or an illegal payment by 
     manufacturer of the product.
       (11) Noneconomic damages.--The term ``noneconomic damages'' 
     means damages paid to compensate an individual for losses for 
     physical and emotional pain, suffering, inconvenience, 
     physical impairment, mental anguish, disfigurement, loss of 
     enjoyment of life, loss of consortium, and other nonpecuniary 
     losses, but does not include punitive damages.
       (12) Punitive damages.--The term ``punitive damages'' means 
     compensation, in addition to compensation for actual harm 
     suffered, that is awarded for the purpose of punishing a 
     person for conduct deemed to be malicious, wanton, willful, 
     or excessively reckless.

     PART 4--PAYMENT AREAS FOR PHYSICIANS' SERVICES UNDER MEDICARE

     SEC. 8151. MODIFICATION OF PAYMENT AREAS USED TO DETERMINE 
                   PAYMENTS FOR PHYSICIANS' SERVICES UNDER 
                   MEDICARE.

       (a) In General.--Section 1848(j)(2) (42 U.S.C. 
     1395w@4(j)(2)) is amended to read as follows:
       ``(2) Fee schedule area.--
       ``(A) General rule.--Except as provided in subparagraph 
     (B), the term `fee schedule area' means, with respect to 
     physicians' services furnished in a State, the State.
       ``(B) Exception for states with highest variation among 
     areas.--In the case of the 15 States with the greatest 
     variation in cost associated with physicians' services among 
     various geographic areas of the State (as determined by the 
     Secretary in accordance with such standards as the Secretary 
     considers appropriate), the fee schedule area applicable with 
     respect to physicians' services furnished in the State shall 
     be a locality used under section 1842(b) for purposes of 
     computing payment amounts for physicians' services, except 
     that the Secretary shall revise the localities used under 
     such section so that there are no more than 5 such localities 
     in any State.''.
       (b) Budget-Neutrality Requirement.--The Secretary of Health 
     and Human Services shall carry out the amendment made by 
     subsection (a) in a manner which ensures that the aggregate 
     amount of payment made for physicians' services under part B 
     of the medicare program in any year does not exceed the 
     aggregate amount of payment which would have been made for 
     such services under part B during the year if the amendment 
     were not in effect.
       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply to physicians' services furnished on or after 
     January 1, 1997.
         Subtitle C--Medicare Payments to Health Care Providers

               PART 1--PROVISIONS AFFECTING ALL PROVIDERS

     SEC. 8201. ONE-YEAR FREEZE IN PAYMENTS TO PROVIDERS.

       (a) Freeze in Updates.--
       (1) In general.--Notwithstanding any other provision of 
     law, except as otherwise provided in paragraph (2), for 
     purposes of determining the amount to paid for an item or 
     service under title XVIII of the Social Security Act, the 
     percentage increase in any economic index by which a payment 
     amount under title XVIII of the Social Security Act is 
     required to be increased during fiscal year 1996 shall be 
     deemed to be zero.
       (2) Exceptions.--Paragraph (1) shall not apply--
       (A) to payments for the operating costs of inpatient 
     hospital services of a subsection (d) hospital (as defined in 
     section 1886(d)(1)(B) of the Social Security Act); or
       (B) to the determination of hospital-specific FTE resident 
     amounts under section 1886(h) of such Act.
       (b) Economic Index.-- The term ``economic index'' 
     includes--
       (1) the hospital market basket index (described in section 
     1886(b)(3)(B)(iii) of the Social Security Act),
       (2) the medicare economic index (referred to in the fourth 
     sentence of section 1842(b)(3) of such Act),
       (3) the consumer price index for all urban consumers (U.S. 
     city average), and
       (4) any other index used to adjust payment amounts under 
     title XVIII of such Act.
       (c) Extension of Payment Freeze for SNFs and HHAs.--
       (1) Skilled nursing facilities.--
       (A) No change in cost limits.--Section 13503(a)(1) of OBRA-
     1993 is amended by striking ``1994 and 1995'' and inserting 
     ``1994, 1995, and 1996''.
       (B) Delay in updates; no catch up.--The last sentence of 
     section 1888(a) (42 U.S.C. 1395yy(a)) is amended--
       (i) by striking ``1995'' and inserting ``1996'', and
       (ii) by striking ``subsection.'' and inserting ``subsection 
     (except that such updates may not take into account any 
     changes in the routine service costs of skilled nursing 
     facilities during cost reporting periods which began during 
     fiscal year 1994, 1995, or 1996).''.
       (C) Prospective payments.--Section 13505(b) of OBRA-1993 is 
     amended by striking ``fiscal years 1994 and 1995'' and 
     inserting ``fiscal years 1994, 1995, and 1996''.
       (2) Home health agencies.--
       (A) No change in cost limits.--Section 13564(a)(1) of OBRA-
     1993 is amended by striking ``1996'' and inserting ``1997''.
       (B) Delay in updates; no catch up.--Section 
     1861(v)(1)(L)(iii) (42 U.S.C. 1395x(v)(1)(L)(iii)) is 
     amended--
       (i) by striking ``1996'' and inserting ``1997'', and
       (ii) by adding at the end the following: ``In establishing 
     limits under this subparagraph, the Secretary may not take 
     into account any changes in the routine service costs of the 
     provision of services furnished by home health agencies with 
     respect to cost reporting periods which began on or after 
     July 1, 1994, and before July 1,1997.''.

                  PART 2--PROVISIONS AFFECTING DOCTORS

     SEC. 8211. UPDATING FEES FOR PHYSICIANS' SERVICES.

       (a) Establishment of Single, Cumulative MVPS.-- Section 
     1848(f) (42 U.S.C. 1395w-4(f)) is amended--
       (1) in subparagraphs (A) and (C) of paragraph (1), by 
     striking ``rates of increase for all physicians' services and 
     for each category of such services'' each place it appears 
     and inserting ``rate of increase for all physicians' services 
     (and, in the case of fiscal years beginning before fiscal 
     year 1996, for each category of such services)''; and
       (2) in paragraph (2)--
       (A) in subparagraph (A)--
       (i) by striking ``In general.--'' and inserting ``Fiscal 
     years 1991 through 1995.--'',
       (ii) in the matter preceding clause (i), by striking ``a 
     fiscal year (beginning with fiscal year 1991)'' and inserting 
     ``fiscal years 1991 through 1995'', and
       (iii) in the matter following clause (iv), by striking 
     ``subparagraph (B)) and inserting ``subparagraph (C))'',
       (B) by redesignating subparagraphs (B) and (C) as 
     subparagraphs (C) and (D), and
       (C) by inserting after subparagraph (A) the following:
       ``(B) Fiscal year 1996 and thereafter.--Unless Congress 
     otherwise provides, the performance standard rate of increase 
     for all physicians' services for a fiscal year beginning with 
     fiscal year 1996 shall be equal to the performance standard 
     rate of increase determined under this paragraph for the 
     previous fiscal year, increased by the product of--
       ``(i) 1 plus the Secretary's estimate of the weighted 
     average percentage increase (divided by 100) in the fees for 
     all physicians' services under this part for portions of 
     calendar years included in the fiscal year involved,
       ``(ii) 1 plus the Secretary's estimate of the percentage 
     increase or decrease (divided by 100) in the average number 
     of individuals enrolled under this part (other than HMO 
     enrollees) from the previous fiscal year to the fiscal year 
     involved,
       ``(iii) 1 plus the Secretary's estimate of the average 
     annual percentage growth (divided by 100) in volume and 
     intensity of all physicians' services under this part for the 
     5-fiscal-year- period ending with the preceding fiscal year, 
     and
       ``(iv) 1 plus the Secretary's estimate of the percentage 
     increase or decrease (divided by 100) in expenditures for all 
     physicians' services in the fiscal year (compared with the 
     previous fiscal year) that are estimated to result from 
     changes in law or regulations affecting the percentage 
     increase described in clause (i) and that is not taken into 
     account in the percentage increase described in clause 
     (i),minus 1, multiplied by 100, and reduced by the 
     performance standard factor (specified in subparagraph 
     (C)).''.
       (b) Annual Update Based on Cumulative Performance.--
       (1) In general.--Section 1848(d)(3)(B) (42 U.S.C. 1395w- 
     4(d)(3)(B)) is amended--
       (A) in clause (i)--
       (i) by striking ``In general.--'' and inserting ``For 1992 
     through 1995'',
       (ii) by striking ``for a year'' and inserting ``for each of 
     the years 1992 through 1995'', and
       (iii) by striking ``, subject to clause (ii),'' and 
     inserting ``subject to clause (iii),'';
       (B) by redesignating clause (ii) as clause (iii); and
       (C) by inserting after clause (i) the following:
       ``(ii) Years beginning after 1996.--

       ``(I) In general.--The update for all physicians'' services 
     for a year beginning after 1996 provided under subparagraph 
     (A) shall, subject to clause (iii), be increased or decreased 
     by the same percentage by which the cumulative percentage 
     increase in actual expenditures for all physicians' services 
     in the second previous fiscal year over the third previous 
     fiscal year, was less or greater, respectively, than the 
     performance standard rate of increase (established under 
     subsection (f)) for such services for the second previous 
     fiscal year.
       ``(II) Cumulative percentage increase defined.--In 
     subclause (I), the `cumulative percentage increase in actual 
     expenditures' for a year shall be equal to the product of the 
     adjusted increases for each year beginning with 1995 up to 
     and including the year involved, minus 1 and multiplied by 
     100. In the previous sentence, the `adjusted increase' for a 
     year is equal to 1 plus the percentage increase in actual 
     expenditures for the year (over the preceding year).''.

       (3) Establishment of conversion factor for 1996.--Section 
     1848(d)(1) (42 U.S.C. 1395w@4(d)(1)) is amended--
       (A) by redesignating subparagraph (C) as subparagraph (D); 
     and
       (B) by inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) Special rule for 1996.--For 1996, the conversion 
     factor under this subsection shall be $36.40 for all 
     physicians' services.''.
       (c) Establishing Upper Limit on MVPS Rewards.--

[[Page H10572]]

       (1) In general.--Clause (iii) of section 1848(d)(3)(B), as 
     redesignated by subsection (b)(1)(B), is amended by striking 
     ``a decrease'' and inserting ``an increase or decrease''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to physicians' services furnished on or after 
     January 1, 1996.

     SEC. 8212. USE OF REAL GDP TO ADJUST FOR VOLUME AND 
                   INTENSITY.

       Section 1848(f)(2)(B)(iii) (42 U.S.C. 1395w-
     4(f)(2)(B)(iii)), as added by section 8211(a)(2)(C), is 
     amended to read as follows:
       ``(iii) 1 plus the average per capita growth in the real 
     gross domestic product (divided by 100) for the 5-fiscal-year 
     period ending with the previous fiscal year (increased by 1.5 
     percentage points for the category of services consisting of 
     primary care services), and''.

                 PART 3--PROVISIONS AFFECTING HOSPITALS

     SEC. 8221. REDUCTION IN UPDATE FOR INPATIENT HOSPITAL 
                   SERVICES.

       (a) PPS Hospitals.--Section 1886(b)(3)(B)(i) (42 U.S.C. 
     1395ww(b)(3)(B)(i)) is amended--
       (1) by amending subclause (XII) to read as follows:
       ``(XII) for each of the fiscal years 1997 through 2002, the 
     market basket percentage increase minus 0.5 percentage point 
     for hospitals in a rural area, and the market basket 
     percentage increase minus 1.5 percentage points for all other 
     hospitals, and''; and
       (2) in subclause (XIII), by striking ``1998'' and inserting 
     ``2003''.
       (b) PPS-Exempt Hospitals.--
       (1) In general.--Section 1886(b)(3)(B)(ii) (42 U.S.C. 
     1395ww(b)(3)(B)(ii)) is amended--
       (A) in subclause (V)--
       (i) by striking ``thorugh 1997'' and inserting ``through 
     1996'', and
       (ii) by striking ``and'' at the end;
       (B) by redesignating subclause (VI) as subclause (VII); and
       (C) by inserting after subclause (V) the following new 
     subclause:
       ``(VI) fiscal years 1997 through 2002, is the market basket 
     percentage increase minus 1.0 percentage point, and''.
       (2) Conforming amendment.--Section 1886(b)(3)(B) (42 U.S.C. 
     1395ww(b)(3)(B)) is amended by striking clause (v).

     SEC. 8222. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR 
                   CERTAIN OUTPATIENT HOSPITAL SERVICES.

       (a) 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) Radiology Services and Diagnostic Procedures.--Section 
     1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(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).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to services furnished during portions of cost 
     reporting periods occurring on or after July 1, 1994.

     SEC. 8223. ESTABLISHMENT OF PROSPECTIVE PAYMENT SYSTEM FOR 
                   OUTPATIENT SERVICES.

       (a) In General.--Section 1833(a)(2)(B) (42 U.S.C. 
     1395l(a)(2)(B)) is amended by striking ``section 1886)--'' 
     and all that follows and inserting the following: ``section 
     1886), an amount equal to a prospectively determined payment 
     rate established by the Secretary that provides for payments 
     for such items and services to be based upon a national rate 
     adjusted to take into account the relative costs of 
     furnishing such items and services in various geographic 
     areas, except that for items and services furnished during 
     cost reporting periods (or portions thereof) in years 
     beginning with 1996, such amount shall be equal to 95 percent 
     of the amount that would otherwise have been determined;''.
       (b) Establishment of Prospective Payment System.--Not later 
     than July 1, 1995, the Secretary of Health and Human Services 
     shall establish the prospective payment system for hospital 
     outpatient services necessary to carry out section 
     1833(a)(2)(B) of the Social Security Act (as amended by 
     subsection (a)).
       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply to items and services furnished on or after 
     January 1, 1996.

     SEC. 8224. REDUCTION IN MEDICARE PAYMENTS TO HOSPITALS FOR 
                   INPATIENT CAPITAL-RELATED COSTS.

       (a) PPS Hospitals.--Section 1886(g)(1)(A) (42 U.S.C. 
     1395ww(g)(1)(A)) is amended by striking ``1995'' and 
     inserting ``1996''.
       (b) PPS-Exempt Hospitals.--Section 1861(v)(1) (42 U.S.C. 
     1395x(v)(1)) is amended by adding at the end the following:
       ``(T) Such regulations shall provide that, in determining 
     the amount of the payments that may be made under this title 
     with respect to the capital-related costs of inpatient 
     hospital services furnished by a hospital that is not a 
     subsection (d) hospital (as defined in section 1886(d)(1)(B)) 
     or a subsection (d) Puerto Rico hospital (as defined in 
     section 1886(d)(9)(A)), the Secretary shall reduce the 
     amounts of such payments otherwise established under this 
     title by 10 percent for payments attributable to portions of 
     cost reporting periods occurring during fiscal year 1996.''.

     SEC. 8225. MORATORIUM ON PPS EXEMPTION FOR LONG-TERM CARE 
                   HOSPITALS.

       (a) In General.--Section 1886(d)(1)(B)(iv) (42 U.S.C. 
     1395ww(d)(1)(B)(iv)) is amended by striking ``Secretary)'' 
     and inserting ``Secretary on or before September 30, 1995)''.
       (b) Recommendations on Appropriate Standards for Long-Term 
     Care Hospitals.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary of Health and Human 
     Services shall submit to Congress recommendations for 
     modifications to the standards used by the Secretary to 
     determine whether a hospital (including a distinct part of 
     another hospital) is classified as a long-term care hospital 
     for purposes of determining the amount of payment to the 
     hospital under part A of the medicare program for the 
     operating costs of inpatient hospital services.

              PART 4--PROVISIONS AFFECTING OTHER PROVIDERS

     SEC. 8231. REVISION OF PAYMENT METHODOLOGY FOR HOME HEALTH 
                   SERVICES.

       (a) Additions to Cost Limits.--Section 1861(v)(1)(L) (42 
     U.S.C. 1395x(v)(1)(L)) is amended by adding at the end the 
     following new clauses:
       ``(iv) For services furnished by home health agencies for 
     cost reporting periods beginning on or after October 1, 1996, 
     the Secretary shall provide for an interim system of limits. 
     Payment shall be the lower of--

       ``(I) costs determined under the preceding provisions of 
     this subparagraph, or
       ``(II) an agency-specific per beneficiary annual limit 
     calculated from the agency's 12-month cost reporting period 
     ending on or after January 1, 1994 and on or before December 
     31, 1994 based on reasonable costs (including non-routine 
     medical supplies), updated by the home health market basket 
     index. The per beneficiary limitation shall be multiplied by 
     the agency's unduplicated census count of Medicare patients 
     for the year subject to the limitation. The limitation shall 
     represent total Medicare reasonable costs divided by the 
     unduplicated census count of Medicare patients.

       ``(v) For services furnished by home health agencies for 
     cost reporting periods beginning on or after October 1, 1996, 
     the following rules shall apply:

       ``(I) For new providers and those providers without a 12-
     month cost reporting period ending in calendar year 1994, the 
     per beneficiary limit shall be equal to the mean of these 
     limits (or the Secretary's best estimates thereof) applied to 
     home health agencies as determined by the Secretary. Home 
     health agencies that have altered their corporate structure 
     or name may not be considered new providers for payment 
     purposes.
       ``(II) For beneficiaries who use services furnished by more 
     than one home health agency, the per beneficiary limitation 
     shall be pro-rated among agencies.

       ``(vi) Home health agencies whose cost or utilization 
     experience is below 125 percent of the mean national or 
     census region aggregate per beneficiary cost or utilization 
     experience for 1994, or best estimates thereof, and whose 
     year-end reasonable costs are below the agency-specific per 
     beneficiary limit, shall receive payment equal to 50 percent 
     of the difference between the agency's reasonable costs and 
     its limit for fiscal years 1996, 1997, 1998, and 1999. Such 
     payments may not exceed 5 percent of an agency's aggregate 
     Medicare reasonable cost in a year.
       ``(vii) Effective January 1, 1997, or as soon as feasible, 
     the Secretary shall modify the agency specific per 
     beneficiary annual limit described in clause (iv) to provide 
     for regional or national variations in utilization. For 
     purposes of determining payment under clause (iv), the limit 
     shall be calculated through a blend of 75 percent of the 
     agency-specific cost or utilization experience in 1994 with 
     25 percent of the national or census region cost or 
     utilization experience in 1994, or the Secretary's best 
     estimates thereof.''.
       (b) Use of Interim Final Regulations.--The Secretary shall 
     implement the payment limits described in section 
     1861(v)(1)(L)(iv) of the Social Security Act by publishing in 
     the Federal Register a notice of interim final payment limits 
     by August 1, 1996 and allowing for a period of public 
     comments thereon. Payments subject to these limits will be 
     effective for cost reporting periods beginning on or after 
     October 1, 1996, without the necessity for consideration of 
     comments received, but the Secretary shall, by Federal 
     Register notice, affirm or modify the limits after 
     considering those comments.
       (c) Studies.--The Secretary shall expand research on a 
     prospective payment system for home health agencies that 
     shall tie prospective payments to an episode of care, 
     including an intensive effort to develop a reliable case mix 
     adjuster that explains a significant amount of the variances 
     in costs. The Secretary shall develop such a system for 
     implementation in fiscal year 2000.
       (d) Payments Determined on Prospective Basis.--Title XVIII 
     is amended by adding at the end the following new section:


             ``Prospective Payment for Home Health Services

       ``Sec. 1893. (a) Notwithstanding section 1861(v), the 
     Secretary shall, for cost reporting periods beginning on or 
     after fiscal year 2000, provide for payments for home health 
     services in accordance with a prospective payment system, 
     which pays home health agencies on a per episode basis, 
     established by the Secretary.
       ``(b) Such a system shall include the following:

[[Page H10573]]

       ``(1) Per episode rates under the system shall be 15 
     percent less than those that would otherwise occur under 
     fiscal year 2000 Medicare expenditures for home health 
     services.
       ``(2) 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 Medicare Enhancement Act of 1995, 
     including medical supplies, shall be subject to the per 
     episode amount. In defining an episode of care, the Secretary 
     shall consider an appropriate length of time for an episode 
     the use of services and the number of visits provided within 
     an episode, potential changes in the mix of services provided 
     within an episode and their cost, and a general system design 
     that will provide for continued access to quality services. 
     The per episode amount shall be based on the most current 
     audited cost report data available to the Secretary.
       ``(c) The Secretary shall employ an appropriate case mix 
     adjuster that explains a significant amount of the variation 
     in cost.
       ``(d) The episode payment amount shall be adjusted annually 
     by the home health market basket index. The labor portion of 
     the episode amount shall be adjusted for geographic 
     differences in labor-related costs based on the most current 
     hospital wage index.
       ``(e) The Secretary may designate a payment provision for 
     outliers, recognizing the need to adjust payments due to 
     unusual variations in the type or amount of medically 
     necessary care.
       ``(f) A home health agency shall be responsible for 
     coordinating all care for a beneficiary. If a beneficiary 
     elects to transfer to, or receive services from, another home 
     health agency within an episode period, the episode payment 
     shall be pro-rated between home health agencies.''.

     SEC. 8232. LIMITATION OF HOME HEALTH COVERAGE UNDER PART A.

       (a) In General.--Section 1812(a)(3) (42 U.S.C. 1395d(a)(3)) 
     is amended by striking the semicolon and inserting ``for up 
     to 150 days during any spell of illness;''.
       (b) Conforming Amendment.--Section 1812(b) (42 U.S.C. 
     1395d(b)) is amended--
       (1) by striking ``or'' at the end of paragraph (2),
       (2) by striking the period at the end of paragraph (3) and 
     inserting ``; or'', and
       (3) by adding at the end the following new paragraph:
       ``(4) home health services furnished to the individual 
     during such spell after such services have been furnished to 
     the individual for 150 days during such spell.''.
       (c) Exclusion of additional part b costs from determination 
     of part b monthly premium.--Section 1839(a) (42 U.S.C. 
     1395r(a)) is amended--
       (1) in the second sentence of paragraph (1), by striking 
     ``enrollees.'' and inserting ``enrollees (except as provided 
     in paragraph (5)).''; and
       (2) by adding at the end the following new paragraph:
       ``(5) In estimating the benefits and administrative costs 
     which will be payable from the Federal Supplementary Medical 
     Insurance Trust Fund for a year (beginning with 1996), the 
     Secretary shall exclude an estimate of any benefits and costs 
     attributable to home health services for which payment would 
     have been made under part A during the year but for paragraph 
     (4) of section 1812(b).''.
       (d) Effective Date.--The amendments made by this subsection 
     shall apply to spells of illness beginning on or after 
     October 1, 1995.

     SEC. 8233. REDUCTION IN FEE SCHEDULE FOR DURABLE MEDICAL 
                   EQUIPMENT.

       (a) In General.--
       (1) Freeze in update for covered items.--Section 
     1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended--
       (A) by striking ``and'' at the end of subparagraph (A);
       (B) in subparagraph (B)--
       (i) by striking ``a subsequent year'' and inserting ``1993, 
     1994, and 1995'', and
       (ii) by striking the period at the end and inserting ``; 
     and''; and
       (C) by adding at the end the following:
       ``(C) for each of the years 1996 through 1999, 0 percent; 
     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)(iii) (42 U.S.C. 1395m(h)(4)(A)(iii)) is amended 
     by striking ``1994 and 1995'' and inserting ``each of the 
     years 1994 through 1999''.
       (b) Oxygen and Oxygen Equipment.--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, and 1995'', and
       (B) by striking the period at the end and inserting ``; 
     and''; and
       (3) by adding at the end the following new clause:
       ``(v) in 1996 and each subsequent year, is 90 percent of 
     the national limited monthly payment rate computed under 
     subparagraph (B) for the item for the year.''.

     SEC. 8234. NURSING HOME BILLING.

       (a) Payments for Routine Service Costs.--
       (1) Clarification of definition of routine service costs.--
     Section 1888 (42 U.S.C. 1395yy) is amended by adding at the 
     end the following new subsection:
       ``(e) For purposes of this section, the `routine service 
     costs' of a skilled nursing facility are all costs which are 
     attributable to nursing services, room and board, 
     administrative costs, other overhead costs, and all other 
     ancillary services (including supplies and equipment), 
     excluding costs attributable to covered non-routine services 
     subject to payment limits under section 1888A.''.
       (2) Conforming amendment.--Section 1888 (42 U.S.C. 1395yy) 
     is amended in the heading by inserting ``and certain 
     ancillary'' after ``service''.
       (b) Incentives for Cost Effective Management of Covered 
     Nonroutine Services.--
       (1) In general.--Title XVIII is amended by inserting after 
     section 1888 the following new section:


   ``incentives for cost-effective management of covered non-routine 
                 services of skilled nursing facilities

       ``Sec. 1888A. (a) Definitions.--For purposes of this 
     section:
       ``(1) Covered non-routine services.--The term `covered non-
     routine services' means post-hospital extended care services 
     consisting of any of the following:
       ``(A) Physical or occupational therapy or speech-language 
     pathology services, or respiratory therapy.
       ``(B) Prescription drugs.
       ``(C) Complex medical equipment.
       ``(D) Intravenous therapy and solutions (including enteral 
     and parenteral nutrients, supplies, and equipment).
       ``(E) Radiation therapy.
       ``(F) Diagnostic services, including laboratory, radiology 
     (including computerized tomography services and imaging 
     services), and pulmonary services.
       ``(2) SNF market basket percentage increase.--The term `SNF 
     market basket percentage increase' for a fiscal year means a 
     percentage equal to the percentage increase in routine 
     service cost limits for the year under section 1888(a).
       ``(3) Stay.--The term `stay' means, with respect to an 
     individual who is a resident of a skilled nursing facility, a 
     period of continuous days during which the facility provides 
     extended care services for which payment may be made under 
     this title to the individual during the individual's spell of 
     illness.
       ``(b) New Payment Method for Covered Non-Routine 
     Services.--
       ``(1) In general.--Subject to subsection (c), a skilled 
     nursing facility shall receive interim payments under this 
     title for covered non-routine services furnished to an 
     individual during a cost reporting period beginning during a 
     fiscal year (after fiscal year 1996) in an amount equal to 
     the reasonable cost of providing such services in accordance 
     with section 1861(v). The Secretary may adjust such payments 
     if the Secretary determines (on the basis of such estimated 
     information as the Secretary considers appropriate) that 
     payments to the facility under this paragraph for a cost 
     reporting period would substantially exceed the cost 
     reporting period limit determined under subsection (c)(1)(B).
       ``(2) Responsibility of skilled nursing facility to manage 
     billings.--
       ``(A) Clarification relating to part a billing.--In the 
     case of a covered non-routine service furnished to an 
     individual who (at the time the service is furnished) is a 
     resident of a skilled nursing facility who is entitled to 
     coverage under section 1812(a)(2) for such service, the 
     skilled nursing facility shall submit a claim for payment 
     under this title for such service under part A (without 
     regard to whether or not the item or service was furnished by 
     the facility, by others under arrangement with them made by 
     the facility, under any other contracting or consulting 
     arrangement, or otherwise).
       ``(B) Part b billing.--In the case of a covered non-routine 
     service furnished to an individual who (at the time the 
     service is furnished) is a resident of a skilled nursing 
     facility who is not entitled to coverage under section 
     1812(a)(2) for such service but is entitled to coverage under 
     part B for such service, the skilled nursing facility shall 
     submit a claim for payment under this title for such service 
     under part B (without regard to whether or not the item or 
     service was furnished by the facility, by others under 
     arrangement with them made by the facility, under any other 
     contracting or consulting arrangement, or otherwise).
       ``(C) Maintaining records on services furnished to 
     residents.--Each skilled nursing facility receiving payments 
     for extended care services under this title shall document on 
     the facility's cost report all covered non-routine services 
     furnished to all residents of the facility to whom the 
     facility provided extended care services for which payment 
     was made under part A during a fiscal year (beginning with 
     fiscal year 1996) (without regard to whether or not the 
     services were furnished by the facility, by others under 
     arrangement with them made by the facility, under any other 
     contracting or consulting arrangement, or otherwise).
       ``(c) Reconciliation of Amounts.--
       ``(1) Limit based on per stay limit and number of stays.--
       ``(A) In general.--If a skilled nursing facility has 
     received aggregate payments under subsection (b) for covered 
     non-routine services during a cost reporting period beginning 
     during a fiscal year in excess of an amount equal to the cost 
     reporting period limit determined under subparagraph (B), the 
     Secretary shall reduce the payments 

[[Page H10574]]

     made to the facility with respect to such services for cost 
     reporting periods beginning during the following fiscal year 
     in an amount equal to such excess. The Secretary shall reduce 
     payments under this subparagraph at such times and in such 
     manner during a fiscal year as the Secretary finds necessary 
     to meet the requirement of this subparagraph.
       ``(B) Cost reporting period limit.--The cost reporting 
     period limit determined under this subparagraph is an amount 
     equal to the product of--
       ``(i) the per stay limit applicable to the facility under 
     subsection (d) for the period; and
       ``(ii) the number of stays beginning during the period for 
     which payment was made to the facility for such services.
       ``(C) Prospective reduction in payments.--In addition to 
     the process for reducing payments described in subparagraph 
     (A), the Secretary may reduce payments made to a facility 
     under this section during a cost reporting period if the 
     Secretary determines (on the basis of such estimated 
     information as the Secretary considers appropriate) that 
     payments to the facility under this section for the period 
     will substantially exceed the cost reporting period limit for 
     the period determined under this paragraph.
       ``(2) Incentive payments.--
       ``(A) In general.--If a skilled nursing facility has 
     received aggregate payments under subsection (b) for covered 
     non-routine services during a cost reporting period beginning 
     during a fiscal year in an amount that is less than the 
     amount determined under paragraph (1)(B), the Secretary shall 
     pay the skilled nursing facility in the following fiscal year 
     an incentive payment equal to 50 percent of the difference 
     between such amounts, except that the incentive payment may 
     not exceed 5 percent of the aggregate payments made to the 
     facility under subsection (b) for the previous fiscal year 
     (without regard to subparagraph (B)).
       ``(B) Installment incentive payments.--The Secretary may 
     make installment payments during a fiscal year to a skilled 
     nursing facility based on the estimated incentive payment 
     that the facility would be eligible to receive with respect 
     to such fiscal year.
       ``(d) Determination of Facility Per Stay Limit.--
       ``(1) Limit for fiscal year 1997.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the Secretary shall establish separate per stay limits for 
     hospital-based and freestanding skilled nursing facilities 
     for the 12-month cost reporting period beginning during 
     fiscal year 1997 that are equal to the sum of--
       ``(i) 50 percent of the facility-specific stay amount for 
     the facility (as determined under subsection (e)) for the 
     last 12-month cost reporting period ending on or before 
     September 30, 1994, increased (in a compounded manner) by the 
     SNF market basket percentage increase for fiscal years 1995 
     through 1997; and
       ``(ii) 50 percent of the average of all facility-specific 
     stay amounts for all hospital-based facilities or all 
     freestanding facilities (whichever is applicable) during the 
     cost reporting period described in clause (i), increased (in 
     a compounded manner) by the SNF market basket percentage 
     increase for fiscal years 1995 through 1997.
       ``(B) Facilities not having 1994 cost reporting period.--In 
     the case of a skilled nursing facility for which payments 
     were not made under this title for covered non-routine 
     services for the last 12-month cost reporting period ending 
     on or before September 30, 1994, the per stay limit for the 
     12-month cost reporting period beginning during fiscal year 
     1997 shall be twice the amount determined under subparagraph 
     (A)(ii).
       ``(2) Limit for subsequent fiscal years.--The per stay 
     limit for a skilled nursing facility for a 12-month cost 
     reporting period beginning during a fiscal year after fiscal 
     year 1997 is equal to the per stay limit established under 
     this subsection for the 12-month cost reporting period 
     beginning during the previous fiscal year, increased by the 
     SNF market basket percentage increase for such subsequent 
     fiscal year minus 2 percentage points.
       ``(3) Rebasing of amounts.--
       ``(A) In general.--The Secretary shall provide for an 
     update to the facility-specific amounts used to determine the 
     per stay limits under this subsection for cost reporting 
     periods beginning on or after October 1, 1999, and every 2 
     years thereafter.
       ``(B) Treatment of facilities not having rebased cost 
     reporting periods.--Paragraph (1)(B) shall apply with respect 
     to a skilled nursing facility for which payments were not 
     made under this title for covered non-routine services for 
     the 12-month cost reporting period used by the Secretary to 
     update facility-specific amounts under subparagraph (A) in 
     the same manner as such paragraph applies with respect to a 
     facility for which payments were not made under this title 
     for covered non-routine services for the last 12-month cost 
     reporting period ending on or before September 30, 1994.
       ``(e) Determination of Facility-Specific Stay Amounts.--The 
     `facility-specific stay amount' for a skilled nursing 
     facility for a cost reporting period is the sum of--
       ``(1) the average amount of payments made to the facility 
     under part A during the period which are attributable to 
     covered non-routine services furnished during a stay (as 
     determined on a per diem basis); and
       ``(2) the Secretary's best estimate of the average amount 
     of payments made under part B during the period for covered 
     non-routine services furnished to all residents of the 
     facility to whom the facility provided extended care services 
     for which payment was made under part A during the period 
     (without regard to whether or not the services were furnished 
     by the facility, by others under arrangement with them made 
     by the facility, under any other contracting or consulting 
     arrangement, or otherwise), as estimated by the Secretary.
       ``(f) Intensive Nursing or Therapy Needs.--
       ``(1) In general.--In applying subsection (b) to covered 
     non-routine services furnished during a stay beginning during 
     a cost reporting period beginning during a fiscal year 
     (beginning with fiscal years after fiscal year 1997) to a 
     resident of a skilled nursing facility who requires intensive 
     nursing or therapy services, the per stay limit for such 
     resident shall be the per stay limit developed under 
     paragraph (2) instead of the per stay limit determined under 
     subsection (d)(1)(A).
       ``(2) Per stay limit for intensive need residents.--Not 
     later than June 30, 1997, the Secretary, after consultation 
     with the Medicare Payment Review Commission and skilled 
     nursing facility experts, shall develop and publish a per 
     stay limit for residents of a skilled nursing facility who 
     require intensive nursing or therapy services.
       ``(3) Budget neutrality.--The Secretary shall adjust 
     payments under subsection (b) in a manner that ensures that 
     total payments for covered non-routine services under this 
     section are not greater or less than total payments for such 
     services would have been but for the application of paragraph 
     (1).
       ``(g) Special Treatment for Small Skilled Nursing 
     Facilities.--This section shall not apply with respect to a 
     skilled nursing facility for which payment is made for 
     routine service costs during a cost reporting period on the 
     basis of prospective payments under section 1888(d).
       ``(h) Exceptions and Adjustments to Limits.--
       ``(1) In general.--The Secretary may make exceptions and 
     adjustments to the cost reporting limits applicable to a 
     skilled nursing facility under subsection (c)(1)(B) for a 
     cost reporting period, except that the total amount of any 
     additional payments made under this section for covered non-
     routine services during the cost reporting period as a result 
     of such exceptions and adjustments may not exceed 5 percent 
     of the aggregate payments made to all skilled nursing 
     facilities for covered non-routine services during the cost 
     reporting period (determined without regard to this 
     paragraph).
       ``(2) Budget neutrality.--The Secretary shall adjust 
     payments under subsection (b) in a manner that ensures that 
     total payments for covered non-routine services under this 
     section are not greater or less than total payments for such 
     services would have been but for the application of paragraph 
     (1).
       ``(i) Special Rule for X-Ray Services.--Before furnishing a 
     covered non-routine service consisting of an X-ray service 
     for which payment may be made under part A or part B to a 
     resident, a skilled nursing facility shall consider whether 
     furnishing the service through a provider of portable X-ray 
     service services would be appropriate, taking into account 
     the cost effectiveness of the service and the convenience to 
     the resident.''.
       (2) Conforming amendment.--Section 1814(b) (42 U.S.C. 
     1395f(b)) is amended in the matter preceding paragraph (1) by 
     striking ``1813 and 1886'' and inserting ``1813, 1886, 1888, 
     and 1888A''.

     SEC. 8235. FREEZE IN PAYMENTS FOR CLINICAL DIAGNOSTIC 
                   LABORATORY TESTS.

       Section 1833(h)(2)(A)(ii)(IV) (42 U.S.C. 
     1395l(h)(2)(A)(ii)(IV)) is amended by striking ``1994 and 
     1995'' and inserting ``1994 through 1999''.

       PART 5--GRADUATE MEDICAL EDUCATION AND TEACHING HOSPITALS

     SEC. 8241. TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION 
                   TRUST FUND.

       (a) Teaching Hospital and Graduate Medical Education Trust 
     Fund.--The Social Security Act (42 U.S.C. 300 et seq.) is 
     amended by adding at the end the following title:

  ``TITLE XXI--TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST 
                                  FUND

                    ``Part A--Establishment of Fund

     ``SEC. 2101. ESTABLISHMENT OF FUND.

       ``(a) In General.--There is established in the Treasury of 
     the United States a fund to be known as the Teaching Hospital 
     and Graduate Medical Education Trust Fund (in this title 
     referred to as the `Fund'), consisting of amounts transferred 
     to the Fund under subsection (c), amounts appropriated to the 
     Fund pursuant to subsections (d) and (e)(3), and such gifts 
     and bequests as may be deposited in the Fund pursuant to 
     subsection (f). Amounts in the Fund are available until 
     expended.
       ``(b) Expenditures From Fund.--Amounts in the Fund are 
     available to the Secretary for making payments under section 
     2111.
       ``(c) Transfers to Fund.--
       ``(1) In general.--From the Federal Hospital Insurance 
     Trust Fund and the Federal Supplementary Medical Insurance 
     Trust Fund, the Secretary shall, for fiscal year 1996 and 
     each subsequent fiscal year, transfer to the Fund an amount 
     determined by the Secretary for the fiscal year involved in 
     accordance with paragraph (2).
       ``(2) Determination of amounts.--For purposes of paragraph 
     (1), the amount determined under this paragraph for a fiscal 
     year 

[[Page H10575]]

     is an estimate by the Secretary of an amount equal to 75 
     percent of the difference between--
       ``(A) the nationwide total of the amounts that would have 
     been paid under sections 1855 and 1876 during the year but 
     for the operation of section 1855(b)(2)(B)(ii); and
       ``(B) the nationwide total of the amounts paid under such 
     sections during the year.
       ``(3) Allocation between medicare trust funds.--In 
     providing for a transfer under paragraph (1) for a fiscal 
     year, the Secretary shall provide for an allocation of the 
     amounts involved between part A and part B of title XVIII 
     (and the trust funds established under the respective parts) 
     as reasonably reflects the proportion of payments for the 
     indirect costs of medical education and direct graduate 
     medical education costs of hospitals associated with the 
     provision of services under each respective part.
       ``(d) Authorization of Appropriations.--There are 
     authorized to be appropriated to the Fund such sums as may be 
     necessary for each of the fiscal years 1996 through 2002.
       ``(e) Investment.--
       ``(1) In general.--The Secretary of the Treasury shall 
     invest such amounts of the Fund as such Secretary determines 
     are not required to meet current withdrawals from the Fund. 
     Such investments may be made only in interest-bearing 
     obligations of the United States. For such purpose, such 
     obligations may be acquired on original issue at the issue 
     price, or by purchase of outstanding obligations at the 
     market price.
       ``(2) Sale of obligations.--Any obligation acquired by the 
     Fund may be sold by the Secretary of the Treasury at the 
     market price.
       ``(3) Availability of income.--Any interest derived from 
     obligations acquired by the Fund, and proceeds from any sale 
     or redemption of such obligations, are hereby appropriated to 
     the Fund.
       ``(f) Acceptance of Gifts and Bequests.--The Fund may 
     accept on behalf of the United States money gifts and 
     bequests made unconditionally to the Fund for the benefit of 
     the Fund or any activity financed through the Fund.

                ``Part B--Payments to Teaching Hospitals

     ``SEC. 2111. FORMULA PAYMENTS TO TEACHING HOSPITALS.

       ``(a) In General.--In the case of each teaching hospital 
     that in accordance with subsection (b) submits to the 
     Secretary a payment document for fiscal year 1996 or any 
     subsequent fiscal year, the Secretary shall make payments for 
     the year to the teaching hospital for the direct and indirect 
     costs of operating approved medical residency training 
     programs. Such payments shall be made from the Fund, and 
     shall be made in accordance with a formula established by the 
     Secretary.
       ``(b) Payment Document.--For purposes of subsection (a), a 
     payment document is a document containing such information as 
     may be necessary for the Secretary to make payments under 
     such subsection to a teaching hospital for a fiscal year. The 
     document is submitted in accordance with this subsection if 
     the document is submitted not later than the date specified 
     by the Secretary, and the document is in such form and is 
     made in such manner as the Secretary may require. The 
     Secretary may require that information under this subsection 
     be submitted to the Secretary in periodic reports.''.
       (b) National Advisory Council on Postgraduate Medical 
     Education.--
       (1) In general.--There is established within the Department 
     of Health and Human Services an advisory council to be known 
     as the National Advisory Council on Postgraduate Medical 
     Education (in this title referred to as the ``Council'').
       (2) Duties.--The council shall provide advice to the 
     Secretary on appropriate policies for making payments for the 
     support of postgraduate medical education in order to assure 
     an adequate supply of physicians trained in various 
     specialities, consistent with the health care needs of the 
     United States.
       (3) Composition.--
       (A) In general.--The Secretary shall appoint to the Council 
     15 individuals who are not officers or employees of the 
     United States. Such individuals shall include not less than 1 
     individual from each of the following categories of 
     individuals or entities:
       (i) Organizations representing consumers of health care 
     services.
       (ii) Physicians who are faculty members of medical schools, 
     or who supervise approved physician training programs.
       (iii) Physicians in private practice who are not physicians 
     described in clause (ii).
       (iv) Practitioners in public health.
       (v) Advanced-practice nurses.
       (vi) Other health professionals who are not physicians.
       (vii) Medical schools.
       (viii) Teaching hospitals.
       (ix) The Accreditation Council on Graduate Medical 
     Education.
       (x) The American Board of Medical Specialities.
       (xi) The Council on Postdoctoral Training of the American 
     Osteopathic Association.
       (xii) The Council on Podiatric Medical Education of the 
     American Podiatric Medical Association.
       (B) Requirements regarding representative membership.--To 
     the greatest extent feasible, the membership of the Council 
     shall represent the various geographic regions of the United 
     States, shall reflect the racial, ethnic, and gender 
     composition of the population of the United States, and shall 
     be broadly representative of medical schools and teaching 
     hospitals in the United States.
       (C) Ex officio members; other federal officers or 
     employees.--The membership of the Council shall include 
     individuals designated by the Secretary to serve as members 
     of the Council from among Federal officers or employees who 
     are appointed by the President, or by the Secretary (or by 
     other Federal officers who are appointed by the President 
     with the advice and consent of the Senate). Individuals 
     designated under the preceding sentence shall include each of 
     the following officials (or a designee of the official):
       (i) The Secretary of Health and Human Services.
       (ii) The Secretary of Veterans Affairs.
       (iii) The Secretary of Defense.
       (4) Chair.--The Secretary shall, from among members of the 
     council appointed under paragraph (3)(A), designate an 
     individual to serve as the chair of the council.
       (5) Termination.--The Council terminates December 31, 1999.
       (c) Remove Medical Education and Disproportionate Share 
     Hospital Payments From Calculation of Adjusted Average Per 
     Capita Cost.--For provision removing medical education and 
     disproportionate share hospital payments from calculation of 
     payment amounts for organizations paid on a capitated basis, 
     see section 1855(b)(2)(B)(ii).
       (2) Payments to hospitals of amounts attributable to dsh.--
     Section 1886 (42 U.S.C. 1395ww) is amended by adding at the 
     end the following new subsection:
       ``(j)(1) In addition to amounts paid under subsection 
     (d)(5)(F), the Secretary is authorized to pay hospitals which 
     are eligible for such payments for a fiscal year supplemental 
     amounts that do not exceed the limit provided for in 
     paragraph (2).
       ``(2) The sum of the aggregate amounts paid pursuant to 
     paragraph (1) for a fiscal year shall not exceed the 
     Secretary's estimate of 75 percent of the amount of 
     reductions in payments under section 1855 that are 
     attributable to the operation of subsection (b)(2)(B)(ii) of 
     such section. ''.

     SEC. 8242. REDUCTION IN PAYMENT ADJUSTMENTS FOR INDIRECT 
                   MEDICAL EDUCATION.

       (a) Modification Regarding 6.8 percent.--Section 
     1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) is 
     amended--
       (1) by striking ``on or after October 1, 1988,'' and 
     inserting ``on or after October 1, 1999,''; and
       (2) by striking ``1.89'' and inserting ``1.68''.
       (b) Special Rule Regarding Fiscal Years 1996 Through 1998; 
     Modification Regarding 6 Percent .--Section 
     1886(d)(5)(B)(ii), as amended by paragraph (1), is amended by 
     adding at the end the following: ``In the case of discharges 
     occurring on or after October 1, 1995, and before October 1, 
     1999, the preceding sentence applies to the same extent and 
     in the same manner as the sentence applies to discharges 
     occurring on or after October 1, 1999, except that the term 
     `1.68' is deemed to be 1.48.''.
       Subtitle D--Provisions Relating to Medicare Beneficiaries

     SEC. 8301. PART B PREMIUM.

       (a) Freeze in Premium for 1996.--Section 1839(e)(1) (42 
     U.S.C. 1395r(e)(1)) is amended--
       (1) in subparagraph (A), by striking ``December 1995'' and 
     inserting ``December 1996''; and
       (2) in subparagraph (B)(v), by striking ``1995'' and 
     inserting ``1995 and 1996''.
       (b) Establishing Premium at 25 Percent of Program Costs 
     Through 2002.--Section 1839(e)(1)(A) (42 U.S.C. 
     1395r(e)(1)(A)) is amended by striking ``January 1999'' and 
     inserting ``January 2003''.

     SEC. 8302. FULL COST OF MEDICARE PART B COVERAGE PAYABLE BY 
                   HIGH-INCOME INDIVIDUALS.

       (a) In General.--Subchapter A of chapter 1 of the Internal 
     Revenue Code of 1986 is amended by adding at the end thereof 
     the following new part:

  ``PART VIII--SUPPLEMENTAL MEDICARE PART B PREMIUMS FOR HIGH-INCOME 
                              INDIVIDUALS

``Sec. 59B. Supplemental Medicare part B premium.

     ``SEC. 59B. SUPPLEMENTAL MEDICARE PART B PREMIUM.

       ``(a) Requirement To Pay Premium.--In the case of an 
     individual to whom this section applies for the taxable year, 
     there is hereby imposed (in addition to any other amount 
     imposed by this subtitle) an amount equal to the aggregate of 
     the supplemental Medicare part B premiums (if any) for months 
     during such year that such individual is covered under 
     Medicare part B.
       ``(b) Individuals to Whom Section Applies.--This section 
     shall apply to any individual for any taxable year if--
       ``(1) such individual is covered under Medicare part B for 
     any month during such year, and
       ``(2) the modified adjusted gross income of the taxpayer 
     for such taxable year exceeds the threshold amount.
       ``(c) Supplemental Medicare Part B Premium.--
       ``(1) In general.--For purposes of subsection (a), the 
     supplemental Medicare part B premium for any month is an 
     amount equal to the excess of--
       ``(A) subject to adjustment under paragraph (2), 200 
     percent of the monthly actuarial rate for enrollees age 65 
     and over determined under subsection 1839(a)(1) of the Social 
     Security Act for such month, over

[[Page H10576]]

       ``(B) the total monthly premium under section 1839 of the 
     Social Security Act (determined without regard to subsections 
     (b) and (f) of section 1839 of such Act).
       ``(2) Adjusting monthly actuarial rate by geographic 
     area.--
       ``(A) In general.--In determining the amount described in 
     paragraph (1)(A) for an individual residing in a premium 
     area, the Secretary shall adjust such amount for a year by a 
     geographic adjustment factor established by the Secretary 
     which reflects the relative benefits and administrative costs 
     payable from the Federal Supplementary Medical Insurance 
     Trust Fund for services performed and related administrative 
     costs incurred in the year with respect to enrollees residing 
     in such are compared to the national average of such benefits 
     and costs.
       ``(B) Premium area.--In this paragraph, a `premium area' 
     means a metropolitan statistical area or the portion of a 
     State outside of any metropolitan statistical area.
       ``(d) Phasein.--
       ``(1) In general.--If the modified adjusted gross income of 
     the taxpayer for any taxable year exceeds the threshold 
     amount by less than $25,000, the amount imposed by this 
     section for such taxable year shall be an amount which bears 
     the same ratio to the amount which would (but for this 
     subsection) be imposed by this section for such taxable year 
     as such excess bears to $25,000. The preceding sentence shall 
     not apply to any individual whose threshold amount is zero.
       ``(2) Phasein range for joint returns where both spouses 
     are covered by medicare part b.--In the case of a joint 
     return filed by spouses both of whom are covered by Medicare 
     part B for any month during the taxable year, paragraph (1) 
     shall be applied by substituting `$50,000' for `$25,000'.
       ``(e) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Threshold amount.--The term `threshold amount' 
     means--
       ``(A) except as otherwise provided in this paragraph, 
     $50,000,
       ``(B) $75,000 in the case of a joint return, and
       ``(C) zero in the case of a taxpayer who--
       ``(i) is married at the close of the taxable year but does 
     not file a joint return for such year, and
       ``(ii) does not live apart from his spouse at all times 
     during the taxable year.
       ``(2) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income determined 
     without regard to sections 931 and 933.
       ``(3) Joint returns.--In the case of a joint return--
       ``(A) the amount imposed by subsection (a) shall be the sum 
     of the amounts so imposed determined separately for each 
     spouse, and
       ``(B) subsections (a) and (d) shall be applied by taking 
     into account the combined modified adjusted gross income of 
     the spouses.
       ``(4) Medicare part b coverage.--An individual shall be 
     treated as covered under Medicare part B for any month if a 
     premium is paid under part B of title XVIII of the Social 
     Security Act for the coverage of the individual under such 
     part for the month.
       ``(5) Married individual.--The determination of whether an 
     individual is married shall be made in accordance with 
     section 7703.
       ``(f) Coordination With Other Provisions.--
       ``(1) Treatment as medical expense.--For purposes of 
     section 213, the supplemental Medicare part B premium imposed 
     by this section shall be treated as an amount paid for 
     insurance covering medical care (as defined in section 
     213(d)).
       ``(2) Treatment under subtitle f.--For purposes of subtitle 
     F (other than section 6654), the supplemental Medicare part B 
     premium imposed by this section shall be treated as if it 
     were a tax imposed by section 1.
       ``(3) Not treated as tax for certain purposes.--The 
     supplemental Medicare part B premium imposed by this section 
     shall not be treated as a tax imposed by this chapter for 
     purposes of determining--
       ``(A) the amount of any credit allowable under this 
     chapter, or
       ``(B) the amount of the minimum tax imposed by section 
     55.''
       (b) Transfers to Supplemental Medical Insurance Trust 
     Fund.--
       (1) In general.--There are hereby appropriated to the 
     Supplemental Medical Insurance Trust Fund amounts equivalent 
     to the aggregate increase in liabilities under chapter 1 of 
     the Internal Revenue Code of 1986 which is attributable to 
     the application of section 59B of such Code, as added by this 
     section.
       (2) Transfers.--The amounts appropriated by paragraph (1) 
     to the Supplemental Medical Insurance Trust Fund shall be 
     transferred from time to time (but not less frequently than 
     quarterly) from the general fund of the Treasury on the basis 
     of estimates made by the Secretary of the Treasury of the 
     amounts referred to in paragraph (1). Any quarterly payment 
     shall be made on the first day of such quarter and shall take 
     into account the portion of the supplemental Medicare part B 
     premium (as defined in such section 59B) which is 
     attributable to months during such quarter. Proper 
     adjustments shall be made in the amounts subsequently 
     transferred to the extent prior estimates were in excess of 
     or less than the amounts required to be transferred.
       (c) Reporting Requirements.--
       (1) Paragraph (1) of section 6050F(a) (relating to returns 
     relating to social security benefits) is amended by striking 
     ``and'' at the end of subparagraph (B) and by inserting after 
     subparagraph (C) the following new subparagraph:
       ``(D) the number of months during the calendar year for 
     which a premium was paid under part B of title XVIII of the 
     Social Security Act for the coverage of such individual under 
     such part, and''.
       (2) Paragraph (2) of section 6050F(b) is amended to read as 
     follows:
       ``(2) the information required to be shown on such return 
     with respect to such individual.''
       (3) Paragraph (1) of section 6050F(c) is amended by 
     striking ``and'' at the end of subparagraph (A), by striking 
     the period at the end of subparagraph (B) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(C) the Secretary of Health and Human Services in the 
     case of the information specified in subsection (a)(1)(D).''
       (4) The heading for section 6050F is amended by inserting 
     ``and medicare part b coverage'' before the period.
       (5) The item relating to section 6050F in the table of 
     sections for subpart B of part III of subchapter A of chapter 
     61 is amended by inserting ``and Medicare part B coverage'' 
     before the period.
       (d) Clerical Amendment.--The table of parts for subchapter 
     A of chapter 1 is amended by adding at the end thereof the 
     following new item:
``Part VIII. Supplemental Medicare part B premiums for high-income 
              individuals.''

       (e) Effective Date.--The amendments made by this section 
     shall apply to months after December 1995 in taxable years 
     ending after December 31, 1995.

     SEC. 8303. EXPANDED COVERAGE OF PREVENTIVE BENEFITS.

       (a) Providing Annual Screening Mammography for Women Over 
     Age 49.--Section 1834(c)(2)(A) (42 U.S.C. 1395m(c)(2)(A)) is 
     amended--
       (1) in clause (iv), by striking ``but under 65 years of 
     age,''; and
       (2) by striking clause (v).
       (b) Coverage of Screening Pap Smear and Pelvic Exams.--
       (1) Coverage of pelvic exam; increasing frequency of 
     coverage of pap smear.--Section 1861(nn) (42 U.S.C. 
     1395x(nn)) is amended--
       (A) in the heading, by striking ``Smear'' and inserting 
     ``Smear; Screening Pelvic Exam'';
       (B) by striking ``(nn)'' and inserting ``(nn)(1)'';
       (C) 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
       (D) by adding at the end the following new paragraphs:
       ``(2) The term `screening pelvic exam' means an 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 cancer; 
     or
       ``(B) is at high risk of developing cervical cancer (as 
     determined pursuant to factors identified by the 
     Secretary).''.
       (2) Waiver of deductible.--The first sentence of section 
     1833(b) (42 U.S.C. 1395l(b)), as amended by subsection 
     (a)(2), is amended--
       (A) by striking ``and (5)'' and inserting ``(5)''; and
       (B) by striking the period at the end and inserting the 
     following: ``, and (6) such deductible shall not apply with 
     respect to screening pap smear and screening pelvic exam (as 
     described in section 1861(nn)).''.
       (3) Conforming amendments.--(A) Section 1861(s)(14) (42 
     U.S.C. 1395x(s)(14)) is amended by inserting ``and screening 
     pelvic exam'' after ``screening pap smear''.
       (B) Section 1862(a)(1)(F) (42 U.S.C. 1395y(a)(1)(F)) is 
     amended by inserting ``and screening pelvic exam'' after 
     ``screening pap smear''.
       (c) Coverage of Colorectal Screening.--
       (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 Screening Fecal-
     Occult Blood Tests, Screening Flexible Sigmoidoscopies, and 
     Screening Colonoscopy.--
       ``(1) Frequency limits for screening fecal-occult blood 
     tests.--Subject to revision by the Secretary under paragraph 
     (4), no payment may be made under this part for a screening 
     fecal-occult blood test provided to an individual for the 
     purpose of early detection of colon cancer if the test is 
     performed--
       ``(A) in the case of an individual under 65 years of age, 
     more frequently than is provided in a periodicity schedule 
     established by the Secretary for purposes of this 
     subparagraph; or
       ``(B) in the case of any other individual, within the 11 
     months following the month in which a previous screening 
     fecal-occult blood test was performed.
       ``(2) Screening flexible sigmoidoscopies.--
       ``(A) Payment amount.--The Secretary shall establish a 
     payment amount under section 1848 with respect to screening 
     flexible 

[[Page H10577]]

     sigmoidoscopies provided for the purpose of early detection 
     of colon cancer 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) Frequency limits.--Subject to revision by the 
     Secretary under paragraph (4), no payment may be made under 
     this part for a screening flexible sigmoidoscopy provided to 
     an individual for the purpose of early detection of colon 
     cancer if the procedure is performed--
       ``(i) in the case of an individual under 65 years of age, 
     more frequently than is provided in a periodicity schedule 
     established by the Secretary for purposes of this 
     subparagraph; or
       ``(ii) in the case of any other individual, within the 59 
     months following the month in which a previous screening 
     flexible sigmoidoscopy was performed.
       ``(3) Screening colonoscopy for individuals at high risk 
     for colorectal cancer.--
       ``(A) Payment amount.--The Secretary shall establish a 
     payment amount under section 1848 with respect to screening 
     colonoscopy for individuals at high risk for colorectal 
     cancer (as determined in accordance with criteria established 
     by the Secretary) provided for the purpose of early detection 
     of colon cancer 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) Frequency limit.--Subject to revision by the 
     Secretary under paragraph (4), no payment may be made under 
     this part for a screening colonoscopy for individuals at high 
     risk for colorectal cancer provided to an individual for the 
     purpose of early detection of colon cancer if the procedure 
     is performed within the 47 months following the month in 
     which a previous screening colonoscopy was performed.
       ``(C) Factors considered in establishing criteria for 
     determining individuals at high risk.--In establishing 
     criteria for determining whether an individual is at high 
     risk for colorectal cancer for purposes of this paragraph, 
     the Secretary shall take into consideration family history, 
     prior experience of cancer, a history of chronic digestive 
     disease condition, and the presence of any appropriate 
     recognized gene markers for colorectal cancer.
       ``(4) Revision of frequency.--
       ``(A) Review.--The Secretary shall review periodically the 
     appropriate frequency for performing screening fecal-occult 
     blood tests, screening flexible sigmoidoscopies, and 
     screening colonoscopy based on age and such other factors as 
     the Secretary believes to be pertinent.
       ``(B) 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 and 
     procedures may be paid for under this subsection.''.
       (2) Conforming amendments.--(A) Paragraphs (1)(D) and 
     (2)(D) of section 1833(a) (42 U.S.C. 1395l(a)) are each 
     amended by striking ``subsection (h)(1),'' and inserting 
     ``subsection (h)(1) or section 1834(d)(1),''.
       (B) Clauses (i) and (ii) of section 1848(a)(2)(A) (42 
     U.S.C. 1395w-4(a)(2)(A)) are each amended by striking ``a 
     service'' and inserting ``a service (other than a screening 
     flexible sigmoidoscopy provided to an individual for the 
     purpose of early detection of colon cancer or a screening 
     colonoscopy provided to an individual at high risk for 
     colorectal cancer for the purpose of early detection of colon 
     cancer)''.
       (C) Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
       (i) in paragraph (1)--
       (I) in subparagraph (E), by striking ``and'' at the end;
       (II) in subparagraph (F), by striking the semicolon at the 
     end and inserting ``, and''; and
       (III) by adding at the end the following new subparagraph:
       ``(G) in the case of screening fecal-occult blood tests, 
     screening flexible sigmoidoscopies, and screening colonoscopy 
     provided for the purpose of early detection of colon cancer, 
     which are performed more frequently than is covered under 
     section 1834(d);''; and
       (ii) in paragraph (7), by striking ``paragraph (1)(B) or 
     under paragraph (1)(F)'' and inserting ``subparagraphs (B), 
     (F), or (G) of paragraph (1)''.
       (d) Prostate Cancer Screening Tests.--
       (1) In general.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) 
     is amended--
       (A) by striking ``and'' at the end of subparagraph (N) and 
     subparagraph (O); and
       (B) by inserting after subparagraph (O) the following new 
     subparagraph:
       ``(P) prostate cancer screening tests (as defined in 
     subsection (oo)); and''.
       (2) Tests described.--Section 1861 (42 U.S.C. 1395x) is 
     amended by adding at the end the following new subsection:

                   ``Prostate Cancer Screening Tests

       ``(oo) The term `prostate cancer screening test' means a 
     test that consists of a digital rectal examination or a 
     prostate-specific antigen blood test (or both) provided for 
     the purpose of early detection of prostate cancer to a man 
     over 40 years of age who has not had such a test during the 
     preceding year.''.
       (3) 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)''.
       (4) Conforming amendment.--Section 1862(a) (42 U.S.C. 
     1395y(a)), as amended by subsection (c)(3)(C), is amended--
       (A) in paragraph (1)--
       (i) in subparagraph (F), by striking ``and'' at the end,
       (ii) in subparagraph (G), by striking the semicolon at the 
     end and inserting ``, and'', and
       (iii) by adding at the end the following new subparagraph:
       ``(H) in the case of prostate cancer screening test (as 
     defined in section 1861(oo)) provided for the purpose of 
     early detection of prostate cancer, which are performed more 
     frequently than is covered under such section;''; and
       (B) in paragraph (7), by striking ``or (G)'' and inserting 
     ``(G), or (H)''.
       (e) Diabetes Screening Benefits.--
       (1) Diabetes outpatient self-management training 
     services.--
       (A) In general.--Section 1861(s)(2) (42 U.S.C. 
     1395x(s)(2)), as amended by subsection (d)(1), is amended--
       (i) by striking ``and'' at the end of subparagraph (N);
       (ii) by striking ``and'' at the end of subparagraph (O); 
     and
       (iii) by inserting after subparagraph (O) the following new 
     subparagraph:
       ``(P) diabetes outpatient self-management training services 
     (as defined in subsection (pp)); and''.
       (B) Definition.--Section 1861 (42 U.S.C. 1395x), as amended 
     by subsection (d)(2), is amended by adding at the end the 
     following new subsection:


        ``diabetes outpatient self-management training services

       ``(pp)(1) The term `diabetes outpatient self-management 
     training services' means educational and training services 
     furnished to an individual with diabetes by or under 
     arrangements with 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 an individual or entity 
     that, in addition to providing diabetes outpatient self-
     management training services, provides other items or 
     services for which payment may be made under this title; and
       ``(B) an individual or entity meets the quality standards 
     described in this paragraph if the individual or entity meets 
     quality standards established by the Secretary, except that 
     the individual or entity shall be deemed to have met such 
     standards if the 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 the American Diabetes Association as 
     meeting standards for furnishing the services.''.
       (C) Consultation with organizations in establishing payment 
     amounts for services provided by physicians.--In establishing 
     payment amounts under section 1848(a) 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 the American Diabetes Association, 
     in determining the relative value for such services under 
     section 1848(c)(2) of such Act.
       (2) Blood-testing strips for individuals with diabetes.--
       (A) Including strips as durable medical equipment.--Section 
     1861(n) (42 U.S.C. 1395x(n)) is amended by striking the 
     semicolon in the first sentence and inserting the following: 
     ``, and includes blood-testing strips for individuals with 
     diabetes without regard to whether the individual has Type I 
     or Type II diabetes (as determined under standards 
     established by the Secretary in consultation with the 
     American Diabetes Association);''.
       (2) Payment for strips based on methodology for inexpensive 
     and routinely purchased equipment.--Section 1834(a)(2)(A) (42 
     U.S.C. 1395m(a)(2)(A)) is amended--
       (A) by striking ``or'' at the end of clause (ii);
       (B) by adding ``or'' at the end of clause (iii); and
       (C) by inserting after clause (iii) the following new 
     clause:
       ``(iv) which is a blood-testing strip for an individual 
     with diabetes,''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1996.
                  Subtitle E--Medicare Fraud Reduction

     SEC. 8401. INCREASING BENEFICIARY AWARENESS OF FRAUD AND 
                   ABUSE.

       (a) Beneficiary Outreach Efforts.--The Secretary of Health 
     and Human Services 

[[Page H10578]]

     (acting through the Administrator of the Health Care 
     Financing Administration and the Inspector General of the 
     Department of Health and Human Services) shall make ongoing 
     efforts (through public service announcements, publications, 
     and other appropriate methods) to alert individuals entitled 
     to benefits under the medicare program of the existence of 
     fraud and abuse committed against the program and the costs 
     to the program of such fraud and abuse, and of the existence 
     of the toll-free telephone line operated by the Secretary to 
     receive information on fraud and abuse committed against the 
     program.
       (b) Clarification of Requirement to Provide Explanation of 
     Medicare Benefits.--The Secretary shall provide an 
     explanation of benefits under the medicare program with 
     respect to each item or service for which payment may be made 
     under the program which is furnished to an individual, 
     without regard to whether or not a deductible or coinsurance 
     may be imposed against the individual with respect to the 
     item or service.
       (c) Provider Outreach Efforts; Publication of Fraud 
     Alerts.--
       (1) Special fraud alerts.--
       (A) In general.--
       (i) Request for special fraud alerts.--Any person may 
     present, at any time, a request to the Secretary to issue and 
     publish a special fraud alert.
       (ii) Special fraud alert defined.--In this section, a 
     ``special fraud alert'' is a notice which informs the public 
     of practices which the Secretary considers to be suspect or 
     of particular concern under the medicare program or a State 
     health care program (as defined in section 1128(h) of the 
     Social Security Act).
       (B) Issuance and publication of special fraud alerts.--
       (i) Investigation.--Upon receipt of a request for a special 
     fraud alert under subparagraph (A), the Secretary shall 
     investigate the subject matter of the request to determine 
     whether a special fraud alert should be issued. If 
     appropriate, the Secretary (in consultation with the Attorney 
     General) shall issue a special fraud alert in response to the 
     request. All special fraud alerts issued pursuant to this 
     subparagraph shall be published in the Federal Register.
       (ii) Criteria for issuance.--In determining whether to 
     issue a special fraud alert upon a request under subparagraph 
     (A), the Secretary may consider--

       (I) whether and to what extent the practices that would be 
     identified in the special fraud alert may result in any of 
     the consequences described in subparagraph (C); and
       (II) the extent and frequency of the conduct that would be 
     identified in the special fraud alert.

       (C) Consequences described.--The consequences described in 
     this subparagraph are as follows:
       (i) An increase or decrease in access to health care 
     services.
       (ii) An increase or decrease in the quality of health care 
     services.
       (iii) An increase or decrease in patient freedom of choice 
     among health care providers.
       (iv) An increase or decrease in competition among health 
     care providers.
       (v) An increase or decrease in the cost to health care 
     programs of the Federal Government.
       (vi) An increase or decrease in the potential 
     overutilization of health care services.
       (viii) Any other factors the Secretary deems appropriate in 
     the interest of preventing fraud and abuse in health care 
     programs of the Federal Government.
       (2) Publication of all hcfa fraud alerts in federal 
     register.--Each notice issued by the Health Care Financing 
     Administration which informs the public of practices which 
     the Secretary considers to be suspect or of particular 
     concern under the medicare program or a State health care 
     program (as defined in section 1128(h) of the Social Security 
     Act) shall be published in the Federal Register, without 
     regard to whether or not the notice is issued by a regional 
     office of the Health Care Financing Administration.

     SEC. 8402. BENEFICIARY INCENTIVES TO REPORT FRAUD AND ABUSE.

       (a) Program to Collect Information on Fraud and Abuse.--
       (1) Establishment of program.--Not later than 3 months 
     after the date of the enactment of this Act, the Secretary 
     shall establish a program under which the Secretary shall 
     encourage individuals to report to the Secretary information 
     on individuals and entities who are engaging or who have 
     engaged in acts or omissions which constitute grounds for the 
     imposition of a sanction under section 1128, section 1128A, 
     or section 1128B of the Social Security Act, or who have 
     otherwise engaged in fraud and abuse against the medicare 
     program.
       (2) Payment of portion of amounts collected.--If an 
     individual reports information to the Secretary under the 
     program established under paragraph (1) which serves as the 
     basis for the collection by the Secretary or the Attorney 
     General of any amount of at least $100 (other than any amount 
     paid as a penalty under section 1128B of the Social Security 
     Act), the Secretary may pay a portion of the amount collected 
     to the individual (under procedures similar to those 
     applicable under section 7623 of the Internal Revenue Code of 
     1986 to payments to individuals providing information on 
     violations of such Code).
       (b) Program to Collect Information on Program Efficiency.--
       (1) Establishment of program.--Not later than 3 months 
     after the date of the enactment of this Act, the Secretary 
     shall establish a program under which the Secretary shall 
     encourage individuals to submit to the Secretary suggestions 
     on methods to improve the efficiency of the medicare program.
       (2) Payment of portion of program savings.--If an 
     individual submits a suggestion to the Secretary under the 
     program established under paragraph (1) which is adopted by 
     the Secretary and which results in savings to the program, 
     the Secretary may make a payment to the individual of such 
     amount as the Secretary considers appropriate.

     SEC. 8403. ELIMINATION OF HOME HEALTH OVERPAYMENTS.

       (a) Requiring Billing and Payment to be Based on Site Where 
     Service Furnished.--Section 1891 (42 U.S.C. 1395bbb) is 
     amended by adding at the end the following new subsection:
       ``(g) 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.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to services furnished during cost reporting 
     periods beginning on or after October 1, 1995.

     SEC. 8404. SKILLED NURSING FACILITIES.

       (a) Clarification of Treatment of Hospital Transfers.--
     Section 1886(d)(5)(I) (42 U.S.C. 1395ww(d)(5)(I)) is amended 
     by adding at the end the following new clause:
       ``(iii) In making adjustments under clause (i) for transfer 
     cases, the Secretary shall treat as a transfer any transfer 
     to a hospital (without regard to whether or not the hospital 
     is a subsection (d) hospital), a unit thereof, or a skilled 
     nursing facility.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to discharges occurring on or after October 1, 
     1995.

     SEC. 8405. DIRECT SPENDING FOR ANTI-FRAUD ACTIVITIES UNDER 
                   MEDICARE.

       (a) Establishment of Medicare Integrity Program.--Title 
     XVIII, as amended by section 8231(d), is further amended by 
     adding at the end the following new section:


                      ``medicare integrity program

       ``Sec. 1894. (a) Establishment of Program.--There is hereby 
     established the Medicare Integrity Program (hereafter in this 
     section referred to as the `Program') under which the 
     Secretary shall promote the integrity of the medicare program 
     by entering into contracts in accordance with this section 
     with eligible private entities to carry out the activities 
     described in subsection (b).
       ``(b) Activities Described.--The activities described in 
     this subsection are as follows:
       ``(1) Review of activities of providers of services or 
     other individuals and entities furnishing items and services 
     for which payment may be made under this title (including 
     skilled nursing facilities and home health agencies), 
     including medical and utilization review and fraud review 
     (employing similar standards, processes, and technologies 
     used by private health plans, including equipment and 
     software technologies which surpass the capability of the 
     equipment and technologies used in the review of claims under 
     this title as of the date of the enactment of this section).
       ``(2) Audit of cost reports.
       ``(3) Determinations as to whether payment should not be, 
     or should not have been, made under this title by reason of 
     section 1862(b), and recovery of payments that should not 
     have been made.
       ``(4) Education of providers of services, beneficiaries, 
     and other persons with respect to payment integrity and 
     benefit quality assurance issues.
       ``(c) Eligibility of Entities.--An entity is eligible to 
     enter into a contract under the Program to carry out any of 
     the activities described in subsection (b) if--
       ``(1) the entity has demonstrated capability to carry out 
     such activities;
       ``(2) in carrying out such activities, the entity agrees to 
     cooperate with the Inspector General of the Department of 
     Health and Human Services, the Attorney General of the United 
     States, and other law enforcement agencies, as appropriate, 
     in the investigation and deterrence of fraud and abuse in 
     relation to this title and in other cases arising out of such 
     activities;
       ``(3) the entity's financial holdings, interests, or 
     relationships will not interfere with its ability to perform 
     the functions to be required by the contract in an effective 
     and impartial manner; and
       ``(4) the entity meets such other requirements as the 
     Secretary may impose.
       ``(d) Process for Entering Into Contracts.--The Secretary 
     shall enter into contracts under the Program in accordance 
     with such procedures as the Secretary may by regulation 
     establish, except that such procedures shall include the 
     following:
       ``(1) The Secretary shall determine the appropriate number 
     of separate contracts which are necessary to carry out the 
     Program and the appropriate times at which the Secretary 
     shall enter into such contracts.
       ``(2) The provisions of section 1153(e)(1) shall apply to 
     contracts and contracting authority under this section, 
     except that competitive procedures must be used when entering 
     into new contracts under this section, or at any other time 
     considered appropriate by the Secretary.
       ``(3) A contract under this section may be renewed without 
     regard to any provision of 

[[Page H10579]]

     law requiring competition if the contractor has met or 
     exceeded the performance requirements established in the 
     current contract.
       ``(e) Limitation on Contractor Liability.--The Secretary 
     shall by regulation provide for the limitation of a 
     contractor's liability for actions taken to carry out a 
     contract under the Program, and such regulation shall, to the 
     extent the Secretary finds appropriate, employ the same or 
     comparable standards and other substantive and procedural 
     provisions as are contained in section 1157.
       ``(f) Transfer of Amounts to Medicare Anti-Fraud and Abuse 
     Trust Fund.--For each fiscal year, the Secretary shall 
     transfer from the Federal Hospital Insurance Trust Fund and 
     the Federal Supplementary Medical Insurance Trust Fund to the 
     Medicare Anti-Fraud and Abuse Trust Fund under subsection (g) 
     such amounts as are necessary to carry out the activities 
     described in subsection (b). Such transfer shall be in an 
     allocation as reasonably reflects the proportion of such 
     expenditures associated with part A and part B.
       ``(g) Medicare Anti-Fraud and Abuse Trust Fund.--
       ``(1) Establishment.--
       ``(A) In general.--There is hereby established in the 
     Treasury of the United States the Anti-Fraud and Abuse Trust 
     Fund (hereafter in this subsection referred to as the `Trust 
     Fund'). The Trust Fund shall consist of such gifts and 
     bequests as may be made as provided in subparagraph (B) and 
     such amounts as may be deposited in the Trust Fund as 
     provided in subsection (f), paragraph (3), and title XI.
       ``(B) Authorization to accept gifts and bequests.--The 
     Trust Fund is authorized to accept on behalf of the United 
     States money gifts and bequests made unconditionally to the 
     Trust Fund, for the benefit of the Trust Fund or any activity 
     financed through the Trust Fund.
       ``(2) Investment.--
       ``(A) In general.--The Secretary of the Treasury shall 
     invest such amounts of the Fund as such Secretary determines 
     are not required to meet current withdrawals from the Fund in 
     government account serial securities.
       ``(B) Use of income.--Any interest derived from investments 
     under subparagraph (A) shall be credited to the Fund.
       ``(3) Amounts deposited into trust fund.--In addition to 
     amounts transferred under subsection (f), there shall be 
     deposited in the Trust Fund--
       ``(A) that portion of amounts recovered in relation to 
     section 1128A arising out of a claim under title XVIII as 
     remains after application of subsection (f)(2) (relating to 
     repayment of the Federal Hospital Insurance Trust Fund or the 
     Federal Supplementary Medical Insurance Trust Fund) of that 
     section, as may be applicable,
       ``(B) fines imposed under section 1128B arising out of a 
     claim under this title, and
       ``(C) penalties and damages imposed (other than funds 
     awarded to a relator or for restitution) under sections 3729 
     through 3732 of title 31, United States Code (pertaining to 
     false claims) in cases involving claims relating to programs 
     under title XVIII, XIX, or XXI.
       ``(4) Direct appropriation of funds to carry out program.--
       ``(A) In general.--There are appropriated from the Trust 
     Fund for each fiscal year such amounts as are necessary to 
     carry out the Medicare Integrity Program under this section, 
     subject to subparagraph (B).
       ``(B) Amounts specified.--The amount appropriated under 
     subparagraph (A) for a fiscal year is as follows:
       ``(i) For fiscal year 1996, such amount shall be not less 
     than $430,000,000 and not more than $440,000,000.
       ``(ii) For fiscal year 1997, such amount shall be not less 
     than $490,000,000 and not more than $500,000,000.
       ``(iii) For fiscal year 1998, such amount shall be not less 
     than $550,000,000 and not more than $560,000,000.
       ``(iv) For fiscal year 1999, such amount shall be not less 
     than $620,000,000 and not more than $630,000,000.
       ``(v) For fiscal year 2000, such amount shall be not less 
     than $670,000,000 and not more than $680,000,000.
       ``(vi) For fiscal year 2001, such amount shall be not less 
     than $690,000,000 and not more than $700,000,000.
       ``(vii) For fiscal year 2002, such amount shall be not less 
     than $710,000,000 and not more than $720,000,000.
       ``(5) Annual report.--The Secretary shall submit an annual 
     report to Congress on the amount of revenue which is 
     generated and disbursed by the Trust Fund in each fiscal 
     year.''.
       (b) Elimination of FI and Carrier Responsibility for 
     Carrying out Activities Subject to Program.--
       (1) Responsibilities of fiscal intermediaries under part 
     a.--Section 1816 (42 U.S.C. 1395h) is amended by adding at 
     the end the following new subsection:
       ``(l) No agency or organization may carry out (or receive 
     payment for carrying out) any activity pursuant to an 
     agreement under this section to the extent that the activity 
     is carried out pursuant to a contract under the Medicare 
     Integrity Program under section 1894.''.
       (2) Responsibilities of carriers under part b.--Section 
     1842(c) (42 U.S.C. 1395u(c)) is amended by adding at the end 
     the following new paragraph:
       ``(6) No carrier may carry out (or receive payment for 
     carrying out) any activity pursuant to a contract under this 
     subsection to the extent that the activity is carried out 
     pursuant to a contract under the Medicare Integrity Program 
     under section 1894.''.
       (c) Conforming Amendment.--Section 1128A(f)(3) (42 U.S.C. 
     1320a-7a(f)(3)) is amended by striking ``as miscellaneous 
     receipts of the Treasury of the United States'' and inserting 
     ``in the Anti-Fraud and Abuse Trust Fund established under 
     section 1895(g)''.
       (d) Direct Spending for Medicare-Related Activities of 
     Inspector General.--Section 1894, as added by subsection (a), 
     is amended by adding at the end the following new subsection:
       ``(h) Direct Spending for Medicare-Related Activities of 
     Inspector General.--
       ``(1) In general.--There are appropriated from the Federal 
     Hospital Insurance Trust Fund and the Federal Supplementary 
     Medical Insurance Trust Fund to the Inspector General of the 
     Department of Health and Human Services for each fiscal year 
     such amounts as are necessary to enable the Inspector General 
     to carry out activities relating to the medicare program (as 
     described in paragraph (2)), subject to paragraph (3).
       ``(2) Activities described.--The activities described in 
     this paragraph are as follows:
       ``(A) Prosecuting medicare-related matters through 
     criminal, civil, and administrative proceedings.
       ``(B) Conducting investigations relating to the medicare 
     program.
       ``(C) Performing financial and performance audits of 
     programs and operations relating to the medicare program.
       ``(D) Performing inspections and other evaluations relating 
     to the medicare program.
       ``(E) Conducting provider and conumer education activities 
     regarding the requirements of this title.
       ``(3) Amounts specified.--The amount appropriated under 
     paragraph (1) for a fiscal year is as follows:
       ``(A) For fiscal year 1996, such amount shall be 
     $130,000,000.
       ``(B) For fiscal year 1997, such amount shall be 
     $181,000,000.
       ``(C) For fiscal year 1998, such amount shall be 
     $204,000,000.
       ``(D) For each subsequent fiscal year, the amount 
     appropriated for the previous fiscal year, increased by the 
     percentage increase in aggregate expenditures under this 
     title for the fiscal year involved over the previous fiscal 
     year.
       ``(4) Allocation of payments among trust funds.--The 
     appropriations made under paragraph (1) shall be in an 
     allocation as reasonably reflects the proportion of such 
     expenditures associated with part A and part B.''.

     SEC. 8406. FRAUD REDUCTION DEMONSTRATION PROJECT.

       (a) In General.--Not later than July 1, 1996, the Secretary 
     of Health and Human Services (in this section referred to as 
     the ``Secretary'') shall establish not less than three 
     demonstration projects under which organizations with a 
     contract under section 1816 or section 1842 of the Social 
     Security Act--
       (1) identify practitioners and providers whose patterns of 
     providing care to beneficiaries enrolled under title XVIII of 
     the Social Security Act are consistently outside the norm for 
     other practitioners or providers of the same category, class, 
     or type, and
       (2) experiment with ways of identifying fraudulent claims 
     submitted to the program established under such title before 
     they are paid.
       (b) Duration of Projects.--Each project established under 
     subsection (a) shall last for at least 18 months and shall 
     focus on those categories, classes, or types of providers and 
     practitioners that have been identified by the Inspector 
     General of the Department of Health and Human Services as 
     having a high incidence of fraud and abuse.
       (c) Report.--Not later than July 1, 1997, the Secretary 
     shall report to the Congress on the demonstration projects 
     established under subsection (a), and shall include in the 
     report an assessment of the effectiveness of, and any 
     recommended legislative changes based on, the projects.

     SEC. 8407. REPORT ON COMPETITIVE PRICING.

       Not later than 1 year after the date of the enactment of 
     this Act, the Secretary of Health and Human Services (acting 
     through the Administrator of the Health Care Financing 
     Administration) shall submit to Congress a report 
     recommending legislative changes to the medicare program to 
     enable the prices paid for items and services under the 
     medicare program to be established on a more competitive 
     basis.
              Subtitle F--Improving Access to Health Care

                 PART 1--ASSISTANCE FOR RURAL PROVIDERS

                       Subpart A--Rural Hospitals

     SEC. 8501. SOLE COMMUNITY HOSPITALS.

       (a) Update.--Section 1886(b)(3)(B)(iv) (42 U.S.C. 
     1395ww(b)(3)(B)(iv)) is amended--
       (A) in subclause (III), by striking ``and'' at the end; and
       (B) by striking subclause (IV) and inserting the following:
       ``(IV) for each of the fiscal years 1996 through 2000, the 
     market basket percentage increase minus 1 percentage points, 
     and
       ``(V) for fiscal year 2001 and each subsequent fiscal year, 
     the applicable percentage increase under clause (i).''.

[[Page H10580]]

       (b) Study of Impact of Sole Community Hospital 
     Designations.--
       (1) Study.--The Medicare Payment Review Commission shall 
     conduct a study of the impact of the designation of hospitals 
     as sole community hospitals under the medicare program on the 
     delivery of health care services to individuals in rural 
     areas, and shall include in the study an analysis of the 
     characteristics of the hospitals designated as such sole 
     community hospitals under the program.
       (2) Report.--Not later than 12 months after the date a 
     majority of the members of the Commission are first 
     appointed, the Commission shall submit to Congress a report 
     on the study conducted under paragraph (1).

     SEC. 8502. CLARIFICATION OF TREATMENT OF EAC AND RPC 
                   HOSPITALS.

       Paragraphs (1)(A) and (2)(A) of section 1820(i) (42 U.S.C. 
     1395i@4(i)) are each amended by striking the semicolon at the 
     end and inserting the following: ``, or in a State which the 
     Secretary finds would receive a grant under such subsection 
     during a fiscal year if funds were appropriated for grants 
     under such subsection for the fiscal year;''.

     SEC. 8503. ESTABLISHMENT OF RURAL EMERGENCY ACCESS CARE 
                   HOSPITALS.

       (a) Establishment.--
       (1) In general.--Section 1861 (42 U.S.C. 1395x) is amended 
     by adding at the end the following new subsection:

  ``Rural Emergency Access Care Hospital; Rural Emergency Access Care 
                           Hospital Services

       ``(oo)(1) The term `rural emergency access care hospital' 
     means, for a fiscal year, a facility with respect to which 
     the Secretary finds the following:
       ``(A) The facility is located in a rural area (as defined 
     in section 1886(d)(2)(D)).
       ``(B) The facility was a hospital under this title at any 
     time during the 5-year period that ends on the date of the 
     enactment of this subsection.
       ``(C) The facility is in danger of closing due to low 
     inpatient utilization rates and operating losses, and the 
     closure of the facility would limit the access to emergency 
     services of individuals residing in the facility's service 
     area.
       ``(D) The facility has entered into (or plans to enter 
     into) an agreement with a hospital with a participation 
     agreement in effect under section 1866(a), and under such 
     agreement the hospital shall accept patients transferred to 
     the hospital from the facility and receive data from and 
     transmit data to the facility.
       ``(E) There is a practitioner who is qualified to provide 
     advanced cardiac life support services (as determined by the 
     State in which the facility is located) on-site at the 
     facility on a 24-hour basis.
       ``(F) A physician is available on-call to provide emergency 
     medical services on a 24-hour basis.
       ``(G) The facility meets such staffing requirements as 
     would apply under section 1861(e) to a hospital located in a 
     rural area, except that--
       ``(i) the facility need not meet hospital standards 
     relating to the number of hours during a day, or days during 
     a week, in which the facility must be open, except insofar as 
     the facility is required to provide emergency care on a 24-
     hour basis under subparagraphs (E) and (F); and
       ``(ii) the facility may provide any services otherwise 
     required to be provided by a full-time, on-site dietitian, 
     pharmacist, laboratory technician, medical technologist, or 
     radiological technologist on a part-time, off-site basis.
       ``(H) The facility meets the requirements applicable to 
     clinics and facilities under subparagraphs (C) through (J) of 
     paragraph (2) of section 1861(aa) and of clauses (ii) and 
     (iv) of the second sentence of such paragraph (or, in the 
     case of the requirements of subparagraph (E), (F), or (J) of 
     such paragraph, would meet the requirements if any reference 
     in such subparagraph to a `nurse practitioner' or to `nurse 
     practitioners' were deemed to be a reference to a `nurse 
     practitioner or nurse' or to `nurse practitioners or 
     nurses'); except that in determining whether a facility meets 
     the requirements of this subparagraph, subparagraphs (E) and 
     (F) of that paragraph shall be applied as if any reference to 
     a `physician' is a reference to a physician as defined in 
     section 1861(r)(1).
       ``(2) The term `rural emergency access care hospital 
     services' means the following services provided by a rural 
     emergency access care hospital and furnished to an individual 
     over a continuous period not to exceed 24 hours (except that 
     such services may be furnished over a longer period in the 
     case of an individual who is unable to leave the hospital 
     because of inclement weather):
       ``(A) An appropriate medical screening examination (as 
     described in section 1867(a)).
       ``(B) Necessary stabilizing examination and treatment 
     services for an emergency medical condition and labor (as 
     described in section 1867(b)).''.
       (2) Requiring rural emergency access care hospitals to meet 
     hospital anti-dumping requirements.--Section 1867(e)(5) (42 
     U.S.C. 1395dd(e)(5)) is amended by striking ``1861(mm)(1))'' 
     and inserting ``1861(mm)(1)) and a rural emergency access 
     care hospital (as defined in section 1861(oo)(1))''.
       (b) Coverage and Payment Under Part B.--
       (1) Coverage under part b.--Section 1832(a)(2) (42 U.S.C. 
     1395k(a)(2)) is amended--
       (A) by striking ``and'' at the end of subparagraph (I);
       (B) by striking the period at the end of subparagraph (J) 
     and inserting ``; and''; and
       (C) by adding at the end the following new subparagraph:
       ``(K) rural emergency access care hospital services (as 
     defined in section 1861(oo)(2)).''.
       (2) Payment based on payment for outpatient rural primary 
     care hospital services.--
       (A) In general.--Section 1833(a)(6) (42 U.S.C. 1395l(a)(6)) 
     is amended by striking ``services,'' and inserting ``services 
     and rural emergency access care hospital services,''.
       (B) Payment methodology described.--Section 1834(g) (42 
     U.S.C. 1395m(g)) is amended--
       (i) in the heading, by striking ``Services'' and inserting 
     ``Services and Rural Emergency Access Care Hospital 
     Services''; and
       (ii) by adding at the end the following new sentence: ``The 
     amount of payment for rural emergency access care hospital 
     services provided during a year shall be determined using the 
     applicable method provided under this subsection for 
     determining payment for outpatient rural primary care 
     hospital services during the year.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to fiscal years beginning on or after October 1, 
     1995.

     SEC. 8504. CLASSIFICATION OF RURAL REFERRAL CENTERS.

       (a) Prohibiting Denial of Request for Reclassification on 
     Basis of Comparability of Wages.--
       (1) In general.--Section 1886(d)(10)(D) (42 U.S.C. 
     1395ww(d)(10)(D)) is amended--
       (A) by redesignating clause (iii) as clause (iv); and
       (B) by inserting after clause (ii) the following new 
     clause:
       ``(iii) Under the guidelines published by the Secretary 
     under clause (i), in the case of a hospital which is 
     classified by the Secretary as a rural referral center under 
     paragraph (5)(C), the Board may not reject the application of 
     the hospital under this paragraph on the basis of any 
     comparison between the average hourly wage of the hospital 
     and the average hourly wage of hospitals in the area in which 
     it is located.''.
       (2) Effective date.--Notwithstanding section 
     1886(d)(10)(C)(ii) of the Social Security Act, a hospital may 
     submit an application to the Medicare Geographic 
     Classification Review Board during the 30-day period 
     beginning on the date of the enactment of this Act requesting 
     a change in its classification for purposes of determining 
     the area wage index applicable to the hospital under section 
     1886(d)(3)(D) of such Act for fiscal year 1997, if the 
     hospital would be eligible for such a change in its 
     classification under the standards described in section 
     1886(d)(10)(D) (as amended by paragraph (1)) but for its 
     failure to meet the deadline for applications under section 
     1886(d)(10)(C)(ii).
       (b) Continuing Treatment of Previously Designated 
     Centers.--Any hospital classified as a rural referral center 
     by the Secretary of Health and Human Services under section 
     1886(d)(5)(C) of the Social Security Act for fiscal year 1994 
     shall be classified as such a rural referral center for 
     fiscal year 1996 and each subsequent fiscal year.

     SEC. 8505. FLOOR ON AREA WAGE INDEX.

       (a) In General.--For purposes of section 1886(d)(3)(E) of 
     the Social Security Act for discharges occurring on or after 
     October 1, 1995, the area wage index applicable under such 
     section to any hospital which is not located in a rural area 
     (as defined in section 1886(d)(2)(D) of such Act) may not be 
     less than the average of the area wage indices applicable 
     under such section to hospitals located in rural areas in the 
     State in which the hospital is located.
       (b) Budget-Neutrality in Implementation.--The Secretary of 
     Health and Human Services shall make any adjustments required 
     under subsection (a) in a manner which assures that the 
     aggregate payments made under section 1886(d) of the Social 
     Security Act in a fiscal year for the operating costs of 
     inpatient hospital services are not greater or less than 
     those which would have been made in the year without such 
     adjustments.

     SEC. 8506. MEDICAL EDUCATION.

       (a) State and Consortium Demonstration Projects.--
       (1) In general.--
       (A) Participation of states and consortia.--The Secretary 
     shall establish and conduct a demonstration project to 
     increase the number and percentage of medical students 
     entering primary care practice relative to those entering 
     nonprimary care practice under which the Secretary shall make 
     payments in accordance with paragraph (4)--
       (i) to not more than 10 States for the purpose of testing 
     and evaluating mechanisms to meet the goals described in 
     subsection (b); and
       (ii) to not more than 10 health care training consortia for 
     the purpose of testing and evaluating mechanisms to meet such 
     goals.
       (B) Exclusion of consortia in participating states.--A 
     consortia may not receive payments under the demonstration 
     project under subparagraph (A)(ii) if any of its members is 
     located in a State receiving payments under the project under 
     subparagraph (A)(i).
       (2) Applications.--
       (A) In general.--Each State and consortium desiring to 
     conduct a demonstration project under this subsection shall 
     prepare and submit to the Secretary an application, at such 
     time, in such manner, and containing such information as the 
     Secretary may 

[[Page H10581]]

     require to assure that the State or consortium will meet the 
     goals described in subsection (b). In the case of an 
     application of a State, the application shall include--
       (i) information demonstrating that the State has consulted 
     with interested parties with respect to the project, 
     including State medical associations, State hospital 
     associations, and medical schools located in the State;
       (ii) an assurance that no hospital conducting an approved 
     medical residency training program in the State will lose 
     more than 10 percent of such hospital's approved medical 
     residency positions in any year as a result of the project; 
     and
       (iii) an explanation of a plan for evaluating the impact of 
     the project in the State.
       (B) Approval of applications.--A State or consortium that 
     submits an application under subparagraph (A) may begin a 
     demonstration project under this subsection--
       (i) upon approval of such application by the Secretary; or
       (ii) at the end of the 60-day period beginning on the date 
     such application is submitted, unless the Secretary denies 
     the application during such period.
       (C) Notice and comment.--A State or consortium shall issue 
     a public notice on the date it submits an application under 
     subparagraph (A) which contains a general description of the 
     proposed demonstration project. Any interested party may 
     comment on the proposed demonstration project to the State or 
     consortium or the Secretary during the 30-day period 
     beginning on the date the public notice is issued.
       (3) Specific requirements for participants.--
       (A) Requirements for states.--Each State participating in 
     the demonstration project under this section shall use the 
     payments provided under paragraph (4) to test and evaluate 
     either of the following mechanisms to increase the number and 
     percentage of medical students entering primary care practice 
     relative to those entering nonprimary care practice:
       (i) Use of alternative weighting factors.--

       (I) In general.--The State may make payments to hospitals 
     in the State for direct graduate medical education costs in 
     amounts determined under the methodology provided under 
     section 1886(h) of the Social Security Act, except that the 
     State shall apply weighting factors that are different than 
     the weighting factors otherwise set forth in section 
     1886(h)(4)(C) of the Social Security Act.

       (II) Use of payments for primary care residents.--In 
     applying different weighting factors under subclause (I), the 
     State shall ensure that the amount of payment made to 
     hospitals for costs attributable to primary care residents 
     shall be greater than the amount that would have been paid to 
     hospitals for costs attributable to such residents if the 
     State had applied the weighting factors otherwise set forth 
     in section 1886(h)(4)(C) of the Social Security Act.

       (ii) Payments for medical education through consortium.--
     The State may make payments for graduate medical education 
     costs through payments to a health care training consortium 
     (or through any entity identified by such a consortium as 
     appropriate for receiving payments on behalf of the 
     consortium) that is established in the State but that is not 
     otherwise participating in the demonstration project.
       (B) Requirements for consortium.--
       (i) In general.--In the case of a consortium participating 
     in the demonstration project under this section, the 
     Secretary shall make payments for graduate medical education 
     costs through a health care training consortium whose members 
     provide medical residency training (or through any entity 
     identified by such a consortium as appropriate for receiving 
     payments on behalf of the consortium).
       (ii) Use of payments.--

       (I) In general.--Each consortium receiving payments under 
     clause (i) shall use such funds to conduct activities which 
     test and evaluate mechanisms to increase the number and 
     percentage of medical students entering primary care practice 
     relative to those entering nonprimary care practice, and may 
     use such funds for the operation of the consortium.
       (II) Payments to participating programs.--The consortium 
     shall ensure that the majority of the payments received under 
     clause (i) are directed to consortium members for primary 
     care residency programs, and shall designate for each 
     resident assigned to the consortium a hospital operating an 
     approved medical residency training program for purposes of 
     enabling the Secretary to calculate the consortium's payment 
     amount under the project. Such hospital shall be the hospital 
     where the resident receives the majority of the resident's 
     hospital-based, nonambulatory training experience.

       (4) Allocation of portion of medicare gme payments for 
     activities under project.--Notwithstanding any provision of 
     title XVIII of the Social Security Act, the following rules 
     apply with respect to each State and each health care 
     training consortium participating in the demonstration 
     project established under this subsection during a year:
       (A) In the case of a State--
       (i) the Secretary shall reduce the amount of each payment 
     made to hospitals in the State during the year for direct 
     graduate medical education costs under section 1886(h) of the 
     Social Security Act by 3 percent; and
       (ii) the Secretary shall pay the State an amount equal to 
     the Secretary's estimate of the sum of the reductions made 
     during the year under clause (i) (as adjusted by the 
     Secretary in subsequent years for over- or under-estimations 
     in the amount estimated under this subparagraph in previous 
     years).
       (B) In the case of a consortium--
       (i) the Secretary shall reduce the amount of each payment 
     made to hospitals who are members of the consortium during 
     the year for direct graduate medical education costs under 
     section 1886(h) of the Social Security Act by 3 percent; and
       (ii) the Secretary shall pay the consortium an amount equal 
     to the Secretary's estimate of the sum of the reductions made 
     during the year under clause (i) (as adjusted by the 
     Secretary in subsequent years for over- or under-estimations 
     in the amount estimated under this subparagraph in previous 
     years).
       (5) Duration.--A demonstration project under this 
     subsection shall be conducted for a period not to exceed 5 
     years. The Secretary may terminate a project if the Secretary 
     determines that the State or consortium conducting the 
     project is not in substantial compliance with the terms of 
     the application approved by the Secretary.
       (6) Evaluations and reports.--
       (A) Evaluations.--Each State or consortium participating in 
     the demonstration project shall submit to the Secretary a 
     final evaluation within 360 days of the termination of the 
     State or consortium's participation and such interim 
     evaluations as the Secretary may require.
       (B) Reports to congress.--Not later than 360 days after the 
     first demonstration project under this section begins, and 
     annually thereafter for each year in which such a project is 
     conducted, the Secretary shall submit a report to Congress 
     which evaluates the effectiveness of the State and consortium 
     activities conducted under such projects and includes any 
     legislative recommendations determined appropriate by the 
     Secretary.
       (7) Maintenance of effort.--Any funds available for the 
     activities covered by a demonstration project under this 
     section shall supplement, and shall not supplant, funds that 
     are expended for similar purposes under any State, regional, 
     or local program.
       (b) Goals for Projects.--The goals referred to in this 
     subsection for a State or consortium participating in the 
     demonstration project under this section are as follows:
       (1) The training of an equal number of physician and 
     nonphysician primary care providers.
       (2) The recruiting of residents for graduate medical 
     education training programs who received a portion of 
     undergraduate training in a rural area.
       (3) The allocation of not less than 50 percent of the 
     training spent in a graduate medical residency training 
     program at sites at which acute care inpatient hospital 
     services are not furnished.
       (4) The rotation of residents in approved medical residency 
     training programs among practices that serve residents of 
     rural areas.
       (5) The development of a plan under which, after a 5-year 
     transition period, not less than 50 percent of the residents 
     who begin an initial residency period in an approved medical 
     residency training program shall be primary care residents.
       (c) Definitions.--In this section:
       (1) Approved medical residency training program.--The term 
     ``approved medical residency training program'' has the 
     meaning given such term in section 1886(h)(5)(A) of the 
     Social Security Act.
       (2) Health care training consortium.--The term ``health 
     care training consortium'' means a State, regional, or local 
     entity consisting of at least one of each of the following:
       (A) A hospital operating an approved medical residency 
     training program at which residents receive training at 
     ambulatory training sites located in rural areas.
       (B) A school of medicine or osteopathic medicine.
       (C) A school of allied health or a program for the training 
     of physician assistants (as such terms are defined in section 
     799 of the Public Health Service Act).
       (D) A school of nursing (as defined in section 853 of the 
     Public Health Service Act).
       (3) Primary care.--The term ``primary care'' means family 
     practice, general internal medicine, general pediatrics, and 
     obstetrics and gynecology.
       (4) Resident.--The term ``resident'' has the meaning given 
     such term in section 1886(h)(5)(H) of the Social Security 
     Act.
       (5) Rural area.--The term ``rural area'' has the meaning 
     given such term in section 1886(d)(2)(D) of the Social 
     Security Act.

            Subpart B--Rural Physicians and Other Providers

     SEC. 8511. PROVIDER INCENTIVES.

       (a) Additional Payments Under Medicare for Physicians' 
     Services Furnished in Shortage Areas.--
       (1) Increase in amount of additional payment.--Section 
     1833(m) (42 U.S.C. 1395l(m)) is amended by striking ``10 
     percent'' and inserting ``20 percent''.
       (2) Restriction to primary care services.--Section 1833(m) 
     (42 U.S.C. 1395l(m)) is amended by inserting after 
     ``physicians' services'' the following: ``consisting of 
     primary care services (as defined in section 1842(i)(4))''.
       (3) Extension of payment for former shortage areas.--
       (A) In general.--Section 1833(m) (42 U.S.C. 1395l(m)) is 
     amended by striking ``area,'' and 

[[Page H10582]]

     inserting ``area (or, in the case of an area for which the 
     designation as a health professional shortage area under such 
     section is withdrawn, in the case of physicians' services 
     furnished to such an individual during the 3-year period 
     beginning on the effective date of the withdrawal of such 
     designation),''.
       (B) Effective date.--The amendment made by subparagraph (A) 
     shall apply to physicians' services furnished in an area for 
     which the designation as a health professional shortage area 
     under section 332(a)(1)(A) of the Public Health Service Act 
     is withdrawn on or after January 1, 1996.
       (4) Requiring carriers to report on services provided.--
     Section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended--
       (A) by striking ``and'' at the end of subparagraph (I); and
       (B) by inserting after subparagraph (I) the following new 
     subparagraph:
       ``(J) will provide information to the Secretary not later 
     than 30 days after the end of the contract year on the types 
     of providers to whom the carrier made additional payments 
     during the year for certain physicians' services pursuant to 
     section 1833(m), together with a description of the services 
     furnished by such providers during the year; and''.
       (5) Study.--
       (A) In general.--The Secretary of Health and Human Services 
     shall conduct a study analyzing the effectiveness of the 
     provision of additional payments under part B of the medicare 
     program for physicians' services provided in health 
     professional shortage areas in recruiting and retaining 
     physicians to provide services in such areas.
       (B) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary shall submit to Congress 
     a report on the study conducted under subparagraph (A), and 
     shall include in the report such recommendations as the 
     Secretary considers appropriate.
       (6) Effective date.--The amendments made by paragraphs (1), 
     (2), and (4) shall apply to physicians' services furnished on 
     or after January 1, 1996.
       (b) Development of Model State Scope of Practice Law.--
       (1) In general.--The Secretary of Health and Human Services 
     shall develop and publish a model law that may be adopted by 
     States to increase the access of individuals residing in 
     underserved rural areas to health care services by expanding 
     the services which non-physician health care professionals 
     may provide in such areas.
       (2) Deadline.--The Secretary shall publish the model law 
     developed under paragraph (1) not later than 1 year after the 
     date of the enactment of this Act.

     SEC. 8512. NATIONAL HEALTH SERVICE CORPS LOAN REPAYMENTS 
                   EXCLUDED FROM GROSS INCOME.

       (a) In General.--Part III of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to items 
     specifically excluded from gross income) is amended by 
     redesignating section 137 as section 138 and by inserting 
     after section 136 the following new section:

     ``SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN REPAYMENTS.

       ``(a) General Rule.--Gross income shall not include any 
     qualified loan repayment.
       ``(b) Qualified Loan Repayment.--For purposes of this 
     section, the term `qualified loan repayment' means any 
     payment made on behalf of the taxpayer by the National Health 
     Service Corps Loan Repayment Program under section 338B(g) of 
     the Public Health Service Act.''.
       (b) Conforming Amendment.--Paragraph (3) of section 338B(g) 
     of the Public Health Service Act is amended by striking 
     ``Federal, State, or local'' and inserting ``State or 
     local''.
       (c) Clerical Amendment.--The table of sections for part III 
     of subchapter B of chapter 1 of the Internal Revenue Code of 
     1986 is amended by striking the item relating to section 137 
     and inserting the following:

``Sec. 137. National Health Service Corps loan repayments.
``Sec. 138. Cross references to other Acts.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to payments made under section 338B(g) of the 
     Public Health Service Act after the date of the enactment of 
     this Act.

     SEC. 8513. TELEMEDICINE PAYMENT METHODOLOGY.

       The Secretary of Health and Human Services shall establish 
     a methodology for making payments under part B of the 
     medicare program for telemedicine services furnished on an 
     emergency basis to individuals residing in an area designated 
     as a health professional shortage area (under section 332(a) 
     of the Public Health Service Act).

     SEC. 8514. DEMONSTRATION PROJECT TO INCREASE CHOICE IN RURAL 
                   AREAS.

       The Secretary of Health and Human Services (acting through 
     the Administrator of the Health Care Financing 
     Administration) shall conduct a demonstration project to 
     assess the advantages and disadvantages of requiring Medicare 
     Choice organizations under part C of title XVIII of the 
     Social Security Act (as added by section 8002(a)) to market 
     Medicare Choice products in certain underserved areas which 
     are near the standard service area for such products.

                      PART 2--MEDICARE SUBVENTION

     SEC. 8521. MEDICARE PROGRAM PAYMENTS FOR HEALTH CARE SERVICES 
                   PROVIDED IN THE MILITARY HEALTH SERVICES 
                   SYSTEM.

       (a) Payments Under Medicare Risk Contracts Program.--
       (1) Current program.--Section 1876 (42 U.S.C. 1395mm) is 
     amended by adding at the end the following new subsection:
       ``(k) Notwithstanding any other provision of this section, 
     a managed health care plan established by the Secretary of 
     Defense under chapter 55 of title 10, United States Code, 
     shall be considered an eligible organization under this 
     section, and the Secretary shall make payments to such a 
     managed health care plan during a year on behalf of any 
     individuals entitled to benefits under this title who are 
     enrolled in such a managed health care plan during the year. 
     Such payments shall be equal to 30 percent of the amount 
     otherwise paid to other eligible organizations under this 
     section, and shall be made under similar terms and conditions 
     under which the Secretary makes payments to other eligible 
     organizations with risk sharing contracts under this 
     section.''.
       (2) Medicare choice program.--Section 1855, as inserted by 
     section 8002(a), by adding at the end the following new 
     subsection:
       ``(h) Payments to Military Program.--Notwithstanding any 
     other provision of this section, a managed health care plan 
     established by the Secretary of Defense under chapter 55 of 
     title 10, United States Code, shall be considered a Medicare 
     Choice organization under this part, and the Secretary shall 
     make payments to such a managed health care plan during a 
     year on behalf of any individuals entitled to benefits under 
     this title who are enrolled in such a managed health care 
     plan during the year. Such payments shall be equal to 30 
     percent of the amount otherwise paid to other Medicare Choice 
     organizations under this section, and shall be made under 
     similar terms and conditions under which the Secretary makes 
     payments to other Medicare Choice organizations with 
     contracts in effect under this part.''.
       (b) Temporary Provision for Waiver of Part B Premium 
     Penalty.--Section 1839 (42 U.S.C. 1395r) is amended by adding 
     at the end the following new subsection:
       ``(h) The premium increase required by subsection (b) shall 
     not apply with respect to a person who is enrolled with a 
     managed care plan that is established by the Secretary of 
     Defense under chapter 55 of title 10, United States Code, and 
     is recognized as an eligible organization pursuant to section 
     1855(h) or section 1876(k), if such person first enrolled in 
     such plan prior to January 1, 1998.''.
       (c) Payments Under Part A of Medicare.--Section 1814(c) (42 
     U.S.C. 1395f(c)) is amended--
       (1) by redesignating the current matter as paragraph (1); 
     and
       (2) by adding at the end the following new paragraph:
       ``(2) Paragraph (1) shall not apply to services provided by 
     facilities of the uniformed services pursuant to chapter 55 
     of title 10, United States Code, and subject to the 
     provisions of section 1095 of such title. With respect to 
     such services, payments under this title shall be made 
     without regard to whether the beneficiary under this title 
     has paid the deductible and copayments amounts generally 
     required by this title.''.
       (d) Payments Under Part B of Medicare.--Section 1835(d) (42 
     U.S.C. 1395n(d)) is amended--
       (1) by redesignating the current matter as paragraph (1); 
     and
       (2) by adding at the end the following new paragraph:
       ``(2) Paragraph (1) shall not apply to services provided by 
     facilities of the uniformed services pursuant to chapter 55 
     of title 10, United States Code, and subject to the 
     provisions of section 1095 of such title. With respect to 
     such services, payments under this title shall be made 
     without regard to whether the beneficiary under this title 
     has paid the deductible and copayments amounts generally 
     required by this title.''.
       (e) Conforming Amendments to the Third Party Collection 
     Program for Military Medical Facilities.--(1) Section 1095(d) 
     of title 10, United States Code, is amended--
       (A) by striking ``XVIII or''; and
       (B) by striking ``1395'' and inserting ``1396''.
       (2) Section 1095(h)(2) of such title is amended by 
     inserting after ``includes'' the following: ``plans 
     administered under title XVIII of the Social Security Act (42 
     U.S.C. 1395 et seq.),''.
       (f) Effective Date.--The amendments made by this section 
     shall take effect at the end of the 30-day period beginning 
     on the date of the enactment of this Act.
                      Subtitle G--Other Provisions

     SEC. 8601. EXTENSION AND EXPANSION OF EXISTING SECONDARY 
                   PAYER REQUIREMENTS.

       (a) Data Match.--
       (1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is 
     amended by striking clause (iii).
       (2) Section 6103(l)(12) of the Internal Revenue Code of 
     1986 is amended by striking subparagraph (F).
       (b) Application to Disabled Individuals in Large Group 
     Health Plans.--
       (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. 

[[Page H10583]]

     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)''.
       (c) Expansion of Period of Application to Individuals With 
     End Stage Renal Disease.--Section 1862(b)(1)(C) (42 U.S.C. 
     1395y(b)(1)(C)) is amended--
       (1) in the first sentence, by striking ``12-month'' each 
     place it appears and inserting ``24-month'', and
       (2) by striking the second sentence.

     SEC. 8602. REPEAL OF MEDICARE AND MEDICAID COVERAGE DATA 
                   BANK.

       (a) In General.--Section 1144 (42 U.S.C. 1320b-14) is 
     repealed.
       (b) Conforming Amendments.--
       (1) Medicare.--Section 1862(b)(5) (42 U.S.C. 1395y(b)(5)) 
     is amended--
       (A) in subparagraph (B), by striking ``under--'' and all 
     that follows through the end and inserting ``subparagraph (A) 
     for purposes of carrying out this subsection.'', and
       (B) in subparagraph (C)(i), by striking ``subparagraph 
     (B)(i)'' and inserting ``subparagraph (B)''.
       (2) Medicaid.--Section 1902(a)(25)(A)(i) (42 U.S.C. 
     1396a(a)(25)(A)(i)) is amended by striking ``including the 
     use of'' and all that follows through ``any additional 
     measures''.
       (3) ERISA.--Section 101(f) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1021(f)) is repealed.
       (4) Data matches.--Section 552a(a)(8)(B) of title 5, United 
     States Code, is amended--
       (A) by adding ``; or'' at the end of clause (v),
       (B) by striking ``or'' at the end of clause (vi), and
       (C) by striking clause (vii).

     SEC. 8603. CLARIFICATION OF MEDICARE COVERAGE OF ITEMS AND 
                   SERVICES ASSOCIATED WITH CERTAIN MEDICAL 
                   DEVICES APPROVED FOR INVESTIGATIONAL USE.

       (a) Coverage.--Nothing in title XVIII of the Social 
     Security Act may be construed to prohibit coverage under part 
     A or part B of the medicare program of items and services 
     associated with the use of a medical device in the furnishing 
     of inpatient or outpatient hospital services (including 
     outpatient diagnostic imaging services) for which payment may 
     be made under the program solely on the grounds that the 
     device is not an approved device, if--
       (1) the device is an investigational device; and
       (2) the device is used instead of either an approved device 
     or a covered procedure.
       (b) Clarification of Payment Amount.--Notwithstanding any 
     other provision of title XVIII of the Social Security Act, 
     the amount of payment made under the medicare program for any 
     item or service associated with the use of an investigational 
     device in the furnishing of inpatient or outpatient hospital 
     services (including outpatient diagnostic imaging services) 
     for which payment may be made under the program may not 
     exceed the amount of the payment which would have been made 
     under the program for the item or service if the item or 
     service were associated with the use of an approved device or 
     a covered procedure.
       (c) Definitions.--In this section--
       (1) the term ``approved device'' means a medical device (or 
     devices) which has been approved for marketing under pre-
     market approval under the Federal Food, Drug, and Cosmetic 
     Act or cleared for marketing under a 510(k) notice under such 
     Act; and
       (2) the term ``investigational device'' means--
       (A) a medical device or devices (other than a device 
     described in paragraph (1)) approved for investigational use 
     under section 520(g) of the Federal Food, Drug, and Cosmetic 
     Act, or
       (B) a product authorized for use under section 505(i) of 
     the Federal Food, Drug, and Cosmetic Act which includes the 
     use of a medical device (or devices) or an investigational 
     combination product under section 503(g) of such Act which 
     includes a device (or devices) authorized for use under 
     section 505(i) of such Act.

     SEC. 8604. ADDITIONAL EXCLUSION FROM COVERAGE.

       (a) In General.--Section 1862(a) (42 U.S.C. 1395y(a)) is 
     amended--
       (1) by striking ``or'' at the end of paragraph (14),
       (2) by striking the period at the end of paragraph (15) and 
     inserting ``; or'', and
       (3) by inserting after paragraph (15) the following new 
     paragraph:
       ``(16) where such expenses are for items or services, or to 
     assist in the purchase, in whole or in part, of health 
     benefit coverage that includes items or services, for the 
     purpose of causing, or assisting in causing, the death, 
     suicide, euthanasia, or mercy killing of a person.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to payment for items and services furnished on or 
     after the date of the enactment of this Act.

     SEC. 8605. EXTENDING MEDICARE COVERAGE OF, AND APPLICATION OF 
                   HOSPITAL INSURANCE TAX TO, ALL STATE AND LOCAL 
                   GOVERNMENT EMPLOYEES.

       (a) In General.--
       (1) Application of hospital insurance tax.--Section 
     3121(u)(2) of the Internal Revenue Code of 1986 is amended by 
     striking subparagraphs (C) and (D).
       (2) Coverage under medicare.--Section 210(p) of the Social 
     Security Act (42 U.S.C. 410(p)) is amended by striking 
     paragraphs (3) and (4).
       (3) Effective date.--The amendments made by this subsection 
     shall apply to services performed after December 31, 1996.
       (b) Transition in Benefits for State and Local Government 
     Employees and Former Employees.--
       (1) In general.--
       (A) Employees newly subject to tax.--For purposes of 
     sections 226, 226A, and 1811 of the Social Security Act, in 
     the case of any individual who performs services during the 
     calendar quarter beginning January 1, 1997, the wages for 
     which are subject to the tax imposed by section 3101(b) of 
     the Internal Revenue Code of 1986 only because of the 
     amendment made by subsection (a), the individual's medicare 
     qualified State or local government employment (as defined in 
     subparagraph (B)) performed before January 1, 1997, shall be 
     considered to be ``employment'' (as defined for purposes of 
     title II of such Act), but only for purposes of providing the 
     individual (or another person) with entitlement to hospital 
     insurance benefits under part A of title XVIII of such Act 
     for months beginning with January 1997.
       (B) Medicare qualified state or local government employment 
     defined.--In this paragraph, the term ``medicare qualified 
     State or local government employment'' means medicare 
     qualified government employment described in section 
     210(p)(1)(B) of the Social Security Act (determined without 
     regard to section 210(p)(3) of such Act, as in effect before 
     its repeal under subsection (a)(2)).
       (2) Authorization of appropriations.--There are authorized 
     to be appropriated to the Federal Hospital Insurance Trust 
     Fund from time to time such sums as the Secretary of Health 
     and Human Services deems necessary for any fiscal year on 
     account of--
       (A) payments made or to be made during such fiscal year 
     from such Trust Fund with respect to individuals who are 
     entitled to benefits under title XVIII of the Social Security 
     Act solely by reason of paragraph (1),
       (B) the additional administrative expenses resulting or 
     expected to result therefrom, and
       (C) any loss in interest to such Trust Fund resulting from 
     the payment of those amounts, in order to place such Trust 
     Fund in the same position at the end of such fiscal year as 
     it would have been in if this subsection had not been 
     enacted.
       (3) Information to individuals who are prospective medicare 
     beneficiaries based on state and local government 
     employment.--Section 226(g) of the Social Security Act (42 
     U.S.C. 426(g)) is amended--
       (A) by redesignating paragraphs (1) through (3) as 
     subparagraphs (A) through (C), respectively,
       (B) by inserting ``(1)'' after ``(g)'', and
       (C) by adding at the end the following new paragraph:
       ``(2) The Secretary, in consultation with State and local 
     governments, shall provide procedures designed to assure that 
     individuals who perform medicare qualified government 
     employment by virtue of service described in section 
     210(a)(7) are fully informed with respect to (A) their 
     eligibility or potential eligibility for hospital insurance 
     benefits (based on such employment) under part A of title 
     XVIII, (B) the requirements for, and conditions of, such 
     eligibility, and (C) the necessity of timely application as a 
     condition of becoming entitled under subsection (b)(2)(C), 
     giving particular attention to individuals who apply for an 
     annuity or retirement benefit and whose eligibility for such 
     annuity or retirement benefit is based on a disability.''
       (c) Technical Amendments.--
       (1) Subparagraph (A) of section 3121(u)(2) of the Internal 
     Revenue Code of 1986 is amended by striking ``subparagraphs 
     (B) and (C),'' and inserting ``subparagraph (B),''.
       (2) Subparagraph (B) of section 210(p)(1) of the Social 
     Security Act (42 U.S.C. 410(p)(1)) is amended by striking 
     ``paragraphs (2) and (3).'' and inserting ``paragraph (2).''
       (3) Section 218 of the Social Security Act (42 U.S.C. 418) 
     is amended by striking subsection (n).
       (4) The amendments made by this subsection shall apply 
     after December 31, 1996.
      Subtitle H--Monitoring Achievement of Medicare Reform Goals

     SEC. 8701. ESTABLISHMENT OF BUDGETARY AND PROGRAM GOALS.

       (a) In General.--The Secretary shall establish program 
     budgetary and program goals for the medicare program 
     consistent with this section.
       (b) Budgetary Goals.--The budgetary goal is to restrict 
     total outlays under the medicare program as follows:
       (1) For fiscal year 1996, $173,500,000,000.
       (2) For fiscal year 1997, $187,300,000,000.
       (3) For fiscal year 1998, $200,800,000,000.
       (4) For fiscal year 1999, $215,200,000,000.
       (5) For fiscal year 2000, $220,500,000,000.
       (6) For fiscal year 2001, $248,000,000,000.
       (7) For fiscal year 2002, $267,100,000,000.
       (c) Program Goals.--The program goals shall be consistent 
     with the following:
       (1) There should be an equitable distribution of funds 
     between per beneficiary spending on payments to Medicare 
     Choice organizations under part C of the medicare program and 
     on payments to providers on a fee-for-service basis under 
     parts A and B of the program.
       (2) Payments to Medicare Choice organizations should be 
     established in a manner that promotes the availability of 
     Medicare Choice products in all regions of the country and 
     that permits such organizations to offer adequate coverage.

[[Page H10584]]


     SEC. 8702. MEDICARE REFORM COMMISSION.

       (a) Establishment.--There is established a commission to be 
     known as the Medicare Reform Commission (in this section 
     referred to as the ``Commission'').
       (b) Duties.--
       (1) In general.--The Commission shall examine how the 
     medicare program has met the budgetary and program goals 
     established under section 8701.
       (2) Periodic reports.--
       (A) In general.--The Commission shall issue a report on 
     April 1, 1998, and on March 1 of every third subsequent year, 
     on the status of the medicare program in relation to the 
     budgetary and program goals specified in section 8601.
       (B) Contents.--Each report shall include the following 
     information about the medicare program in the most recent 
     fiscal year and projects for the succeeding 3 fiscal years:
       (i) The actuarial value of the traditional medicare benefit 
     package.
       (ii) The projected rate of growth of outlays under the 
     traditional medicare program.
       (iii) The ability of Medicare Choice organizations to offer 
     an adequate benefit package under part C of the medicare 
     program.
       (iv) The extent of Medicare Choice products made available 
     to medicare beneficiaries in the different regions of the 
     country.
       (3) Recommendations.--
       (A) In general.--If a report under paragraph (2) finds that 
     any of the following problems exists, the Commission shall 
     include recommendations to respond to the problem:
       (i) The actuarial value of the traditional medicare benefit 
     package exceeds the payment rate under the Medicare Choice 
     program.
       (ii) The rate of growth of the traditional medicare program 
     under parts A and B is projected to result in medicare 
     outlays exceeding the outlay targets specified in section 
     8701.
       (iii) The payments under the Medicare Choice program are 
     not sufficient to allow contractors to provide an adequate 
     benefit package.
       (iv) The selection of Medicare Choice products are limited 
     or not available in parts of the country.
       (B) Types of recommendations.--The recommendations provided 
     under subparagraph (A) may include--
       (i) in response to the problem described in subparagraph 
     (A)(ii), reduction in payments to providers under parts A and 
     B or an increase in cost sharing by beneficiaries; and
       (ii) in response to the problems described in subparagraphs 
     (A)(iii) and (A)(iv), an adjustment to payment rates to 
     Medicare Choice organizations.

     Such recommendations may not include any change that is 
     inconsistent with attaining the outlay targets specified 
     under section 8701.
       (4) Presidential response.--If the Commission reports under 
     this subsection that the goals established in section 8701 
     are not met (or projects that such goals will not be met for 
     during a 3-year period), the President shall submit to 
     Congress, within 90 days after the date of submission of the 
     report, specific legislative recommendations to correct the 
     problem. Such recommendations may include those described in 
     paragraph (3)(B) and may not include any any change that is 
     inconsistent with attaining the outlay targets specified 
     under section 8701.
       (5) Congressional consideration.--
       (A) In general.--The President's recommendations submitted 
     under paragraph (4) shall not apply unless a joint resolution 
     (described in subparagraph (B)) approving such 
     recommendations is enacted, in accordance with the provisions 
     of subparagraph (C), before the end of the 60-day period 
     beginning on the date on which a report containing such 
     recommendations is submitted by the President under paragraph 
     (4). For purposes of applying the preceding sentence and 
     subparagraphs (B) and (C), the days on which either House of 
     Congress is not in session because of an adjournment of more 
     than three days to a day certain shall be excluded in the 
     computation of a period.
       (B) Joint resolution of approval.--A joint resolution 
     described in this subparagraph means only a joint resolution 
     which is introduced within the 10-day period beginning on the 
     date on which the report described in subparagraph (A) is 
     submitted and--
       (i) which does not have a preamble;
       (ii) the matter after the resolving clause of which is as 
     follows: ``That Congress approves the recommendations of the 
     President under section 8702(b)(4) of the Medicare 
     Preservation Act, as submitted by the President on 
     ______________.'', the blank space being filled in with the 
     appropriate date; and
       (iii) the title of which is as follows: ``Joint resolution 
     approving Presidential recommendations submitted under 
     section 8702(b)(4) of the Medicare Preservation Act, as 
     submitted by the President on ______________.'', the blank 
     space being filled in with the appropriate date.
       (C) Procedures for consideration of resolution of 
     approval.--Subject to subparagraph (D), the provisions of 
     section 2908 (other than subsection (a)) of the Defense Base 
     Closure and Realignment Act of 1990 shall apply to the 
     consideration of a joint resolution described in subparagraph 
     (B) in the same manner as such provisions apply to a joint 
     resolution described in section 2908(a) of such Act.
       (D) Special rules.--For purposes of applying subparagraph 
     (C) with respect to such provisions--
       (i) any reference to the Committee on Armed Services of the 
     House of Representatives shall be deemed a reference to the 
     Committee on Ways and Means and any reference to the 
     Committee on Armed Services of the Senate shall be deemed a 
     reference to the Committee on Finance of the Senate; and
       (ii) any reference to the date on which the President 
     transmits a report shall be deemed a reference to the date on 
     which the President submits the recommendations under 
     paragraph (4).
       (c) Membership.--
       (1) Appointment.--The Commission shall be composed of 5 
     members appointed by the President, of which 4 of whom are 
     appointed from a list (of at least 5 nominees) submitted by 
     each of the following:
       (A) The Speaker of the House of Representatives.
       (B) The Minority Leader of the House of Representatives.
       (C) The Majority Leader of the Senate.
       (D) The Minority Leader of the Senate.
       (2) Term of service.--Each member of the Commission shall 
     serve for a term of 3 years. Members may be reappointed for 
     additional terms.
       (3) Chairman and vice chairman.--The Commission shall elect 
     a Chairman and Vice Chairman from among its members.
       (4) 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.
       (5) Quorum.--A quorum shall consist of 3 members of the 
     Commission, except that 2 members may conduct a hearing under 
     subsection (e).
       (6) Meetings.--The Commission shall meet at the call of its 
     Chairman or a majority of its members.
       (7) 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) 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.
       (e) 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 subparagraph (A).
       (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 provide such 
     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 Code.
       (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. 
     In particular, the Administrator of the Health Care Financing 
     Administration and the Director of the Office of Management 
     and Budget shall provide the 

[[Page H10585]]

     Commission with access to data for the conduct of its work.
       (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) Acceptance of donations.--The Commission may accept, 
     use, and dispose of gifts or donations of services or 
     property.
       (10) 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.
       (f) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as may be necessary to carry out 
     this section. Amounts appropriated to carry out this section 
     shall remain available until expended.
Subtitle I--Lock-Box Provisions for Medicare Part B Savings from Growth 
                               Reductions

     SEC. 8801. ESTABLISHMENT OF MEDICARE GROWTH REDUCTION TRUST 
                   FUND FOR PART B SAVINGS.

       Part B of title XVIII is amended by inserting after section 
     1841 the following new section:


                 ``medicare growth reduction trust fund

       ``Sec. 1841A. (a)(1) There is hereby created on the books 
     of the Treasury of the United States a trust fund to be known 
     as the `Federal Medicare Growth Reduction Trust Fund' (in 
     this section referred to as the `Trust Fund'). The Trust Fund 
     shall consist of such gifts and bequests as may be made as 
     provided in section 201(i)(1) and amounts appropriated under 
     paragraph (2).
       ``(2) There are hereby appropriated to the Trust Fund 
     amounts equivalent to 100 percent of the Secretary's estimate 
     of the reductions in expenditures under this part that are 
     attributable to the Medicare Preservation Act of 1995. The 
     amounts appropriated by the preceding sentence shall be 
     transferred from time to time (not less frequently than 
     monthly) from the general fund in the Treasury to the Trust 
     Fund.
       ``(3)(A) Subject to subparagraph (B), with respect to 
     monies transferred to the Trust Fund, no transfers, 
     authorizations of appropriations, or appropriations are 
     permitted.
       ``(B) Beginning with fiscal year 2003, the Secretary may 
     expend funds in the Trust Fund to carry out this title, but 
     only to the extent provided by Congress in advance through a 
     specific amendment to this section.
       ``(b) The provisions of subsections (b) through (e) of 
     section 1841 shall apply to the Trust Fund in the same manner 
     as they apply to the Federal Supplementary Medical Insurance 
     Trust Fund, except that the Board of Trustees and Managing 
     Trustee of the Trust Fund shall be composed of the members of 
     the Board of Trustees and the Managing Trustee, respectively, 
     of the Federal Supplementary Medical Insurance Trust Fund.''.
                   Subtitle J--Clinical Laboratories

     SEC. 8901. EXEMPTION OF PHYSICIAN OFFICE LABORATORIES.

       Section 353(d) of the Public Health Service Act (42 U.S.C. 
     263a(d)) is amended--
       (1) by redesignating paragraphs (2), (3), and (4) as 
     paragraphs (3), (4), and (5) and by adding after paragraph 
     (1) the following:
       ``(2) Exemption of physician office laboratories.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     a clinical laboratory in a physician's office (including an 
     office of a group of physicians) which is directed by a 
     physician and in which examinations and procedures are either 
     performed by a physician or by individuals supervised by a 
     physician solely as an adjunct to other services provided by 
     the physician's office is exempt from this section.
       ``(B) Exception.--A clinical laboratory described in 
     subparagraph (A) is not exempt from this section when it 
     performs a pap smear (Papanicolaou Smear) analysis.
       ``(C) Definition.--For purposes of subparagraph (A), the 
     term `physician' has the same meaning as is prescribed for 
     such term by section 1861(r) of the Social Security Act (42 
     U.S.C. 1395x(r)).'';
       (2) in paragraph (3) (as so redesignated) by striking 
     ``(3)'' and inserting ``(4)''; and
       (3) in paragraphs (4) and (5) (as so redesignated) by 
     striking ``(2)'' and inserting ``(3)''.
                        TITLE X--WELFARE REFORM

     SEC. 9000. AMENDMENT OF THE SOCIAL SECURITY ACT.

       Except as otherwise expressly provided, wherever in this 
     title an amendment or repeal 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 a section or 
     other provision of the Social Security Act.
              Subtitle A--Temporary Employment Assistance

     SEC. 9101. STATE PLAN.

       (a) In General.--Title IV (42 U.S.C. 601 et seq.) is 
     amended by striking part A and inserting the following:

               ``PART A--TEMPORARY EMPLOYMENT ASSISTANCE

     ``SEC. 400. APPROPRIATION.

       ``For the purpose of providing assistance to families with 
     needy children and assisting parents of children in such 
     families to obtain and retain private sector work to the 
     extent possible, and public sector or volunteer work if 
     necessary, through the Work First Employment Block Grant 
     program (hereafter in this title referred to as the `Work 
     First program'), there is hereby authorized to be 
     appropriated, and is hereby appropriated, for each fiscal 
     year a sum sufficient to carry out the purposes of this part. 
     The sums made available under this section shall be used for 
     making payments to States which have approved State plans for 
     temporary employment assistance.

      ``Subpart 1--State Plans for Temporary Employment Assistance

     ``SEC. 401. ELEMENTS OF STATE PLANS.

       ``A State plan for temporary employment assistance shall 
     provide a description of the State program which carries out 
     the purpose described in section 400 and shall meet the 
     requirements of the following sections of this subpart.

     ``SEC. 402. FAMILY ELIGIBILITY FOR TEMPORARY EMPLOYMENT 
                   ASSISTANCE.

       ``(a) In General.--The State plan shall provide that any 
     family--
       ``(1) with 1 or more children (or any expectant family, at 
     the option of the State), defined as needy by the State; and
       ``(2) which fulfills the conditions set forth in subsection 
     (b),
     shall be eligible for cash assistance under the plan, except 
     as otherwise provided under this part.
       ``(b) Individual Responsibility Plan.--The State plan shall 
     provide that not later than 30 days after the approval of the 
     application for temporary employment assistance, a parent 
     qualifying for assistance shall execute an individual 
     responsibility plan as described in section 403. If a child 
     otherwise eligible for assistance under this part is residing 
     with a relative other than a parent, the State plan may 
     require the relative to execute such a plan as a condition of 
     the family receiving such assistance.
       ``(c) Limitations on Eligibility.--
         ``(1) Length of time.--
         ``(A) In general.--Except as provided in subparagraphs 
     (B), (C), (D), and (E), the State plan shall provide that the 
     family of an individual who, after attaining age 18 years (or 
     age 19 years, at the option of the State), has received 
     assistance under the plan for 60 months, shall no longer be 
     eligible for cash assistance under the plan.
       ``(B) Hardship exception.--With respect to any family, the 
     State plan shall not include in the determination of the 60-
     month period under subparagraph (A) any month in which--
       ``(i) at the option of the State, the family includes an 
     individual working 20 hours per week (or more, at the option 
     of the State);
       ``(ii) the family resides in an area with an unemployment 
     rate exceeding 8 percent; or
       ``(iii) the family is experiencing other special hardship 
     circumstances which make it appropriate for the State to 
     provide an exemption for such month, except that the total 
     number of exemptions under this clause for any month shall 
     not exceed 15 percent of the number of families to which the 
     State is providing assistance under the plan.
       ``(C) Exception for teen parents.--With respect to any 
     family, the State plan shall not include in the determination 
     of the 60-month period under subparagraph (A) any month in 
     which the parent--
       ``(i) is under age 18 (or age 19, at the option of the 
     State); and
       ``(ii) is making satisfactory progress while attending high 
     school or an alternative technical preparation school.
       ``(D) Exception for individuals exempt from work 
     requirements.--With respect to any family, the State plan 
     shall not include in the determination of the 60-month period 
     under subparagraph (A) any month in which 1 or each of the 
     parents--
       ``(i) is seriously ill, incapacitated, or of advanced age;
       ``(ii)(I) except for a child described in subclause (II), 
     is responsible for a child under age 1 year (or age 6 months, 
     at the option of the State), or
       ``(II) in the case of a 2nd or subsequent child born during 
     such period, is responsible for a child under age 3 months;
       ``(iii) is pregnant in the 3rd trimester; or
       ``(iv) is caring for a family member who is ill or 
     incapacitated.
       ``(E) Exception for child-only cases.--With respect to any 
     child who has not attained age 18 (or age 19, at the option 
     of the State) and who is eligible for assistance under this 
     part, but not as a member of a family otherwise eligible for 
     assistance under this part (determined without regard to this 
     paragraph), the State plan shall not include in the 
     determination of the 60-month period under subparagraph (A) 
     any month in which such child has not attained such age.
       ``(F) Other program eligibility.--The State plan shall 
     provide that if a family is no longer eligible for cash 
     assistance under the plan due to the imposition of the 60-
     month period under subparagraph (A) or due to the imposition 
     of a penalty under subparagraph (A)(ii) or (B)(ii) of section 
     403(e)(1)--
       ``(i) for purposes of determining eligibility for any other 
     Federal or federally assisted program based on need, such 
     family shall continue to be considered eligible for such cash 
     assistance;
       ``(ii) for purposes of determining the amount of assistance 
     under any other Federal or federally assisted program based 
     on need, such family shall continue to be considered 
     receiving such cash assistance; and
       ``(iii) the State may, at the option of the State, after 
     having assessed the needs of the child or children of the 
     family, provide for such needs with a voucher for such 
     family--

[[Page H10586]]


       ``(I) determined on the same basis as the State would 
     provide assistance under the State plan to such a family with 
     1 less individual,
       ``(II) designed appropriately to pay third parties for 
     shelter, goods, and services received by the child or 
     children, and
       ``(III) payable directly to such third parties.

       ``(2) Treatment of interstate migrants.--The State plan may 
     apply to a category of families the rules for such category 
     under a plan of another State approved under this part, if a 
     family in such category has moved to the State from the other 
     State and has resided in the State for less than 12 months.
       ``(3) Individuals on old-age assistance or ssi ineligible 
     for temporary employment assistance.--The State plan shall 
     provide that no assistance shall be furnished any individual 
     under the plan with respect to any period with respect to 
     which such individual is receiving old-age assistance under 
     the State plan approved under section 102 of title I or 
     supplemental security income under title XVI.
       ``(4) Children for whom federal, state, or local foster 
     care maintenance or adoption assistance payments are made.--A 
     child with respect to whom foster care maintenance payments 
     or adoption assistance payments are made under part E or 
     under State or local law shall not, for the period for which 
     such payments are made, be regarded as a needy child under 
     this part, and such child's income and resources shall be 
     disregarded in determining the eligibility of the family of 
     such child for temporary employment assistance.
       ``(5) Denial of assistance for 10 years to a person found 
     to have fraudulently misrepresented residence in order to 
     obtain assistance in 2 or more states.--The State plan shall 
     provide that no assistance will be furnished any individual 
     under the plan during the 10-year period that begins on the 
     date the individual is convicted in Federal or State court of 
     having made, a fraudulent statement or representation with 
     respect to the place of residence of the individual in order 
     to receive benefits or services simultaneously from 2 or more 
     States under programs that are funded under this part, title 
     XIX, or the Food Stamp Act of 1977, or benefits in 2 or more 
     States under the supplemental security income program under 
     title XVI.
       ``(6) Denial of assistance for fugitive felons and 
     probation and parole violators.--
       ``(A) In general.--The State plan shall provide that no 
     assistance will be furnished any individual under the plan 
     for any period if during such period the State agency has 
     knowledge that such individual is--
       ``(i) fleeing to avoid prosecution, or custody or 
     confinement after conviction, under the laws of the place 
     from which the individual flees, for a crime, or an attempt 
     to commit a crime, which is a felony under the laws of the 
     place from which the individual flees, or which, in the case 
     of the State of New Jersey, is a high misdemeanor under the 
     laws of such State; or
       ``(ii) violating a condition of probation or parole imposed 
     under Federal or State law.
       ``(B) Exchange of information with law enforcement 
     agencies.--Notwithstanding any other provision of law, the 
     State plan shall provide that the State shall furnish any 
     Federal, State, or local law enforcement officer, upon the 
     request of the officer, with the current address of any 
     recipient of assistance under the plan, if the officer 
     furnishes the agency with the name of the recipient and 
     notifies the agency that--
       ``(i) such recipient--

       ``(I) is described in clause (i) or (ii) of subparagraph 
     (A); or
       ``(II) has information that is necessary for the officer to 
     conduct the officer's official duties; and

       ``(ii) the location or apprehension of the recipient is 
     within such officer's official duties.
       ``(d) Determination of Eligibility.--
       ``(1) Determination of need.--The State plan shall provide 
     that the State agency take into consideration any income and 
     resources of any individual the State determines should be 
     considered in determining the need of the child or relative 
     claiming temporary employment assistance, subject to section 
     407.
       ``(2) Resource and income determination.--In determining 
     the total resources and income of the family of any needy 
     child, the State plan shall provide the following:
       ``(A) Resources.--The State's resource limit, including a 
     description of the policy determined by the State regarding 
     any exclusion allowed for vehicles owned by family members, 
     resources set aside for future needs of a child, individual 
     development accounts, or other policies established by the 
     State to encourage savings.
       ``(B) Family income.--The extent to which earned or 
     unearned income is disregarded in determining eligibility 
     for, and amount of, assistance.
       ``(C) Child support.--The State's policy, if any, for 
     determining the extent to which child support received in 
     excess of $50 per month on behalf of a member of the family 
     is disregarded in determining eligibility for, and the amount 
     of, assistance.
       ``(D) Child's earnings.--The treatment of earnings of a 
     child living in the home.
       ``(E) Earned income tax credit.--The State agency shall 
     disregard any refund of Federal income taxes made to a family 
     receiving temporary employment assistance by reason of 
     section 32 of the Internal Revenue Code of 1986 (relating to 
     earned income tax credit) and any payment made to such a 
     family by an employer under section 3507 of such Code 
     (relating to advance payment of earned income credit).
       ``(3) Verification System.--The State plan shall provide 
     that information is requested and exchanged for purposes of 
     income and eligibility verification in accordance with a 
     State system which meets the requirements of section 1137.

     ``SEC. 403. INDIVIDUAL RESPONSIBILITY PLAN.

       ``(a) Assessment.--The State agency responsible for 
     administering the State plan shall make an initial assessment 
     of the skills, prior work experience, and employability of 
     each applicant for, or recipient of, assistance under the 
     State plan who--
       ``(1) has attained 18 years of age; or
       ``(2) has not completed high school or obtained a 
     certificate of high school equivalency, and is not attending 
     secondary school.
       ``(b) Individual Responsibility Plans.--
       ``(1) In general.--On the basis of the assessment made 
     under subsection (a) with respect to an individual, the State 
     agency, in consultation with the individual, shall develop an 
     individual responsibility plan for the individual, which--
       ``(A) shall provide that participation by the individual in 
     job search activities shall be a condition of eligibility for 
     assistance under the State plan approved under part A, except 
     during any period for which the individual is employed full-
     time in an unsubsidized job in the private sector;
       ``(B) sets forth an employment goal for the individual and 
     a plan for moving the individual immediately into private 
     sector employment;
       ``(C) sets forth the obligations of the individual, which 
     may include a requirement that the individual attend school, 
     maintain certain grades and attendance, keep school age 
     children of the individual in school, immunize children, 
     attend parenting and money management classes, or do other 
     things that will help the individual become and remain 
     employed in the private sector;
       ``(D) may require that the individual enter the State 
     program established under part F, if the caseworker 
     determines that the individual will need education, training, 
     job placement assistance, wage enhancement, or other services 
     to become employed in the private sector;
       ``(E) shall provide that the individual must--
       ``(i) assign to the State any rights to support from any 
     other person the individual may have in such individual's own 
     behalf or in behalf of any other family member for whom the 
     individual is applying for or receiving assistance; and
       ``(ii) cooperate with the State--

       ``(I) in establishing the paternity of a child born out of 
     wedlock with respect to whom assistance is claimed, and
       ``(II) in obtaining support payments for the individual and 
     for a child with respect to whom such assistance is claimed, 
     or in obtaining any other payments or property due the 
     individual or the child,

     unless (in either case) the individual is found to have good 
     cause for refusing to cooperate as determined by the State 
     agency in accordance with standards prescribed by the 
     Secretary, which standards shall take into consideration the 
     best interests of the child on whose behalf assistance is 
     claimed.
       ``(F) to the greatest extent possible shall be designed to 
     move the individual into whatever private sector employment 
     the individual is capable of handling as quickly as possible, 
     and to increase the responsibility and amount of work the 
     individual is to handle over time;
       ``(G) shall describe what services the State will provide 
     the individual so that the individual will be able to obtain 
     and keep employment in the private sector, and describe the 
     job counseling and other services that will be provided by 
     the State; and
       ``(H) at the option of the State, may require the 
     individual to undergo appropriate substance abuse treatment.
       ``(2) Timing.--The State agency shall comply with paragraph 
     (1) with respect to an individual--
       ``(A) within 90 days (or, at the option of the State, 180 
     days) after the effective date of this part, in the case of 
     an individual who, as of such effective date, is a recipient 
     of assistance under the State plan approved under this part; 
     or
       ``(B) within 30 days (or, at the option of the State, 90 
     days) after the individual is determined to be eligible for 
     such assistance, in the case of any other individual.
       ``(c) Provision of Program and Employment Information.--The 
     State shall inform all applicants for and recipients of 
     assistance under the State plan approved under this part of 
     all available services under the State plan for which they 
     are eligible.
       ``(d) Requirement That Recipients Enter the Work First 
     Program.--
       ``(1) In general.--Beginning with fiscal year 2004, the 
     State shall place recipients of assistance under the State 
     plan approved under this part, who have not become employed 
     in the private sector within 1 year after signing an 
     individual responsibility plan, in the first available slot 
     in the State program established under part F, except as 
     provided in paragraph (2).
       ``(2) Exceptions.--A state may not be required to place a 
     recipient of such assistance in the State program established 
     under part F if the recipient--

[[Page H10587]]

       ``(A) is ill, incapacitated, or of advanced age;
       ``(B) has not attained 18 years of age;
       ``(C) is caring for a child or parent who is ill or 
     incapacitated; or
       ``(D) is enrolled in school or in educational or training 
     programs that will lead to private sector employment.
       ``(e) Penalties.--
       ``(1) State not operating a work first or workfare 
     program.--In the case of a State that is not operating a 
     program under part F or G:
       ``(A) Failure to comply with individual responsibility plan 
     or agreement of mutual responsibility.--
       ``(i) Progressive reductions in assistance for 1st and 2nd 
     failures.--The amount of assistance otherwise to be provided 
     under the State plan approved under this part to a family 
     that includes an individual who fails without good cause to 
     comply with an individual responsibility plan (or, if the 
     State has established a program under subpart 1 of part F and 
     the individual is required to participate in the program, an 
     agreement of mutual responsibility) signed by the individual 
     (other than by reason of conduct described in paragraph (2)) 
     shall be reduced by--

       ``(I) 33 percent for the 1st such act of noncompliance; or
       ``(II) 66 percent for the 2nd such act of noncompliance.

       ``(ii) Denial of assistance for 3rd failure.--In the case 
     of the 3rd such act of noncompliance, the family of which the 
     individual is a member shall not thereafter be eligible for 
     assistance under the State plan approved under this part.
       ``(iii) Acts of noncompliance.--For purposes of this 
     paragraph, a 1st act of noncompliance by an individual 
     continues for more than 1 calendar month shall be considered 
     a 2nd act of noncompliance, and a 2nd act of noncompliance 
     that continues for more than 3 calendar months shall be 
     considered a 3rd act of noncompliance.
       ``(B) Denial of assistance to adults refusing to work, look 
     for work, or accept a bona fide offer of employment.--
       ``(i) Refusal to work or look for work.--If an unemployed 
     individual who has attained 18 years of age refuses to work 
     or look for work--

       ``(I) in the case of the 1st such refusal, assistance under 
     the State plan approved under this part shall not be payable 
     with respect to the individual until the later of--

       ``(aa) a period of not less than 6 months after the date of 
     the first such refusal; or
       ``(bb) the first date the individual agrees to work or look 
     for work; or

       ``(II) in the case of the 2nd such refusal, the family of 
     which the individual is a member shall not thereafter be 
     eligible for assistance under the State plan approved under 
     this part.

       ``(ii) Refusal to accept a bona fide offer of employment.--
     If an unemployed individual who has attained 18 years of age 
     refuses to accept a bona fide offer of employment, the family 
     of which the individual is a member shall not thereafter be 
     eligible for assistance under the State plan approved under 
     this part.
       ``(2) Other states.--In the case of any other State, the 
     State shall reduce, by such amount as the State considers 
     appropriate, the amount of assistance otherwise payable under 
     the State plan approved under this part to a family that 
     includes an individual who fails without good cause to comply 
     with an individual responsibility plan signed by the 
     individual.

     ``SEC. 404. PAYMENT OF ASSISTANCE.

       ``(a) Standards of Assistance.--The State plan shall 
     specify standards of assistance, including--
       ``(1) the composition of the unit for which assistance will 
     be provided;
       ``(2) a standard, expressed in money amounts, to be used in 
     determining the need of applicants and recipients;
       ``(3) a standard, expressed in money amounts, to be used in 
     determining the amount of the assistance payment; and
       ``(4) the methodology to be used in determining the payment 
     amount received by assistance units.
       ``(b) Level of Assistance.--Except as otherwise provided in 
     this title, the State plan shall provide that--
       ``(1) the determination of need and the amount of 
     assistance for all applicants and recipients shall be made on 
     an objective and equitable basis; and
       ``(2) families of similar composition with similar needs 
     and circumstances shall be treated similarly.
       ``(c) Correction of Payments.--The State plan shall provide 
     that the State agency will promptly take all necessary steps 
     to correct any overpayment or underpayment of assistance 
     under such plan, including the request for Federal tax refund 
     intercepts as provided under section 416.
       ``(d) Optional Voluntary Diversion Program.--The State plan 
     shall, at the option of the State, and in such part or parts 
     of the State as the State may select, provide that--
       ``(1) upon the recommendation of the caseworker who is 
     handling the case of a family eligible for assistance under 
     the State plan, the State shall, in lieu of any other 
     assistance under the State plan to the family during a time 
     period of not more than 3 months, make a lump-sum payment to 
     the family for the time period in an amount not to exceed--
       ``(A) the value of the monthly benefits that would 
     otherwise be provided to the family under the State plan; 
     multiplied by
       ``(B) the number of months in the time period;
       ``(2) a lump-sum payment pursuant to subparagraph (A) shall 
     not be made more than once to any family; and
       ``(3) if, during a time period for which the State has made 
     a lump-sum payment to a family pursuant to subparagraph (A), 
     the family applies for and (but for the lump-sum payment) 
     would be eligible under the State plan for a monthly benefit 
     that is greater than the value of the monthly benefit which 
     would have been provided to the family under the State plan 
     at the time of the calculation of the lump sum payment, then, 
     notwithstanding subparagraph (A), the State shall, for that 
     part of the time period that remains after the family becomes 
     eligible for the greater monthly benefit, provide monthly 
     benefits to the family in an amount not to exceed--
       ``(A) the amount by which the value of the greater monthly 
     benefit exceeds the value of the former monthly benefit, 
     multiplied by the number of months in the time period; 
     divided by
       ``(B) the whole number of months remaining in the time 
     period.''.

     ``SEC. 405. OTHER PROGRAMS.

       ``(a) Work First Program; Workfare or Job Placement Voucher 
     Program.--The State plan shall provide that the State has in 
     effect and operation--
       ``(1) a work first program that meets the requirements of 
     part F; and
       ``(2) a workfare program that meets the requirements of 
     part G, or a job placement voucher program that meets the 
     requirements of part H, but not both.
       ``(b) Provision of Positions and Vouchers.--The State plan 
     shall provide that the State shall provide a position in the 
     workfare program established by the State under part G, or a 
     job placement voucher under the job placement voucher program 
     established by the State under part H to any individual who, 
     by reason of section 487(b), is prohibited from participating 
     in the work first program operated by the State, and shall 
     not provide such a position or such a voucher to any other 
     individual.
       ``(c) Provision of Case Management Services.--The State 
     plan shall provide that the State shall provide to 
     participants in such programs such case management services 
     as are necessary to ensure the integrated provision of 
     benefits and services under such programs.
       ``(d) State Child Support Agency.--The State plan shall--
       ``(1) provide that the State has in effect a plan approved 
     under part D and operates a child support program in 
     substantial compliance with such plan;
       ``(2) provide that the State agency administering the plan 
     approved under this part shall be responsible for assuring 
     that--
       ``(A) the benefits and services provided under plans 
     approved under this part and part D are furnished in an 
     integrated manner, including coordination of intake 
     procedures with the agency administering the plan approved 
     under part D;
       ``(B) all applicants for, and recipients of, temporary 
     employment assistance are encouraged, assisted, and required 
     (as provided under section 403(b)(1)(E)(ii)) to cooperate in 
     the establishment and enforcement of paternity and child 
     support obligations and are notified about the services 
     available under the State plan approved under part D; and
       ``(C) procedures require referral of paternity and child 
     support enforcement cases to the agency administering the 
     plan approved under part D not later than 10 days after the 
     application for temporary employment assistance; and
       ``(3) provide for prompt notice (including the transmittal 
     of all relevant information) to the State child support 
     collection agency established pursuant to part D of the 
     furnishing of temporary employment assistance with respect to 
     a child who has been deserted or abandoned by a parent 
     (including a child born out-of-wedlock without regard to 
     whether the paternity of such child has been established).
       ``(e) Child Welfare Services and Foster Care and Adoption 
     Assistance.--The State plan shall provide that the State has 
     in effect--
       ``(1) a State plan for child welfare services approved 
     under part B; and
       ``(2) a State plan for foster care and adoption assistance 
     approved under part E,
     and operates such plans in substantial compliance with the 
     requirements of such parts.
       ``(f) Report of Child Abuse, etc.--The State plan shall 
     provide that the State agency will--
       ``(1) report to an appropriate agency or official, known or 
     suspected instances of physical or mental injury, sexual 
     abuse or exploitation, or negligent treatment or maltreatment 
     of a child receiving assistance under the State plan under 
     circumstances which indicate that the child's health or 
     welfare is threatened thereby; and
       ``(2) provide such information with respect to a situation 
     described in paragraph (1) as the State agency may have.
       ``(g) Availability of Assistance in Rural Areas of State.--
     The State plan shall consider and address the needs of rural 
     areas in the State to ensure that families in such areas 
     receive assistance to become self-sufficient.
       ``(h) Family Preservation.--
       ``(1) In general.--The State plan shall describe the 
     efforts by the State to promote family preservation and 
     stability, including efforts--

[[Page H10588]]

       ``(A) to encourage fathers to stay home and be a part of 
     the family;
       ``(B) to keep families together to the extent possible; and
       ``(C) except to the extent provided in paragraph (2), to 
     treat 2-parent families and 1-parent families equally with 
     respect to eligibility for assistance.
       ``(2) Maintenance of treatment.--The State may impose 
     eligibility limitations relating specifically to 2-parent 
     families to the extent such limitations are no more 
     restrictive than such limitations in effect in the State plan 
     in fiscal year 1995.

     ``SEC. 406. ADMINISTRATIVE REQUIREMENTS FOR STATE PLAN.

       ``(a) Statewide Plan.--The State plan shall be in effect in 
     all political subdivisions of the State, and, if administered 
     by the subdivisions, be mandatory upon such subdivisions. If 
     such plan is not administered uniformly throughout the State, 
     the plan shall describe the administrative variations.
       ``(b) Single Administrating Agency.--The State plan shall 
     provide for the establishment or designation of a single 
     State agency to administer the plan or supervise the 
     administration of the plan.
       ``(c) Financial Participation.--The State plan shall 
     provide for financial participation by the State in the same 
     manner and amount as such State participates under title XIX, 
     except that with respect to the sums expended for the 
     administration of the State plan, the percentage shall be 50 
     percent.
       ``(d) Reasonable Promptness.--The State plan shall provide 
     that all individuals wishing to make application for 
     temporary employment assistance shall have opportunity to do 
     so, and that such assistance be furnished with reasonable 
     promptness to all eligible individuals.
       ``(e) Automated Data Processing System.--The State plan 
     shall, at the option of the State, provide for the 
     establishment and operation of an automated statewide 
     management information system designed effectively and 
     efficiently, to assist management in the administration of 
     the State plan approved under this part, so as--
       ``(1) to control and account for--
       ``(A) all the factors in the total eligibility 
     determination process under such plan for assistance, and
       ``(B) the costs, quality, and delivery of payments and 
     services furnished to applicants for and recipients of 
     assistance; and
       ``(2) to notify the appropriate officials for child 
     support, food stamp, and social service programs, and the 
     medical assistance program approved under title XIX, whenever 
     a recipient becomes ineligible for such assistance or the 
     amount of assistance provided to a recipient under the State 
     plan is changed.
       ``(f) Disclosure of Information.--The State plan shall 
     provide for safeguards which restrict the use or disclosure 
     of information concerning applicants or recipients.
       ``(g) Detection of Fraud.--The State plan shall provide, in 
     accordance with regulations issued by the Secretary, for 
     appropriate measures to detect fraudulent applications for 
     temporary employment assistance before the establishment of 
     eligibility for such assistance.

                 ``Subpart 2--Administrative Provisions

     ``SEC. 411. APPROVAL OF PLAN.

       ``(a) In General.--The Secretary shall approve a State plan 
     which fulfills the requirements under subpart 1 within 120 
     days of the submission of the plan by the State to the 
     Secretary.
       ``(b) Deemed Approval.--If a State plan has not been 
     rejected by the Secretary during the period specified in 
     subsection (a), the plan shall be deemed to have been 
     approved.

     ``SEC. 412. COMPLIANCE.

       In the case of any State plan for temporary employment 
     assistance which has been approved under section 411, if the 
     Secretary, after reasonable notice and opportunity for 
     hearing to the State agency administering or supervising the 
     administration of such plan, finds that in the administration 
     of the plan there is a failure to comply substantially with 
     any provision required by subpart 1 to be included in the 
     plan, the Secretary shall notify such State agency that 
     further payments will not be made to the State (or in the 
     Secretary's discretion, that payments will be limited to 
     categories under or parts of the State plan not affected by 
     such failure) until the Secretary is satisfied that such 
     prohibited requirement is no longer so imposed, and that 
     there is no longer any such failure to comply. Until the 
     Secretary is so satisfied the Secretary shall make no further 
     payments to such State (or shall limit payments to categories 
     under or parts of the State plan not affected by such 
     failure).

     ``SEC. 413. PAYMENTS TO STATES.

       ``(a) Computation of Amount.--Subject to section 412, from 
     the sums appropriated therefor, the Secretary of the Treasury 
     shall pay to each State which has an approved plan for 
     temporary employment assistance, for each quarter, beginning 
     with the quarter commencing October 1, 1996, an amount equal 
     to the Federal medical assistance percentage (as defined in 
     section 1905(b)) of the expenditures by the State under such 
     plan.
       ``(b) Method of Computation and Payment.--The method of 
     computing and paying such amounts shall be as follows:
       ``(1) The Secretary shall, prior to the beginning of each 
     quarter, estimate the amount to be paid to the State for such 
     quarter under the provisions of subsection (a), such estimate 
     to be based on--
       ``(A) a report filed by the State containing its estimate 
     of the total sum to be expended in such quarter in accordance 
     with the provisions of such subsection and stating the amount 
     appropriated or made available by the State and its political 
     subdivisions for such expenditures in such quarter, and if 
     such amount is less than the State's proportionate share of 
     the total sum of such estimated expenditures, the source or 
     sources from which the difference is expected to be derived;
       ``(B) records showing the number of needy children in the 
     State; and
       ``(C) such other information as the Secretary may find 
     necessary.
       ``(2) The Secretary of Health and Human Services shall then 
     certify to the Secretary of the Treasury the amount so 
     estimated by the Secretary of Health and Human Services--
       ``(A) reduced or increased, as the case may be, by any sum 
     by which the Secretary of Health and Human Services finds 
     that the estimate for any prior quarter was greater or less 
     than the amount which should have been paid to the State for 
     such quarter;
       ``(B) reduced by a sum equivalent to the pro rata share to 
     which the Federal Government is equitably entitled, as 
     determined by the Secretary of Health and Human Services, of 
     the net amount recovered during any prior quarter by the 
     State or any political subdivision thereof with respect to 
     temporary employment assistance furnished under the State 
     plan; and
       ``(C) reduced by such amount as is necessary to provide the 
     appropriate reimbursement to the Federal Government that the 
     State is required to make under section 457 out of that 
     portion of child support collections retained by the State 
     pursuant to such section,
     except that such increases or reductions shall not be made to 
     the extent that such sums have been applied to make the 
     amount certified for any prior quarter greater or less than 
     the amount estimated by the Secretary of Health and Human 
     Services for such prior quarter.
       ``(c) Method of Payment.--The Secretary of the Treasury 
     shall thereupon, through the Fiscal Service of the Department 
     of the Treasury and prior to audit or settlement by the 
     General Accounting Office, pay to the State, at the time or 
     times fixed by the Secretary of Health and Human Services, 
     the amount so certified.

     ``SEC. 414. QUALITY ASSURANCE, DATA COLLECTION, AND REPORTING 
                   SYSTEM.

       ``(a) Quality Assurance.--
       ``(1) In general.--Under the State plan, a quality 
     assurance system shall be developed based upon a 
     collaborative effort involving the Secretary, the State, the 
     political subdivisions of the State, and assistance 
     recipients, and shall include quantifiable program outcomes 
     related to self sufficiency in the categories of welfare-to-
     work, payment accuracy, and child support.
       ``(2) Modifications to system.--As deemed necessary, but 
     not more often than every 2 years, the Secretary, in 
     consultation with the State, the political subdivisions of 
     the State, and assistance recipients, shall make appropriate 
     changes in the design and administration of the quality 
     assurance system, including changes in benchmarks, measures, 
     and data collection or sampling procedures.
       ``(b) Data Collection and Reporting.--
       ``(1) In general.--The State plan shall provide for a 
     quarterly report to the Secretary regarding the data 
     described in paragraphs (2) and (3) and such additional data 
     needed for the quality assurance system. The data collection 
     and reporting system under this subsection shall promote 
     accountability, continuous improvement, and integrity in the 
     State plans for temporary employment assistance and Work 
     First.
       ``(2) Disaggregated data.--The State shall collect the 
     following data items on a monthly basis from disaggregated 
     case records of applicants for and recipients of temporary 
     employment assistance from the previous month:
       ``(A) The age of adults and children (including pregnant 
     women).
       ``(B) Marital or familial status of cases: married (2-
     parent family), widowed, divorced, separated, or never 
     married; or child living with other adult relative.
       ``(C) The gender, race, educational attainment, work 
     experience, disability status (whether the individual is 
     seriously ill, incapacitated, or caring for a disabled or 
     incapacitated child) of adults.
       ``(D) The amount of cash assistance and the amount and 
     reason for any reduction in such assistance. Any other data 
     necessary to determine the timeliness and accuracy of 
     benefits and welfare diversions.
       ``(E) Whether any member of the family receives benefits 
     under any of the following:
       ``(i) Any housing program.
       ``(ii) The food stamp program under the Food Stamp Act of 
     1977.
       ``(iii) The Head Start programs carried out under the Head 
     Start Act.
       ``(iv) Any job training program.
       ``(F) The number of months since the most recent 
     application for assistance under the plan.
       ``(G) The total number of months for which assistance has 
     been provided to the families under the plan.
       ``(H) The employment status, hours worked, and earnings of 
     individuals while receiving assistance, whether the case was 

[[Page H10589]]

     closed due to employment, and other data needed to meet the 
     work performance rate.
       ``(I) Status in Work First and workfare, including the 
     number of hours an individual participated and the component 
     in which the individual participated.
       ``(J) The number of persons in the assistance unit and 
     their relationship to the youngest child. Nonrecipients in 
     the household and their relationship to the youngest child.
       ``(K) Citizenship status.
       ``(L) Shelter arrangement.
       ``(M) Unearned income (not including temporary employment 
     assistance), such as child support, and assets.
       ``(N) The number of children who have a parent who is 
     deceased, incapacitated, or unemployed.
       ``(O) Geographic location.
       ``(3) Aggregated data.--The State shall collect the 
     following data items on a monthly basis from aggregated case 
     records of applicants for and recipients of temporary 
     employment assistance from the previous month:
       ``(A) The number of adults receiving assistance.
       ``(B) The number of children receiving assistance.
       ``(C) The number of families receiving assistance.
       ``(D) The number of assistance units who had their grants 
     reduced or terminated and the reason for the reduction or 
     termination, including sanction, employment, and meeting the 
     time limit for assistance).
       ``(E) The number of applications for assistance; the number 
     approved and the number denied and the reason for denial.
       ``(4) Longitudinal studies.--The State shall submit 
     selected data items for a cohort of individuals who are 
     tracked over time. This longitudinal sample shall be used for 
     selected data items described in paragraphs (2) and (3), as 
     determined appropriate by the Secretary.
       ``(c) Additional Data.--The report required by subsection 
     (b) for a fiscal year quarter shall also include the 
     following:
       ``(1) Report on use of federal funds to cover 
     administrative costs and overhead.--A statement of--
       ``(A) the percentage of the Federal funds paid to the State 
     under this part for the fiscal year quarter that are used to 
     cover administrative costs or overhead; and
       ``(B) the total amount of State funds that are used to 
     cover such costs or overhead.
       ``(2) Report on state expenditures on programs for needy 
     families.--A statement of the total amount expended by the 
     State during the fiscal year quarter on programs for needy 
     families, with the amount spent on the program under this 
     part, and the purposes for which such amount was spent, 
     separately stated.
       ``(3) Report on noncustodial parents participating in work 
     activities.--The number of noncustodial parents in the State 
     who participated in work activities during the fiscal year 
     quarter.
       ``(4) Report on child support collected.--The total amount 
     of child support collected by the State agency administering 
     the State plan under part D on behalf of a family receiving 
     assistance under this part.
       ``(5) Report on child care.--The total amount expended by 
     the State for child care under this part, along with a 
     description of the types of child care provided, such as 
     child care provided in the case of a family that has ceased 
     to receive assistance under this part because of increased 
     hours of, or increased income from, employment, or in the 
     case of a family that is not receiving assistance under this 
     part but would be at risk of becoming eligible for such 
     assistance if child care was not provided.
       ``(6) Report on transitional services.--The total amount 
     expended by the State for providing transitional services to 
     a family that has ceased to receive assistance under this 
     part because of increased hours of, or increased income from, 
     employment, along with a description of such services.
       ``(d) Collection Procedures.--The Secretary shall provide 
     case sampling plans and data collection procedures as deemed 
     necessary to make statistically valid estimates of plan 
     performance.
       ``(e) Verification.--The Secretary shall develop and 
     implement procedures for verifying the quality of the data 
     submitted by the State, and shall provide technical 
     assistance, funded by the compliance penalties imposed under 
     section 412, if such data quality falls below acceptable 
     standards.

     ``SEC. 415. COMPILATION AND REPORTING OF DATA.

       ``(a) Current Programs.--The Secretary shall, on the basis 
     of the Secretary's review of the reports received from the 
     States under section 414, compile such data as the Secretary 
     believes necessary, and from time to time, publish the 
     findings as to the effectiveness of the programs developed 
     and administered by the States under this part. The Secretary 
     shall annually report to the Congress on the programs 
     developed and administered by each State under this part.
       ``(b) Research, Demonstration and Evaluation.--Of the 
     amount specified under section 413(a), an amount equal to 
     0.25 percent is authorized to be expended by the Secretary to 
     support the following types of research, demonstrations, and 
     evaluations:
       ``(1) State-initiated research.--States may apply for 
     grants to cover 90 percent of the costs of self-evaluations 
     of programs under State plans approved under this part.
       ``(2) Demonstrations.--
       ``(A) In general.--The Secretary may implement and evaluate 
     demonstrations of innovative and promising strategies to--
       ``(i) improve child well-being through reductions in 
     illegitimacy, teen pregnancy, welfare dependency, 
     homelessness, and poverty;
       ``(ii) test promising strategies by nonprofit and for-
     profit institutions to increase employment, earning, child 
     support payments, and self-sufficiency with respect to 
     temporary employment assistance clients under State plans; 
     and
       ``(iii) foster the development of child care.
       ``(B) Additional parameters.--Demonstrations implemented 
     under this paragraph--
       ``(i) may provide one-time capital funds to establish, 
     expand, or replicate programs;
       ``(ii) may test performance-based grant to loan financing 
     in which programs meeting performance targets receive grants 
     while programs not meeting such targets repay funding on a 
     pro-rated basis; and
       ``(iii) should test stategies in multiple States and types 
     of communities.
       ``(3) Federal evaluations.--
       ``(A) In general.--The Secretary shall conduct research on 
     the effects, benefits, and costs of different approaches to 
     operating welfare programs, including an implementation study 
     based on a representative sample of States and localities, 
     documenting what policies were adopted, how such policies 
     were implemented, the types and mix of services provided, and 
     other such factors as the Secretary deems appropriate.
       ``(B) Research on related issues.--The Secretary shall also 
     conduct research on issues related to the purposes of this 
     part, such as strategies for moving welfare recipients into 
     the workforce quickly, reducing teen pregnancies and out-of-
     wedlock births, and providing adequate child care.
       ``(C) State reimbursement.--The Secretary may reimburse a 
     State for any research-related costs incurred pursuant to 
     research conducted under this paragraph.
       ``(D) Use of random assignment.--Evaluations authorized 
     under this paragraph should use random assignment to the 
     maximum extent feasible and appropriate.
       ``(4) Regional information centers.--
       ``(A) In general.--The Secretary shall establish not less 
     than 5, nor more than 7 regional information centers located 
     at major research universities or consortiums of universities 
     to ensure the effective implementation of welfare reform and 
     the efficient dissemination of information about innovations, 
     evaluation outcomes, and training initiatives.
       ``(B) Center responsibilities.--The Centers shall have the 
     following functions:
       ``(i) Disseminate information about effective income 
     support and related programs, along with suggestions for the 
     replication of such programs.
       ``(ii) Research the factors that cause and sustain welfare 
     dependency and poverty in the regions served by the 
     respective centers.
       ``(iii) Assist the States in the region formulate and 
     implement innovative programs and improvements in existing 
     programs that help clients move off welfare and become 
     productive citizens.
       ``(iv) Provide training as appropriate to staff of State 
     agencies to enhance the ability of the agencies to 
     successfully place Work First clients in productive 
     employment or self-employment.
       ``(C) Center eligibility to perform evaluations.--The 
     Centers may compete for demonstration and evaluation 
     contracts developed under this section.

     ``SEC. 416. COLLECTION OF OVERPAYMENTS FROM FEDERAL TAX 
                   REFUNDS.

       ``(a) In General.--Upon receiving notice from a State 
     agency administering a plan approved under this part that a 
     named individual has been overpaid under the State plan 
     approved under this part, the Secretary of the Treasury shall 
     determine whether any amounts as refunds of Federal taxes 
     paid are payable to such individual, regardless of whether 
     such individual filed a tax return as a married or unmarried 
     individual. If the Secretary of the Treasury finds that any 
     such amount is payable, the Secretary shall withhold from 
     such refunds an amount equal to the overpayment sought to be 
     collected by the State and pay such amount to the State 
     agency.
       ``(b) Regulations.--The Secretary of the Treasury shall 
     issue regulations, approved by the Secretary of Health and 
     Human Services, that provide--
       ``(1) that a State may only submit under subsection (a) 
     requests for collection of overpayments with respect to 
     individuals--
       ``(A) who are no longer receiving temporary employment 
     assistance under the State plan approved under this part,
       ``(B) with respect to whom the State has already taken 
     appropriate action under State law against the income or 
     resources of the individuals or families involved; and
       ``(C) to whom the State agency has given notice of its 
     intent to request withholding by the Secretary of the 
     Treasury from the income tax refunds of such individuals;
       ``(2) that the Secretary of the Treasury will give a timely 
     and appropriate notice to any other person filing a joint 
     return with the individual whose refund is subject to 
     withholding under subsection (a); and
       ``(3) the procedures that the State and the Secretary of 
     the Treasury will follow in carrying out this section which, 
     to the maximum extent feasible and consistent with the 

[[Page H10590]]

     specific provisions of this section, will be the same as 
     those issued pursuant to section 464(b) applicable to 
     collection of past-due child support.''.
       (b) Payments to Puerto Rico.--Section 1108(a)(1) (42 U.S.C. 
     1308(a)(1)) is amended--
       (1) in subparagraph (F), by striking ``or''; and
       (2) by striking subparagraph (G) and inserting the 
     following:
       ``(G) $82,000,000 with respect to each of fiscal years 1989 
     through 1995, or
       ``(H) $102,500,000 with respect to the fiscal year 1996 and 
     each fiscal year thereafter;''.
       (c) Conforming Amendments Relating To Collection of 
     Overpayments.--
       (1) Section 6402 of the Internal Revenue Code of 1986 
     (relating to authority to make credits or refunds) is 
     amended--
       (A) in subsection (a), by striking ``(c) and (d)'' and 
     inserting ``(c), (d), and (e)'';
       (B) by redesignating subsections (e) through (i) as 
     subsections (f) through (j), respectively; and
       (C) by inserting after subsection (d) the following:
       ``(g) Collection of Overpayments Under Title IV-A of the 
     Social Security Act.--The amount of any overpayment to be 
     refunded to the person making the overpayment shall be 
     reduced (after reductions pursuant to subsections (c) and 
     (d), but before a credit against future liability for an 
     internal revenue tax) in accordance with section 416 of the 
     Social Security Act (concerning recovery of overpayments to 
     individuals under State plans approved under part A of title 
     IV of such Act).''.
       (2) Section 552a(a)(8)(B)(iv)(III) of title 5, United 
     States Code, is amended by striking ``section 464 or 1137 of 
     the Social Security Act'' and inserting ``section 416, 464, 
     or 1137 of the Social Security Act''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall be effective with 
     respect to calendar quarters beginning on or after October 1, 
     1996.
       (2) Special rule.--In the case of a State that the 
     Secretary of Health and Human Services determines requires 
     State legislation (other than legislation appropriating 
     funds) in order to meet the requirements imposed by the 
     amendment made by subsection (a), the State shall not be 
     regarded as failing to comply with the requirements of such 
     amendment before the first day of the first calendar quarter 
     beginning after the close of the first regular session of the 
     State legislature that begins after the date of enactment of 
     this Act. For purposes of this paragraph, in the case of a 
     State that has a 2-year legislative session, each year of the 
     session shall be treated as a separate regular session of the 
     State legislature.
                       Subtitle B--Make Work Pay

     SEC. 9201. TRANSITIONAL MEDICAID BENEFITS.

       (a) State Option of Extension of Medicaid Enrollment for 
     Former AFDC Recipients for 1 Additional Year.--
       (1) In general.--Section 1925(b)(1) (42 U.S.C. 1396r-
     6(b)(1)) is amended by striking the period at the end and 
     inserting the following: ``, and that the State may, at its 
     option, offer to each such family the option of extending 
     coverage under this subsection for any of the first 2 
     succeeding 6-month periods, in the same manner and under the 
     same conditions as the option of extending coverage under 
     this subsection for the first succeeding 6-month period.''.
       (2) Conforming amendments.--Section 1925(b) (42 U.S.C. 
     1396r-6(b)) is amended--
       (A) in the heading, by striking ``Extension'' and inserting 
     ``Extensions'';
       (B) in the heading of paragraph (1), by striking 
     ``Requirement'' and inserting ``In general'';
       (C) in paragraph (2)(B)(ii)--
       (i) in the heading, by striking ``period'' and inserting 
     ``periods'', and
       (ii) by striking ``in the period'' and inserting ``in any 
     of the 6-month periods'';
       (D) in paragraph (3)(A), by striking ``the 6-month period'' 
     and inserting ``any 6-month period'';
       (E) in paragraph (4)(A), by striking ``the extension 
     period'' and inserting ``any extension period''; and
       (F) in paragraph (5)(D)(i), by striking ``is a 3-month 
     period'' and all that follows and inserting the following: 
     ``is, with respect to a particular 6-month additional 
     extension period provided under this subsection, a 3-month 
     period beginning with the 1st or 4th month of such extension 
     period.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to calendar quarters beginning on or after 
     October 1, 1997, without regard to whether or not final 
     regulations to carry out such amendments have been 
     promulgated by such date.

     SEC. 9202. NOTICE OF AVAILABILITY REQUIRED TO BE PROVIDED TO 
                   APPLICANTS AND FORMER RECIPIENTS OF TEMPORARY 
                   FAMILY ASSISTANCE, FOOD STAMPS, AND MEDICAID.

       (a) Temporary Family Assistance.--Section 406, as added by 
     the amendment made by section 9101(a) of this Act, is amended 
     by adding at the end the following:
       ``(h) Notice of Availability of EITC.--The State plan shall 
     provide that the State agency referred to in subsection (b) 
     must provide written notice of the existence and availability 
     of the earned income credit under section 32 of the Internal 
     Revenue Code of 1986 to--
       ``(1) any individual who applies for assistance under the 
     State plan, upon receipt of the application; and
       ``(2) any individual whose assistance under the State plan 
     (or under the State plan approved under part A of this title 
     (as in effect before the effective date of title IX of the 
     Omnibus Budget Reconciliation Act of 1995) is terminated, in 
     the notice of termination of benefits.''.
       (b) Food Stamps.--Section 11(e) of the Food Stamp Act of 
     1977 (7 U.S.C. 2020(e)) is amended--
       (1) in paragraph (24) by striking ``and'' at the end;
       (2) in paragraph (25) by striking the period at the end and 
     inserting ``; and''; and
       (3) by inserting after paragraph (25) the following:
       ``(26) that whenever a household applies for food stamp 
     benefits, and whenever such benefits are terminated with 
     respect to a household, the State agency shall provide to 
     each member of such household notice of--
       ``(A) the existence of the earned income tax credit under 
     section 32 of the Internal Revenue Code of 1986; and
       ``(B) the fact that such credit may be applicable to such 
     member.''.
       (c) Medicaid.--Section 1902(a) (42 U.S.C. 1396a(a)) is 
     amended--
       (1) by striking ``and'' at the end of paragraph (61);
       (2) by striking the period at the end of paragraph (62) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (62) the following new 
     paragraph:
       ``(63) provide that the State shall provide notice of the 
     existence and availability of the earned income tax credit 
     under section 32 of the Internal Revenue Code of 1986 to each 
     individual applying for medical assistance under the State 
     plan and to each individual whose eligibility for medical 
     assistance under the State plan is terminated.''.

     SEC. 9203. NOTICE OF AVAILABILITY OF EARNED INCOME TAX CREDIT 
                   AND DEPENDENT CARE TAX CREDIT TO BE INCLUDED ON 
                   W-4 FORM.

       (a) In General.--Section 11114 of the Omnibus Budget 
     Reconciliation Act of 1990 (26 U.S.C. 21 note), relating to 
     program to increase public awareness, is amended by adding at 
     the end the following new sentence: ``Such means shall 
     include printing a notice of the availability of such credits 
     on the forms used by employees to determine the proper number 
     of withholding exemptions under chapter 24 of such Code.''

     SEC. 9204. ADVANCE PAYMENT OF EARNED INCOME TAX CREDIT 
                   THROUGH STATE DEMONSTRATION PROGRAMS.

       (a) In General.--Section 3507 of the Internal Revenue Code 
     of 1986 (relating to the advance payment of the earned income 
     tax credit) is amended by adding at the end the following:
       ``(g) State Demonstrations.--
       ``(1) In general.--In lieu of receiving earned income 
     advance amounts from an employer under subsection (a), a 
     participating resident shall receive advance earned income 
     payments from a responsible State agency pursuant to a State 
     Advance Payment Program that is designated pursuant to 
     paragraph (2).
       ``(2) Designations.--
       ``(A) In general.--From among the States submitting 
     proposals satisfying the requirements of paragraph (3), the 
     Secretary (in consultation with the Secretary of Health and 
     Human Services) may designate not more than 4 State Advance 
     Payment Demonstrations. States selected for the 
     demonstrations may have, in the aggregate, no more than 5 
     percent of the total number of households participating in 
     the program under the Food Stamp program in the immediately 
     preceding fiscal year. Administrative costs of a State in 
     conducting a demonstration under this section may be included 
     for matching under section 413(a) of the Social Security Act 
     and section 16(a) of the Food Stamp Act of 1977.
       ``(B) When designation may be made.--Any designation under 
     this paragraph shall be made no later than December 31, 1996.
       ``(C) Period for which designation is in effect.--
       ``(i) In general.--Designations made under this paragraph 
     shall be effective for advance earned income payments made 
     after December 31, 1996, and before January 1, 2000.
       ``(ii) Special rules.--
       ``(I) Revocation of designations.--The Secretary may revoke 
     any designation made under this paragraph if the Secretary 
     determines that the State is not complying substantially with 
     the proposal described in paragraph (3) submitted by the 
     State.
       ``(II) Automatic termination of designations.--Any failure 
     by a State to comply with the reporting requirements 
     described in paragraphs (3)(F) and (3)(G) shall have the 
     effect of immediately terminating the designation under this 
     paragraph and rendering paragraph (5)(A)(ii) inapplicable to 
     subsequent payments.
       ``(3) Proposals.--No State may be designated under 
     paragraph (2) unless the State's proposal for such 
     designation--
       ``(A) identifies the responsible State agency,
       ``(B) describes how and when the advance earned income 
     payments will be made by that agency, including a description 
     of any other State or Federal benefits with which such 
     payments will be coordinated,
       ``(C) describes how the State will obtain the information 
     on which the amount of advance earned income payments made to 
     each participating resident will be determined in accordance 
     with paragraph (4),

[[Page H10591]]

       ``(D) describes how State residents who will be eligible to 
     receive advance earned income payments will be selected, 
     notified of the opportunity to receive advance earned income 
     payments from the responsible State agency, and given the 
     opportunity to elect to participate in the program,
       ``(E) describes how the State will verify, in addition to 
     receiving the certifications and statement described in 
     paragraph (7)(D)(iv), the eligibility of participating 
     residents for the earned income tax credit,
       ``(F) commits the State to furnishing to each participating 
     resident by January 31 of each year a written statement 
     showing--
       ``(i) the name and taxpayer identification number of the 
     participating resident, and
       ``(ii) the total amount of advance earned income payments 
     made to the participating resident during the prior calendar 
     year,
       ``(G) commits the State to furnishing to the Secretary by 
     December 1 of each year a written statement showing the name 
     and taxpayer identification number of each participating 
     resident,
       ``(H) commits the State to treat any advance earned income 
     payments as described in paragraph (5) and any repayments of 
     excessive advance earned income payments as described in 
     paragraph (6),
       ``(I) commits the State to assess the development and 
     implementation of its State Advance Payment Program, 
     including an agreement to share its findings and lessons with 
     other interested States in a manner to be described by the 
     Secretary, and
       ``(J) is submitted to the Secretary on or before June 30, 
     1996.
       ``(4) Amount and timing of advance earned income 
     payments.--
       ``(A) Amount.--
       ``(i) In general.--The method for determining the amount of 
     advance earned income payments made to each participating 
     resident shall conform to the fullest extent possible with 
     the provisions of subsection (c).
       ``(ii) Special rule.--A State may, at its election, apply 
     the rules of subsection (c)(2)(B) by substituting `between 60 
     percent and 75 percent of the credit percentage in effect 
     under section 32(b)(1) for an individual with the 
     corresponding number of qualifying children' for `60 percent 
     of the credit percentage in effect under section 32(b)(1) for 
     such an eligible individual with 1 qualifying child' in 
     clause (i) and `the same percentage (as applied in clause 
     (i))' for `60 percent' in clause (ii).
       ``(B) Timing.--The frequency of advance earned income 
     payments may be determined on the basis of the payroll 
     periods of participating residents, on a single statewide 
     schedule, or on any other reasonable basis prescribed by the 
     State in its proposal; however, in no event may advance 
     earned income payments be made to any participating resident 
     less frequently than on a calendar-quarter basis.
       ``(5) Payments to be treated as payments of withholding and 
     fica taxes.--
       ``(A) In general.--For purposes of this title, advance 
     earned income payments during any calendar quarter--
       ``(i) shall neither be treated as a payment of compensation 
     nor be included in gross income, and
       ``(ii) shall be treated as made out of--

       ``(I) amounts required to be deducted by the State and 
     withheld for the calendar quarter by the State under section 
     3401 (relating to wage withholding),
       ``(II) amounts required to be deducted for the calendar 
     quarter under section 3102 (relating to FICA employee taxes), 
     and
       ``(III) amounts of the taxes imposed on the State for the 
     calendar quarter under section 3111 (relating to FICA 
     employer taxes),

     as if the State had paid to the Secretary, on the day on 
     which payments are made to participating residents, an amount 
     equal to such payments.
       ``(B) If advance payments exceed taxes due.--If for any 
     calendar quarter the aggregate amount of advance earned 
     income payments made by the responsible State agency under a 
     State Advance Payment Program exceeds the sum of the amounts 
     referred to in subparagraph (A)(ii) (without regard to 
     paragraph (6)(A)), each such advance earned income payment 
     shall be reduced by an amount which bears the same ratio to 
     such excess as such advance earned income payment bears to 
     the aggregate amount of all such advance earned income 
     payments.
       ``(6) State repayment of excessive advance earned income 
     payments.--
       ``(A) In general.--Notwithstanding any other provision of 
     law, in the case of an excessive advance earned income 
     payment a State shall be treated as having deducted and 
     withheld under section 3401 (relating to wage withholding), 
     and as being required to pay to the United States, the 
     repayment amount during the repayment calendar quarter.
       ``(B) Excessive advance earned income payment.--For 
     purposes of this section, the term `excessive advance income 
     payment' means that portion of any advance earned income 
     payment that, when combined with other advance earned income 
     payments previously made to the same participating resident 
     during the same calendar year, exceeds the amount of earned 
     income tax credit to which that participating resident is 
     entitled under section 32 for that year.
       ``(C) Repayment amount.--For purposes of this subsection, 
     the term `repayment amount' means an amount equal to 50 
     percent of the excess of--
       ``(i) excessive advance earned income payments made by a 
     State during a particular calendar year, over
       ``(ii) the sum of--

       ``(I) 4 percent of all advance earned income payments made 
     by the State during that calendar year, and
       ``(II) the excessive advance earned income payments made by 
     the State during that calendar year that have been collected 
     from participating residents by the Secretary.

       ``(D) Repayment calendar quarter.--For purposes of this 
     subsection, the term `repayment calendar quarter' means the 
     second calendar quarter of the third calendar year beginning 
     after the calendar year in which an excessive earned income 
     payment is made.
       ``(7) Definitions.--For purposes of this subsection--
       ``(A) State advance payment program.--The term `State 
     Advance Payment Program' means the program described in a 
     proposal submitted for designation under paragraph (1) and 
     designated by the Secretary under paragraph (2).
       ``(B) Responsible state agency.--The term `responsible 
     State agency' means the single State agency that will be 
     making the advance earned income payments to residents of the 
     State who elect to participate in a State Advance Payment 
     Program.
       ``(C) Advance earned income payments.--The term `advance 
     earned income payments' means an amount paid by a responsible 
     State agency to residents of the State pursuant to a State 
     Advance Payment Program.
       ``(D) Participating resident.--The term `participating 
     resident' means an individual who--
       ``(i) is a resident of a State that has in effect a 
     designated State Advance Payment Program,
       ``(ii) makes the election described in paragraph (3)(D) 
     pursuant to guidelines prescribed by the State,
       ``(iii) certifies to the State the number of qualifying 
     children the individual has, and
       ``(iv) provides to the State the certifications and 
     statement described in subsections (b)(1), (b)(2), (b)(3), 
     and (b)(4) (except that for purposes of this clause, the term 
     `any employer' shall be substituted for `another employer' in 
     subsection (b)(3)), along with any other information required 
     by the State.''.
       (b) Technical Assistance.--The Secretaries of the Treasury 
     and Health and Human Services shall jointly ensure that 
     technical assistance is provided to State Advance Payment 
     Programs and that these programs are rigorously evaluated.
       (c) Annual Reports.--The Secretary shall issue annual 
     reports detailing the extent to which--
       (1) residents participate in the State Advance Payment 
     Programs,
       (2) participating residents file Federal and State tax 
     returns,
       (3) participating residents report accurately the amount of 
     the advance earned income payments made to them by the 
     responsible State agency during the year, and
       (4) recipients of excessive advance earned income payments 
     repay those amounts.
     The report shall also contain an estimate of the amount of 
     advance earned income payments made by each responsible State 
     agency but not reported on the tax returns of a participating 
     resident and the amount of excessive advance earned income 
     payments.
       (d) Authorization of Appropriations.--For purposes of 
     providing technical assistance described in subsection (b), 
     preparing the reports described in subsection (c), and 
     providing grants to States in support of designated State 
     Advance Payment Programs, there are authorized to be 
     appropriated in advance to the Secretary of the Treasury and 
     the Secretary of Health and Human Services a total of 
     $1,400,000 for fiscal years 1997 through 2000.

     SEC. 9205. FUNDING OF CHILD CARE SERVICES.

       (a) Repeal of Child Care Programs Under the Child Care and 
     Development Block Grant Act of1990.--The Child Care and 
     Development Block Grant Act of 1990 (42 U.S.C. 9858 et seq.) 
     is hereby repealed.
       (b) Funding of Child Care Services Through Social Services 
     Block Grant Program.--Title XX (42 U.S.C. 1397-1397f) is 
     amended by adding at the end the following:

     ``SEC. 2008. CHILD CARE.

       ``(a) Conditional Grant.--
       ``(1) In general.--In addition to any payment under section 
     2002 or 2007, the Secretary shall make a grant to each State 
     with a plan approved under this section for a fiscal year in 
     an amount equal to the special allotment of the State for the 
     fiscal year.
       ``(2) Limitations on authorization of appropriations.--For 
     grants under this section, there are authorized to be 
     appropriated to the Secretary not more than--
       ``(A) $1,400,000,000 for fiscal year 1997;
       ``(B) $1,450,000,000 for each of fiscal years 1998, 1999, 
     and 2000; and
       ``(C) $1,500,000,000 for each of fiscal years 2001 and 
     2002.
       ``(b) State Plans.--
       ``(1) Content.--A plan meets the requirements of this 
     paragraph if the plan--
       ``(A) identifies an appropriate State agency to be the lead 
     agency responsible for administering at the State level, and 
     coordinating with local governments, the activities of the 
     State pursuant to this section;
       ``(B) describes the activities the State will carry out 
     with funds provided under this section;

[[Page H10592]]

       ``(C) provides assurances that the funds provided under 
     this section will be used to supplement, not supplant, State 
     and local funds as well as Federal funds provided under any 
     Act and applied to child care activities in the State during 
     fiscal year 1989;
       ``(D) provides assurances that the State will not expend 
     more than 7 percent of the funds provided to the States under 
     this section for the fiscal year for administrative expenses;
       ``(E) provides assurances that, in providing child care 
     assistance, the State will give priority to families with low 
     income and families living in a low-income geographical area;
       ``(F) ensures that child care providers reimbursed under 
     this section meet applicable standards of State and local 
     law;
       ``(G) provides assurances that the lead agency will 
     coordinate the use of funds provided under this section with 
     the use of other Federal resources for child care provided 
     under this Act, and with other Federal, State, or local child 
     care and preschool programs operated in the State;
       ``(H) provides for the establishment of such fiscal and 
     accounting procedures as may be necessary to--
       ``(i) ensure a proper accounting of Federal funds received 
     by the State under this section; and
       ``(ii) ensure the proper verification of the reports 
     submitted by the State under subsection (f)(2);
       ``(I) provides assurances that the State will not impose 
     more stringent standards and licening or regulatory 
     requirements on child care providers receiving funds provided 
     under this section than those imposed on other child care 
     providers in the State;
       ``(J) provides assurances that the State will not implement 
     any policy or practice which has the effect of significantly 
     restricting parental choice by--
       ``(i) expressly or effectively excluding any category of 
     care or type of provider within a category of care;
       ``(ii) limiting parental access to or choices from among 
     various categories of care or types of providers; or
       ``(iii) excluding a significant number of providers in any 
     category of care; and
       ``(K) provides assurances that parents will be informed 
     regarding their options under this section, including the 
     option of receiving a child care certificate or voucher.
       ``(2) Form.--A State may submit a plan that meets the 
     requirements of paragraph (1) in the form of amendments to 
     the State plan submitted pursuant to section 658E of the 
     Child Care and Development Block Grant Act of 1990, as in 
     effect before the effective date of section 9205 of the 
     Omnibus Budget Reconciliation Act of 1995.
       ``(3) Approval.--Not later than 90 days after the date the 
     State submits a plan to the Secretary under this subsection, 
     the Secretary shall either approve or disapprove the plan. If 
     the Secretary disapproves the plan, the Secretary shall 
     provide the State with an explanation and recommendations for 
     changes in the plan to gain approval.
       ``(c) Special Allotments.--The special allotment of a State 
     for a fiscal year equals the amount that bears the same ratio 
     to the amount appropriated pursuant to this section for the 
     fiscal year, as the number of children who have not attained 
     13 years of age and are residing with families in the State 
     bears to the total number of such children in all States with 
     plans approved under this section for the fiscal year, 
     determined on the basis of the most recent data available 
     from the Department of Commerce at the time the special 
     allotment is determined.
       ``(d) Payments to States.--
       ``(1) Payments.--
       ``(A) Computation of amount.--From the sums appropriated 
     therefor, the Secretary of the Treasury shall pay to each 
     State which has a plan approved under this section for a 
     fiscal year, for each quarter, beginning with the quarter 
     commencing October 1, 1996, an amount equal to \1/4\ of the 
     special allotment of the State for the fiscal year.
       ``(B) Method of computation and payment.--The method of 
     computing and paying such amounts shall be as follows:
       ``(i) Estimate.--The Secretary shall, before each quarter, 
     estimate the amount to be paid to the State for the quarter 
     under this section, based on a report filed by the State 
     containing the State's estimate of the total sum to be 
     expended by the State in such quarter in accordance with 
     subsection (e).
       ``(ii) Certification.--The Secretary of Health and Human 
     Services shall then certify to the Secretary of the Treasury 
     the amount so estimated by the Secretary of Health and Human 
     Services reduced or increased, as the case may be, by any sum 
     by which the Secretary of Health and Human Services finds 
     that the estimate for any prior quarter was greater or less 
     than the amount which should have been paid to the State for 
     such quarter, except that such increases or reductions shall 
     not be made to the extent that such sums have been applied to 
     make the amount certified for any prior quarter greater or 
     less than the amount estimated by the Secretary of Health and 
     Human Services for such prior quarter.
       ``(iii) Method of payment.--The Secretary of the Treasury 
     shall thereupon, through the Fiscal Service of the Department 
     of the Treasury and prior to audit or settlement by the 
     General Accounting Office, pay to the State, at the time or 
     times fixed by the Secretary of Health and Human Services, 
     the amount so certified.
       ``(2) Deadline for expenditure of funds by states.--Except 
     as provided in paragraph (3)(A), each State to which funds 
     are paid under this section for a fiscal year shall expend 
     such funds in the fiscal year or in the immediately 
     succeeding fiscal year.
       ``(3) Redistribution of unexpended special allotments.--
       ``(A) Remittance to the secretary.--Each State to which 
     funds are paid under this section for a fiscal year shall 
     remit to the Secretary that part of such funds which the 
     State intends not to, or does not, expend in the fiscal year 
     or in the immediately succeeding fiscal year.
       ``(B) Redistribution.--The Secretary shall increase the 
     special allotment of each State with a plan approved under 
     this part for a fiscal year that does not remit any amount to 
     the Secretary for the fiscal year by an amount equal to--
       ``(i) the aggregate of the amounts remitted pursuant to 
     subparagraph (A) for the fiscal year; multiplied by
       ``(ii) the adjusted State share for the fiscal year.
       ``(C) Adjusted state share.--As used in subparagraph 
     (B)(ii), the term `adjusted State share' means, with respect 
     to a fiscal year--
       ``(i) the special allotment of the State for the fiscal 
     year (before any increase under subparagraph (B)); divided by
       ``(ii)(I) the sum of the special allotments of all States 
     with plans approved under this part for the fiscal year; 
     minus
       ``(II) the aggregate of the amounts remitted to the 
     Secretary pursuant to subparagraph (A) for the fiscal year.
       ``(e) Use of Funds.--
       ``(1) In general.--Funds provided under this section shall 
     be used to expand parent choices in selecting child care, to 
     address deficiencies in the supply of child care, and to 
     expand and improve child care services, with an emphasis on 
     providing such services to low-income families and 
     geographical areas. Subject to the approval of the Secretary, 
     States to which funds are paid under this section shall use 
     such funds to carry out child care programs and activities 
     through cash grants, certificates, or contracts with 
     families, or public or private entities as the State 
     determines appropriate. States shall take parental preference 
     into account to the maximum extent possible in carrying out 
     child care programs.
       ``(2) Specific uses.--Each State to which funds are paid 
     under this section may expend such funds for--
       ``(A) child care services for infants, sick children, 
     children with special needs, and children of adolescent 
     parents;
       ``(B) after-school and before-school programs and programs 
     during nontraditional hours for the children of working 
     parents;
       ``(C) programs for the recruitment and training of day care 
     workers, including older Americans;
       ``(D) grant and loan programs to enable child care workers 
     and providers to meet State and local standards and 
     requirements;
       ``(E) child care programs developed by public and private 
     sector partnerships;
       ``(F) State efforts to provide technical assistance 
     designed to help providers improve the services offered to 
     parents and children; and
       ``(G) other child care-related programs consistent with the 
     purpose of this section and approved by the Secretary.
       ``(3) Limitations on use of funds.--A State to which funds 
     are paid under this section for a fiscal year shall use not 
     less than 80 percent of such funds to provide direct child 
     care assistance to low-income parents through child care 
     certificates or vouchers, contracts, or grants.
       ``(4) Methods of funding.--Funds for child care services 
     under this title shall be for the benefit of parents and 
     shall be provided through child care vouchers or certificates 
     provided directly to parents or through contracts or grants 
     with public or private providers.
       ``(5) Parental rights of choice.--Any parent who receives a 
     child care certificate under this title may use such 
     certificate with any child care provider, including those 
     providers which have religious activities, if such provider 
     is freely chosen by the parent from among the available 
     alternatives.
       ``(6) Child care certificates.--
       ``(A) In general.--For purposes of this title, a child care 
     certificate is a certificate issued by a State directly to a 
     parent or legal guardian for use only as payment for child 
     care services in any child care facility eligible to receive 
     funds under this Act.
       ``(B) Redemption.--If the demand for child care services of 
     families qualified to receive such services from a State 
     under this Act exceeds the available supply of such services, 
     the State shall ration assistance to obtain such services 
     using procedures that do not disadvantage parents using child 
     care certificates, relative to other methods of financing, in 
     either the waiting period or the pecuniary value of such 
     services.
       ``(C) Commencement of certificate program.--Beginning not 
     later than 1 year after the date of the enactment of this 
     section, each State that receives funds under this title 
     shall offer a child care certificate program in accordance 
     with this section.
       ``(D) Authority to use child care funds for certificate 
     program.--Each State to which funds are paid under this title 
     may use the funds provided to the State under this title 
     which are required to be used for child care activities to 
     plan and establish the State's child care certificate 
     program.

[[Page H10593]]

       ``(7) Option of receiving a child care certificate.--Each 
     parent or legal guardian who receives assistance pursuant to 
     this title shall be provided with the option of enrolling 
     their child with an eligible child care provider that 
     receives funds through grants, contracts, or child care 
     certificates provided under this title. Such parent shall 
     have the right to use such certificates to purchase child 
     care services from an eligible provider of their choice. The 
     State shall ensure that parental preference is considered to 
     the maximum extent possible in awarding grants or contracts.
       ``(8) Rights of religious child care providers.--
     Notwithstanding any other provision of law, a religious child 
     care provider who receives funds under this Act may require 
     adherence by employees to the religious tenets or teachings 
     of the provider.
       ``(9) Eligible child care providers.--Any child care 
     provider who meets applicable standards of State and local 
     law shall be eligible to receive funds under this section. As 
     used in this paragraph, the term `child care provider' 
     includes--
       ``(A) proprietary for-profit entities, relatives, informal 
     day care homes, religious child care providers, day care 
     centers, and any other entities that the State determines 
     appropriate subject to approval of the Secretary;
       ``(B) nonprofit organizations under subsections (c) and (d) 
     of section 501 of the Internal Revenue Code of 1986;
       ``(C) professional or employee associations;
       ``(D) consortia of small businesses; and
       ``(E) units of State and local governments, and elementary, 
     secondary, and post-secondary educational institutions.
       ``(10) Prohibited uses.--Any State to which funds are paid 
     under this section may not use such funds--
       ``(A) to satisfy any State matching requirement imposed 
     under any Federal grant;
       ``(B) for the purchase or improvement of land, or the 
     purchase, construction, or permanent improvement (other than 
     minor remodeling) of any building or other facility; or
       ``(C) to provide any service which the State makes 
     generally available to the residents of the State without 
     cost to such residents and without regard to the income of 
     such residents.
       ``(f) Reporting Requirements.--
       ``(1) Notice to secretary of unexpended funds.--Each State 
     which has not completely expended the funds paid to the State 
     under this section for a fiscal year in the fiscal year or 
     the immediately succeeding fiscal year shall notify the 
     Secretary of any amount not so expended.
       ``(2) State reports on use of funds.--Not later than 18 
     months after the date of the enactment of this section, and 
     each year thereafter, the State shall prepare and submit to 
     the Secretary, in such form as the Secretary shall prescribe, 
     a report describing the State's use of funds paid to the 
     State under this section, including--
       ``(A) the number, type, and distribution of services and 
     programs under this section;
       ``(B) the average cost of child care, by type of provider;
       ``(C) the number of children serviced under this section;
       ``(D) the average income and distribution of incomes of the 
     families being served;
       ``(E) efforts undertaken by the State pursuant to this 
     section to promote and ensure health and safety and improve 
     quality; and
       ``(F) such other information as the Secretary considers 
     appropriate.
       ``(3) Guidelines for state reports; coordination with 
     reports under section 2006.--Within 6 months after the date 
     of the enactment of this section, the Secretary shall 
     establish guidelines for State reports under paragraph (2). 
     To the extent feasible, the Secretary shall coordinate such 
     reporting requirement with the reports required under section 
     2006 and, as the Secretary deems appropriate, with other 
     reporting requirements placed on States as a condition of 
     receipt of other Federal funds which support child care.
       ``(4) Reports by the secretary.--
       ``(A) Reports to the congress of summary of state 
     reports.--The Secretary shall annually summarize the 
     information reported to the Secretary pursuant to paragraph 
     (2) and provide such summary to the Congress.
       ``(B) Reports to the states on effective practices.--The 
     Secretary shall annually provide the States with a report on 
     particularly effective practices and programs supported by 
     funds paid to the State under this section, which ensure the 
     health and safety of children in care, promote quality child 
     care, and provide training to all types of providers.
       ``(g) Administration and Enforcement.--
       ``(1) Administration.--The Secretary shall--
       ``(A) coordinate all activities of the Department of Health 
     and Human Services relating to child care, and, to the 
     maximum extent practicable, coordinate such activities with 
     similar activities of other Federal entities;
       ``(B) collect, publish, and make available to the public a 
     listing of State child care standards at least once every 3 
     years; and
       ``(C) provide technical assistance to assist States to 
     carry out this section, including assistance on a 
     reimbursable basis.
       ``(2) Enforcement.--
       ``(A) Review of compliance with state plan.--The Secretary 
     shall review and monitor State compliance with this section 
     and the plans approved under this section for the State, and 
     shall have the power to terminate payments to the State in 
     accordance with subparagraph (B).
       ``(B) Noncompliance.--
       ``(i) In general.--If the Secretary, after reasonable 
     notice to a State and opportunity for a hearing, finds that--

       ``(I) there has been a failure by the State to comply 
     substantially with any provision or requirement set forth in 
     the plan approved under this section for the State; or
       ``(II) in the operation of any program for which assistance 
     is provided under this section there is a failure by the 
     State to comply substantially with any provision of this 
     section;

     the Secretary shall notify the State of the findings and that 
     no further payments may be made to such State under this 
     section (or, in the case of noncompliance in the operation of 
     a program or activity, that no further payments to the State 
     will be made with respect to such program or activity) until 
     the Secretary is satisfied that there is no longer any such 
     failure to comply or that the noncompliance will be promptly 
     corrected.
       ``(ii) Additional sanctions.--In the case of a finding of 
     noncompliance made pursuant to clause (i), the Secretary may, 
     in addition to imposing the sanctions described in such 
     subparagraph, impose the other appropriate sanctions, 
     including recoupment of money improperly expended for 
     purposes prohibited or not authorized by this section, and 
     disqualification from the receipt of financial assistance 
     under this section.
       ``(iii) Notice.--The notice required under subparagraph (A) 
     shall include a specific identification of any additional 
     sanction being imposed under clause (ii).
       ``(C) Issuance of rules.--The Secretary shall establish by 
     rule procedures for--
       ``(i) receiving, processing, and determining the validity 
     of complaints concerning any failure of a State to comply 
     with the State plan or any requirement of this section; and
       ``(ii) imposing sanctions under this subsection.

     ``SEC. 2009. CHILD CARE DURING PARTICIPATION IN EMPLOYMENT, 
                   EDUCATION, AND TRAINING; EXTENDED ELIGIBILITY.

       ``(a) Child Care Guarantee.--
       ``(1) In general.--Each State agency referred to in section 
     2008(b)(1)(A) shall guarantee child care in accordance with 
     section 2008--
       ``(A) for any individual who is participating in an 
     education or training activity (including participation in a 
     program established under part G of title IV) if the State 
     agency approves the activity and determines that the 
     individual is participating satisfactorily in the activity;
       ``(B) for each family with a dependent child (as defined in 
     section 413(a)(2)(E)) requiring such care to the extent that 
     such care is determined by the State agency to be necessary 
     for an individual in the family to accept employment or 
     remain employed, including in a community service job under 
     part G of title IV; and
       ``(C) to the extent that the State agency determines that 
     such care is necessary for the employment of an individual, 
     if the family of which the individual is a member has ceased 
     to receive assistance under the State plan approved under 
     part A of title IV by reason of increased hours of, or income 
     from, such employment, subject to paragraph (2) of this 
     subsection.
       ``(2) Limitations on eligibility for transitional child 
     care.--A family shall not be eligible for child care under 
     paragraph (1)(C)--
       ``(A) for more than 12 months after the last month for 
     which the family received assistance described in such 
     paragraph;
       ``(B) if the family did not receive such assistance in at 
     least 3 of the most recent 6 months in which the family 
     received such assistance;
       ``(C) if the family does not include a child who is (or, if 
     needy, would be) a dependent child (within the meaning of 
     section 413(a)(2)(E));
       ``(D) for any month beginning after the caretaker relative 
     (within the meaning of such part) in the family has 
     terminated his or her employment without good cause; or
       ``(E) with respect to a child, for any month beginning 
     after the caretaker relative in the family has refused to 
     cooperate with the State in establishing or enforcing the 
     obligation of any parent of the child to provide support for 
     the child, without good cause as determined by the State 
     agency in accordance with standards prescribed by the 
     Secretary which shall take into consideration the best 
     interests of the child.
       ``(b) State Entitlement to Payments.--Each State with a 
     plan approved under section 2008 shall be entitled to receive 
     from the Secretary for any fiscal year an amount equal to--
       ``(1) the total amount expended by the State to carry out 
     subsection (a) during the fiscal year; multiplied by
       ``(2) the Federal medical assistance percentage (as defined 
     in the last sentence of section 1118).''.
       (c) Effective Date.--The amendments and repeals made by 
     this section shall take effect on October 1, 1996.

     SEC. 9206. CERTAIN FEDERAL ASSISTANCE INCLUDIBLE IN GROSS 
                   INCOME.

       (a) In General.--Part II of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to items 
     specifically included in gross income) is amended by adding 
     at the end the following new section:

[[Page H10594]]


     ``SEC. 91. CERTAIN FEDERAL ASSISTANCE.

       ``(a) In General.--Gross income shall include an amount 
     equal to the specified Federal assistance received by the 
     taxpayer during the taxable year.
       ``(b) Specified Federal Assistance.--For purposes of this 
     section--
       ``(1) In general.--The term `specified Federal assistance' 
     means--
       ``(A) assistance provided under a State plan approved under 
     part A of title IV of the Social Security Act (relating to 
     temporary employment assistance program),
       ``(B) assistance provided under any food stamp program, and
       ``(C) supplemental security income benefits under title XVI 
     of the Social Security Act (including supplemental security 
     income benefits of the type described in section 1616 of such 
     Act or section 212 of Public Law 93-66).
       ``(2) Special rule.--In the case of assistance provided 
     under a program described in subsection (d)(2), such term 
     shall include only the assistance required to be provided 
     under section 21 or 22 (as the case may be) of the Food Stamp 
     Act of 1977.
       ``(c) Individuals Subject To Tax.--For purposes of this 
     section--
       ``(1) Temporary employment assistance program.--Assistance 
     described in subsection (b)(1)(A) shall be treated as 
     received by the relative with whom the dependent child is 
     living (within the meaning of section 406(c) of the Social 
     Security Act).
       ``(2) Food stamps.--In the case of assistance described in 
     subsection (b)(1)(B)--
       ``(A) In general.--Except as provided in subparagraph (B), 
     such assistance shall be treated as received ratably by each 
     of the individuals taken into account in determining the 
     amount of such assistance for the benefit of such 
     individuals.
       ``(B) Assistance to children treated as received by 
     parents, etc.--The amount of assistance which would (but for 
     this subparagraph) be treated as received by a child shall be 
     treated as received as follows:
       ``(i) If there is an includible parent, such amount shall 
     be treated as received by the includible parent (or if there 
     is more than 1 includible parent, as received ratably by each 
     includible parent).
       ``(ii) If there is no includible parent and there is an 
     includible grandparent, such amount shall be treated as 
     received by the includible grandparent (or if there is more 
     than 1 includible grandparent, as received ratably by each 
     includible grandparent).
       ``(iii) If there is no includible parent or grandparent, 
     such amount shall be treated as received ratably by each 
     includible adult.
       ``(C) Definitions.--For purposes of subparagraph (B)--
       ``(i) Child.--The term `child' means any individual who has 
     not attained age 16 as of the close of the taxable year. Such 
     term shall not include any individual who is an includible 
     parent of a child (as defined in the preceding sentence).
       ``(ii) Adult.--The term `adult' means any individual who is 
     not a child.
       ``(iii) Includible.--The term `includible' means, with 
     respect to any individual, an individual who is included in 
     determining the amount of assistance paid to the household 
     which includes the child.
       ``(iv) Parent.--The term `parent' includes the stepfather 
     and stepmother of the child.
       ``(v) Grandparent.--The term `grandparent' means any parent 
     of a parent of the child.
       ``(d) Food Stamp Program.--For purposes of subsection (b), 
     the term `food stamp program' means--
       ``(1) the food stamp program (as defined in section 3(h) of 
     the Food Stamp Act of 1977), and
       ``(2) the portion of the program under sections 21 and 22 
     of such Act which provides food assistance.''
       (b) Reporting.--
       (1) In general.--Subpart B of part III of subchapter A of 
     chapter 61 of such Code is amended by adding at the end the 
     following new section:

     ``SEC. 6050Q. PAYMENTS OF CERTAIN FEDERAL ASSISTANCE.

       ``(a) Requirement of Reporting.--The appropriate official 
     shall make a return, according to the forms and regulations 
     prescribed by the Secretary, setting forth--
       ``(1) the aggregate amount of specified Federal assistance 
     paid to any individual during any calendar year, and
       ``(2) the name, address, and TIN of such individual.
       ``(b) Statements To Be Furnished to Persons With Respect to 
     Whom Information Is Required.--Every person required to make 
     a return under subsection (a) shall furnish to each 
     individual whose name is required to be set forth in such 
     return a written statement showing--
       ``(1) the aggregate amount of payments made to the 
     individual which are required to be shown on such return, and
       ``(2) the name of the agency making the payments.
     The written statement required under the preceding sentence 
     shall be furnished to the individual on or before January 31 
     of the year following the calendar year for which the return 
     under subsection (a) was required to be made.
       ``(c) Definitions and Special Rule.--For purposes of this 
     section--
       ``(1) Appropriate official.--The term `appropriate 
     official' means--
       ``(A) in the case of specified Federal assistance described 
     in section 91(b)(1)(A), the head of the State agency 
     administering the plan under which such assistance is 
     provided,
       ``(B) in the case of specified Federal assistance described 
     in section 91(b)(1)(B), the head of the State agency 
     administering the program under which such assistance is 
     provided, and
       ``(C) in the case of specified Federal assistance described 
     in section 91(b)(1)(C), the Secretary of Health and Human 
     Services.
       ``(2) Specified federal assistance.--The term `specified 
     Federal assistance' has the meaning given such term by 
     section 91(b).
       ``(3) Amounts treated as paid.--The rules of section 91(c) 
     shall apply for purposes of determining to whom specified 
     Federal assistance is paid.''
       (2) Penalties.--
       (A) Subparagraph (B) of section 6724(d)(1) of such Code is 
     amended by redesignating clauses (ix) through (xiv) as 
     clauses (x) through (xv), respectively, and by inserting 
     after clause (viii) the following new clause:
       ``(ix) section 6050Q (relating to payments of certain 
     Federal assistance),''.
       (B) Paragraph (2) of section 6724(d) of such Code is 
     amended by redesignating subparagraphs (Q) through (T) as 
     subparagraphs (R) through (U), respectively, and by inserting 
     after subparagraph (P) the following new subparagraph:
       ``(Q) section 6050Q(b) (relating to payments of certain 
     Federal assistance),''.
       (c) Temporary Employment Assistance Program, Supplemental 
     Security Income, and Food Stamp Benefits Not Taken into 
     Account for Purposes of the Earned Income Tax Credit.--
     Section 32 of the Internal Revenue Code of 1986 (relating to 
     the earned income tax credit), is amended by adding at the 
     end the following new subsection:
       ``(k) Adjusted Gross Income Determined Without Regard to 
     Certain Federal Assistance.--For purposes of this section, 
     adjusted gross income shall be determined without regard to 
     any amount which is includible in gross income solely by 
     reason of section 91.''
       (d) Clerical Amendments.--
       (1) The table of sections for part II of subchapter B of 
     chapter 1 of such Code is amended by adding at the end the 
     following new item:

``Sec. 91. Certain Federal assistance.''
       (2) The table of sections for subpart B of part III of 
     subchapter A of chapter 61 of such Code is amended by adding 
     at the end the following new item:

``Sec. 6050Q. Payments of certain Federal assistance.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to benefits received after December 31, 1995, 
     except that the amendment made by subsection (c) shall apply 
     to taxable years beginning after such date.

     SEC. 9207. DEPENDENT CARE CREDIT TO BE REFUNDABLE; HIGH-
                   INCOME TAXPAYERS INELIGIBLE FOR CREDIT.

       (a) Credit To Be Refundable.--
       (1) In general.--Section 21 of the Internal Revenue Code of 
     1986 (relating to expenses for household and dependent care 
     services necessary for gainful employment) is hereby moved to 
     subpart C of part IV of subchapter A of chapter 1 of such 
     Code (relating to refundable credits) and inserted after 
     section 34.
       (2) Technical amendments.--
       (A) Section 35 of such Code is redesignated as section 36.
       (B) Section 21 of such Code is redesignated as section 35.
       (C) Paragraph (1) of section 35(a) of such Code (as 
     redesignated by subparagraph (B)) is amended by striking 
     ``this chapter'' and inserting ``this subtitle''.
       (D) Subparagraph (C) of section 129(a)(2) of such Code is 
     amended by striking ``section 21(e)'' and inserting ``section 
     35(e)''.
       (E) Paragraph (2) of section 129(b) of such Code is amended 
     by striking ``section 21(d)(2)'' and inserting ``section 
     35(d)(2)''.
       (F) Paragraph (1) of section 129(e) of such Code is amended 
     by striking ``section 21(b)(2)'' and inserting ``section 
     35(b)(2)''.
       (G) Subsection (e) of section 213 of such Code is amended 
     by striking ``section 21'' and inserting ``section 35''.
       (H) Paragraph (2) of section 1324(b) of title 31, United 
     States Code, is amended by inserting before the period ``, or 
     from section 35 of such Code''.
       (I) The table of sections for subpart C of part IV of 
     subchapter A of chapter 1 of such Code is amended by striking 
     the item relating to section 35 and inserting the following:

``Sec. 35. Expenses for household and dependent care services necessary 
              for gainful employment.
``Sec. 36. Overpayments of tax.''.
         (J) The table of sections for subpart A of such part IV 
     is amended by striking the item relating to section 21.
       (b) Higher-Income Taxpayers Ineligible for Credit.--
     Subsection (a) of section 35 of such Code, as redesignated by 
     subsection (a), is amended by adding at the end the following 
     new paragraph:
       ``(3) Phaseout of credit for higher-income taxpayers.--The 
     amount of the credit which would (but for this paragraph) be 
     allowed by this section shall be reduced (but not below zero) 
     by an amount which bears the same ratio to such amount of 
     credit as the excess of the taxpayer's adjusted gross income 
     for the taxable year over $60,000 bears to $20,000. Any 
     reduction determined 

[[Page H10595]]

     under the preceding sentence which is not a multiple of $10 
     shall be rounded to the nearest multiple of $10.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.
                         Subtitle C--Work First

     SEC. 9301. WORK FIRST PROGRAM.

       (a) Establishment and Operation of Program.--Title IV (42 
     U.S.C. 601 et seq.) is amended by striking part F and 
     inserting the following:

                      ``Part F--Work First Program

     ``SEC. 481. STATE ROLE.

       ``(a) Program Requirements.--Any State may establish and 
     operate a work first program that meets the following 
     requirements:
       ``(1) Objective.--The objective of the program is for each 
     program participant to find and hold a full-time unsubsidized 
     paid job, and for this goal to be achieved in a cost-
     effective fashion.
       ``(2) Method.--The method of the program is to connect 
     recipients of assistance under the State plan approved under 
     part A with the private sector labor market as soon as 
     possible and offer them the support and skills necessary to 
     remain in the labor market. Each component of the program 
     should be permeated with an emphasis on employment and with 
     an understanding that minimum wage jobs are a stepping stone 
     to more highly paid employment. The program shall provide 
     recipients with education, training, job search and 
     placement, wage supplementation, temporary subsidized jobs, 
     or such other services that the State deems necessary to help 
     a recipient obtain private sector employment.
       ``(3) Job creation.--The creation of jobs, with an emphasis 
     on private sector jobs, shall be a component of the program 
     and shall be a priority for each State office with 
     responsibilities under the program.
       ``(4) Forms of assistance.--The State shall provide 
     assistance to participants in the program in the form of 
     education, training, job placement services (including 
     vouchers for job placement services), work supplementation 
     programs, temporary subsidized job creation, job counseling, 
     assistance in establishing microenterprises, or other 
     services to provide individuals with the support and skills 
     necessary to obtain and keep employment in the private 
     sector.
       ``(5) 2-year limitation on participation.--The program 
     shall comply with section 487(b).
       ``(6) Agreements of mutual responsibility.--
       ``(A) In general.--The State agency shall develop an 
     agreement of mutual responsibility for each program 
     participant, which will be an individualized comprehensive 
     plan, developed by the team and the participant, to move the 
     participant into a full-time unsubsidized job. The agreement 
     should detail the education, training, or skills that the 
     individual will be receiving to obtain a full-time 
     unsubsidized job, and the obligations of the individual.
       ``(B) Hours of participation requirement.--The agreement 
     shall provide that the individual shall participate in 
     activities in accordance with the agreement for--
       ``(i) not fewer than 20 hours per week during fiscal years 
     1997 and 1998;
       ``(ii) not fewer than 25 hours per week during fiscal year 
     1999; and
       ``(iii) not fewer than 30 hours per week thereafter.
       ``(7) Caseload participation rates.--The program shall 
     comply with section 488.
       ``(8) Nondisplacement.--The program may not be operated in 
     a manner that results in--
       ``(A) the displacement of a currently employed worker or 
     position by a program participant;
       ``(B) the replacement of an employee who has been 
     terminated with a program participant; or
       ``(C) the replacement of an individual who is on layoff 
     from the same position given to a progrm participant or any 
     equivalent position.
       ``(b) Annual Reports.--
       ``(1) Compliance with performance measures.--Each State 
     that operates a program under this part shall submit to the 
     Secretary annual reports that compare the achievements of the 
     program with the performance-based measures established under 
     section 488(c).
       ``(2) Compliance with participation rates.--Each State that 
     operates a program under this part for a fiscal year shall 
     submit to the Secretary a report on the participation rate of 
     the State for the fiscal year.

     ``SEC. 482. REVAMPED JOBS PROGRAM.

       ``A State that establishes a program under this part may 
     operate a program similar to the program known as the `GAIN 
     Program' that has been operated by Riverside County, 
     California, under Federal law in effect immediately before 
     the date this part first applies to the State of California.

     ``SEC. 483. USE OF PLACEMENT COMPANIES.

       ``(a) In General.--A State that establishes a program under 
     this part may enter into contracts with private companies 
     (whether operated for profit or not for profit) for the 
     placement of participants in the program in positions of 
     full-time employment, preferably in the private sector, for 
     wages sufficient to eliminate the need of such participants 
     for cash assistance.
       ``(b) Required Contract Terms.--Each contract entered into 
     under this section with a company shall meet the following 
     requirements:
       ``(1) Provision of job readiness and support services.--The 
     contract shall require the company to provide, to any program 
     participant who presents to the company a voucher issued 
     under subsection (d) intensive personalized support and job 
     readiness services designed to prepare the individual for 
     employment and ensure the continued success of the individual 
     in employment.
       ``(2) Payments.--
       ``(A) In general.--The contract shall provide for payments 
     to be made to the company with respect to each program 
     participant who presents to the company a voucher issued 
     under subsection (d).
       ``(B) Structure.--The contract shall provide for the 
     majority of the amounts to be paid under the contract with 
     respect to a program participant, to be paid after the 
     company has placed the participant in a position of full-time 
     employment and the participant has been employed in the 
     position for such period of not less than 5 months as the 
     State deems appropriate.
       ``(c) Competitive Bidding Required.--Contracts under this 
     section shall be awarded only after competitive bidding.
       ``(d) Vouchers.--The State shall issue a voucher to each 
     program participant whose agreement of mutual responsibility 
     provides for the use of placement companies under this 
     section, indicating that the participant is eligible for the 
     services of such a company.

     ``SEC. 484. TEMPORARY SUBSIDIZED JOB CREATION.

       ``A State that establishes a program under this part may 
     establish a program similar to the program known as `JOBS 
     Plus' that has been operated by the State of Oregon under 
     Federal law in effect immediately before the date this part 
     first applies to the State of Oregon.

     ``SEC. 485. MICROENTERPRISE.

       ``(a) Grants and Loans to Nonprofit Organizations for the 
     Provision of Technical Assistance, Training, and Credit to 
     Low Income Entrepreneurs.--A State that establishes a program 
     under this part may make grants and loans to nonprofit 
     organizations to provide technical assistance, training, and 
     credit to low income entrepreneurs for the purpose of 
     establishing microenterprises.
       ``(b) Microenterprise Defined.--For purposes of this 
     subsection, the term `microenterprise' means a commercial 
     enterprise which has 5 or fewer employees, 1 or more of whom 
     owns the enterprise.

     ``SEC. 486. WORK SUPPLEMENTATION PROGRAM.

       ``(a) In General.--A State that establishes a program under 
     this part may institute a work supplementation program under 
     which the State, to the extent it considers appropriate, may 
     reserve the sums that would otherwise be payable under the 
     State plan approved under part A to participants in the 
     program and use the sums instead for the purpose of providing 
     and subsidizing jobs for the participants (as described in 
     subsection (c)(3)(A) and (B)), as an alternative to providing 
     such assistance to the participants.
       ``(b) State Flexibility.--
       ``(1) Nothing in this part, or in any State plan approved 
     under part A, shall be construed to prevent a State from 
     operating (on such terms and conditions and in such cases as 
     the State may find to be necessary or appropriate) a work 
     supplementation program in accordance with this section and 
     section 484 (as in effect immediately before the date this 
     part first applies to the State).
       ``(2) Notwithstanding any other provision of law, a State 
     may adjust the levels of the standards of need under the 
     State plan as the State determines to be necessary and 
     appropriate for carrying out a work supplementation program 
     under this section.
       ``(3) Notwithstanding any other provision of law, a State 
     operating a work supplementation program under this section 
     may provide that the need standards in effect in those areas 
     of the State in which the program is in operation may be 
     different from the need standards in effect in the areas in 
     which the program is not in operation, and the State may 
     provide that the need standards for categories of recipients 
     may vary among such categories to the extent the State 
     determines to be appropriate on the basis of ability to 
     participate in the work supplementation program.
       ``(4) Notwithstanding any other provision of law, a State 
     may make such further adjustments in the amounts of 
     assistance provided under the plan to different categories of 
     recipients (as determined under paragraph (3)) in order to 
     offset increases in benefits from needs-related programs 
     (other than the State plan approved under part A) as the 
     State determines to be necessary and appropriate to further 
     the purposes of the work supplementation program.
       ``(5) In determining the amounts to be reserved and used 
     for providing and subsidizing jobs under this section as 
     described in subsection (a), the State may use a sampling 
     methodology.
       ``(6) Notwithstanding any other provision of law, a State 
     operating a work supplementation program under this section, 
     may reduce or eliminate the amount of earned income to be 
     disregarded under the State plan as the State determines to 
     be necessary and appropriate to further the purposes of the 
     work supplementation program.
       ``(c) Rules Relating to Supplemented Jobs.--
       ``(1) A work supplementation program operated by a State 
     under this section may 

[[Page H10596]]

     provide that any individual who is an eligible individual (as 
     determined under paragraph (2)) shall take a supplemented job 
     (as defined in paragraph (3)) to the extent that supplemented 
     jobs are available under the program. Payments by the State 
     to individuals or to employers under the work supplementation 
     program shall be treated as expenditures incurred by the 
     State for temporary employment assistance under part A except 
     as limited by subsection (d).
       ``(2) For purposes of this section, an eligible individual 
     is an individual who is in a category which the State 
     determines should be eligible to participate in the work 
     supplementation program, and who would, at the time of 
     placement in the job involved, be eligible for assistance 
     under an approved State plan if the State did not have a work 
     supplementation program in effect.
       ``(3) For purposes of this subsection, a supplemented job 
     is--
       ``(A) a job provided to an eligible individual by the State 
     or local agency administering the State plan under part A; or
       ``(B) a job provided to an eligible individual by any other 
     employer for which all or part of the wages are paid by the 
     State or local agency.

     A State may provide or subsidize under the program any job 
     which the State determines to be appropriate.
       ``(d) Cost Limitation.--The amount of the Federal payment 
     to a State under section 413 for expenditures incurred in 
     making payments to individuals and employers under a work 
     supplementation program under this subsection shall not 
     exceed an amount equal to the amount which would otherwise be 
     payable under such section if the family of each individual 
     employed in the program established in the State under this 
     section had received the maximum amount of assistance 
     providable under the State plan to such a family with no 
     income (without regard to adjustments under subsection (b) of 
     this section) for the lesser of--
       ``(1) 9 months; or
       ``(2) the number of months in which the individual was 
     employed in the program.
       ``(e) Rules of Interpretation.--
       ``(1) This section shall not be construed as requiring the 
     State or local agency administering the State plan to provide 
     employee status to an eligible individual to whom the State 
     or local agency provides a job under the work supplementation 
     program (or with respect to whom the State or local agency 
     provides all or part of the wages paid to the individual by 
     another entity under the program), or as requiring any State 
     or local agency to provide that an eligible individual 
     filling a job position provided by another entity under the 
     program be provided employee status by the entity during the 
     first 13 weeks the individual fills the position.
       ``(2) Wages paid under a work supplementation program shall 
     be considered to be earned income for purposes of any 
     provision of law.
       ``(f) Preservation of Medicaid Eligibility.--Any State that 
     chooses to operate a work supplementation program under this 
     section shall provide that any individual who participates in 
     the program, and any child or relative of the individual (or 
     other individual living in the same household as the 
     individual) who would be eligible for assistance under the 
     State plan approved under part A if the State did not have a 
     work supplementation program, shall be considered individuals 
     receiving assistance under the State plan approved under part 
     A for purposes of eligibility for medical assistance under 
     the State plan approved under title XIX.

     ``SEC. 487. PARTICIPATION RULES.

       ``(a) In General.--Except as provided in subsection (b), a 
     State that establishes a program under this part may require 
     any individual receiving assistance under the State plan 
     approved under part A to participate in the program.
       ``(b) 2-Year Limitation on Participation.--
       ``(1) In general.--Except as provided in paragraph (2), an 
     individual may not participate in a State program established 
     under this part if the individual has participated in the 
     State program established under this part for 24 months after 
     the date the individual first signed an agreement of mutual 
     responsibility under this part, excluding any month during 
     which the individual worked for an average of at least 25 
     hours per week in a private sector job.
       ``(2) Authority to allow repeat participation.--
       ``(A) In general.--Subject to subparagraph (B) of this 
     paragraph, a State may allow an individual who, by reason of 
     paragraph (1), would be prohibited from participating in the 
     State program established under this part to participate in 
     the program for such additional period or periods as the 
     State determines appropriate.
       ``(B) Limitation on percentage of repeat participants.--
       ``(i) In general.--Except as provided in clause (ii) of 
     this subparagraph, the number of individuals allowed under 
     subparagraph (A) to participate during a program year in a 
     State program established under this part shall not exceed--

       ``(I) 10 percent of the total number of individuals who 
     participated in the State program established under this part 
     or the State program established under part H during the 
     immediately preceding program year; or
       ``(II) in the case of fiscal year 2004 or any succeeding 
     fiscal year, 15 percent of such total number of individuals.

       ``(ii) Authority to increase limitation.--

         ``(I) Petition.--A State may request the Secretary to 
     increase to not more than 15 percent the percentage 
     limitation imposed by clause (i)(I) for a fiscal year before 
     fiscal year 2004.
         ``(II) Authority to grant request.--The Secretary may 
     approve a request made pursuant to subclause (I) if the 
     Secretary deems it appropriate. The Secretary shall develop 
     recommendations on the criteria that should be applied in 
     evaluating requests under subclause (I).

     ``SEC. 488. CASELOAD PARTICIPATION RATES; PERFORMANCE 
                   MEASURES.

         ``(a) Participation Rates.--
         ``(1) Requirement.--A State that operates a program under 
     this part shall achieve a participation rate for the 
     following fiscal years of not less than the following 
     percentage:

``Fiscal year:                                              Percentage:
  1997..........................................................16 ....

  1998..........................................................20 ....

  1999..........................................................24 ....

  2000..........................................................28 ....

  2001..........................................................32 ....

  2002..........................................................40 ....

  2003 or later.................................................52.....

         ``(2) Participation rate defined.--
         ``(A) In general.--As used in this subsection, the term 
     `participation rate' means, with respect to a State and a 
     fiscal year, an amount equal to--
         ``(i) the average monthly number of individuals who, 
     during the fiscal year, participate in the State program 
     established under this part or (if applicable) part G or H; 
     divided by
         ``(ii) the average monthly number of individuals who are 
     not described in section 402(c)(1)(D) and for whom an 
     individual responsibility plan is in effect under section 403 
     during the fiscal year.
         ``(B) Special rule.--For each of the 1st 12 months after 
     an individual ceases to receive assistance under a State plan 
     approved under part A by reason of having become employed for 
     more than 25 hours per week in an unsubsidized job in the 
     private sector, the individual shall be considered to be 
     participating in the State program established under this 
     part, and to be an adult recipient of such assistance, for 
     purposes of subparagraph (A).
         ``(3) State compliance reports.--Each State that operates 
     a program under this part for a fiscal year shall submit to 
     the Secretary a report on the participation rate of the State 
     for the fiscal year.
         ``(4) Effect of failure to meet participation rates.--
         ``(A) In general.--If a State reports that the State has 
     failed to achieve the participation rate required by 
     paragraph (1) for the fiscal year, the Secretary may make 
     recommendations for changes in the State program established 
     under this part and (if the State has established a program 
     under part G) the State program established under part G. The 
     State may elect to follow such recommendations, and shall 
     demonstrate to the Secretary how the State will achieve the 
     required participation rates.
         ``(B) Second consecutive failure.--Notwithstanding 
     subparagraph (A), if a State fails to achieve the 
     participation rate required by paragraph (1) for 2 
     consecutive fiscal years, the Secretary may--
         ``(i) require the State to make changes in the State 
     program established under this part and (if the State has 
     established a program under part G) the State program 
     established under part G; and
         ``(ii) reduce by 5 percent the amount otherwise payable 
     to the State under section 413.
         ``(b) Performance Standards.--The Secretary shall develop 
     standards to be used to measure the effectiveness of the 
     programs established under this part and part G in moving 
     recipients of assistance under the State plan approved under 
     part A into full-time unsubsidized employment.
         ``(c) Performance-Based Measures.--
         ``(1) Establishment.--The Secretary shall, by regulation, 
     establish measures of the effectiveness of the State programs 
     established under this part and under part G in moving 
     recipients of assistance under the State plan approved under 
     part A into full-time unsubsidized employment, based on the 
     performance of such programs.
         ``(2) Annual compliance reports.--Each State that 
     operates a program under this part shall submit to the 
     Secretary annual reports that compare the achievements of the 
     program with the performance-based measures established under 
     paragraph (1).

     ``SEC. 489. FEDERAL ROLE.

         ``(a) Approval of State Plans.--
         ``(1) In general.--Within 60 days after the date a State 
     submits to the Secretary a plan that provides for the 
     establishment and operation of a work first program that 
     meets the requirements of section 481, the Secretary shall 
     approve the plan.
         ``(2) Authority to extend approval deadline.--The 60-day 
     deadline established in paragraph (1) with respect to a State 
     may be extended in accordance with an agreement between the 
     Secretary and the State.
         ``(b) Performance-Based Measures.--The Secretary shall, 
     by regulation, establish measures of the effectiveness of the 
     State program established under this part and (if the State 
     has established a program under part G) the State program 
     established under 

[[Page H10597]]

     part G in moving recipients of assistance under the State 
     plan approved under part A into full-time unsubsidized 
     employment, based on the performance of such programs.
         ``(c) Effect of Failure To Meet Participation Rates.--
         ``(1) In general.--If a State reports that the State has 
     failed to achieve the participation rate required by section 
     488 for the fiscal year, the Secretary may make 
     recommendations for changes in the State program established 
     under this part and (if the State has established a program 
     under part G) the State program established under part G. The 
     State may elect to follow such recommendations, and shall 
     demonstrate to the Secretary how the State will achieve the 
     required participation rates.
         ``(2) Second consecutive failure.--Notwithstanding 
     paragraph (1), if the State has failed to achieve the 
     participation rates required by section 488 for 2 consecutive 
     fiscal years, the Secretary may require the State to make 
     changes in the State program established under this part and 
     (if the State has established a program under part G) the 
     State program established under part G.

                       ``Part G--Workfare Program

     ``SEC. 490. ESTABLISHMENT AND OPERATION OF PROGRAM.

         ``(a) In General.--A State that establishes a work first 
     program under part F may establish and carry out a workfare 
     program that meets the requirements of this part, unless the 
     State has established a job placement voucher program under 
     part H.
         ``(b) Objective.--The objective of the workfare program 
     is for each program participant to find and hold a full-time 
     unsubsidized paid job, and for this goal to be achieved in a 
     cost-effective fashion.
         ``(c) Case Management Teams.--The State shall assign to 
     each program participant a case management team that shall 
     meet with the participant and assist the participant to 
     choose the most suitable workfare job under subsection (e), 
     (f), or (g) and to eventually obtain a full-time unsubsidized 
     paid job.
         ``(d) Provision of Jobs.--The State shall provide each 
     participant in the program with a community service job that 
     meets the requirements of subsection (e) or a subsidized job 
     that meets the requirements of subsection (f) or (g).
         ``(e) Community Service Jobs.--
         ``(1) In general.--Except as provided in paragraphs (2) 
     and (3), each participant shall work for not fewer than 30 
     hours per week (or, at the option of the State, 20 hours per 
     week during fiscal years 1997 and 1998, not fewer than 25 
     hours per week during fiscal year 1999, not fewer than 30 
     hours per week during fiscal years 2000 and 2001, and not 
     fewer than 35 hours per week thereafter) in a community 
     service job, and be paid at a rate which is not greater than 
     75 percent (or, at the option of the State, 100 percent) of 
     the maximum amount of assistance that may be provided under 
     the State plan approved under part A to a family of the same 
     size and composition with no income.
         ``(2) Exception.--(A) If the participant has obtained 
     unsubsidized part-time employment in the private sector, the 
     State shall provide the participant with a part-time 
     community service job.
         ``(B) If the State provides a participant a part-time 
     community service job under subparagraph (A), the State shall 
     ensure that the participant works for not fewer than 30 hours 
     per week.
         ``(3) Wages not considered earned income.--Wages paid 
     under a workfare program shall not be considered to be earned 
     income for purposes of any provision of law.
         ``(4) Community service job defined.--For purposes of 
     this section, the term `community service job' means--
         ``(A) a job provided to a participant by the State 
     administering the State plan under part A; or
         ``(B) a job provided to a participant by any other 
     employer for which all or part of the wages are paid by the 
     State.
     A State may provide or subsidize under the program any job 
     which the State determines to be appropriate.
         ``(f) Temporary Subsidized Job Creation.--A State that 
     establishes a workfare program under this part may establish 
     a program similar to the program operated by the State of 
     Oregon, which is known as `JOBS Plus'.
         ``(g) Work Supplementation Program.--
         ``(1) In general.--A State that establishes a workfare 
     program under this part may institute a work supplementation 
     program under which the State, to the extent it considers 
     appropriate, may reserve the sums that would otherwise be 
     payable to participants in the program as a community service 
     minimum wage and use the sums instead for the purpose of 
     providing and subsidizing private sector jobs for the 
     participants.
         ``(2) Employer agreement.--An employer who provides a 
     private sector job to a participant under paragraph (1) shall 
     agree to provide to the participant an amount in wages equal 
     to the poverty threshold for a family of three.
         ``(h) Job Search Requirement.--The State shall require 
     each participant to spend a minimum of 5 hours per week on 
     activities related to securing unsubsidized full-time 
     employment in the private sector.
         ``(i) Duration of Participation.--
         ``(1) In general.--Except as provided in paragraph (2), 
     an individual may not participate for more than 2 years in a 
     workfare program under this part.
         ``(2) Authority to allow repeated participation.--
         ``(A) In general.--Subject to subparagraph (B), a State 
     may allow an individual who, by reason of paragraph (1), 
     would be prohibited from participating in the State program 
     established under this part to participate in the program for 
     such additional period or periods as the State determines 
     appropriate.
         ``(B) Limitation on percentage of repeat participants.--
         ``(i) In general.--Except as provided in clause (ii), the 
     number of individuals allowed under subparagraph (A) to 
     participate during a program year in a State program 
     established under this part shall not exceed 10 percent of 
     the total number of individuals who participated in the 
     program during the immediately preceding program year.
         ``(ii) Authority to increase limitation.--

         ``(I) Petition.--A State may request the Secretary to 
     increase the percentage limitation imposed by clause (i) to 
     not more than 15 percent.
         ``(II) Authority to grant request.--The Secretary may 
     approve a request made pursuant to subclause (I) if the 
     Secretary deems it appropriate. The Secretary shall develop 
     recommendations on the criteria that should be applied in 
     evaluating requests under subclause (I).

         ``(j) Use of Placement Companies.--A State that 
     establishes a workfare program under this part may enter into 
     contracts with private companies (whether operated for profit 
     or not for profit) for the placement of participants in the 
     program in positions of full-time employment, preferably in 
     the private sector, for wages sufficient to eliminate the 
     need of such participants for cash assistance in accordance 
     with section 483.
         ``(k) Maximum of 3 Community Service Jobs.--A program 
     participant may not receive more than 3 community service 
     jobs under the program.

                ``Part H--Job Placement Voucher Program

     ``SEC. 490A. JOB PLACEMENT VOUCHER PROGRAM.

         ``A State that is not operating a workfare program under 
     part G may establish a job placement voucher program that 
     meets the following requirements:
         ``(1) The program shall offer each program participant a 
     voucher which the participant may use to obtain employment in 
     the private sector.
         ``(2) An employer who receives a voucher issued under the 
     program from an individual may redeem the voucher at any time 
     after the individual has been employed by the employer for 6 
     months, unless another employee of the employer was displaced 
     by the employment of the individual.
         ``(3) Upon presentation of a voucher by an employer to 
     the State agency responsible for the administration of the 
     program, the State agency shall pay to the employer an amount 
     equal to 50 percent of the total amount of assistance 
     provided under the State plan approved under part A to the 
     family of which the individual is a member for the most 
     recent 12 months for which the family was eligible for such 
     assistance.''.
         (c) Funding.--Section 413(a), as added by section 9101(a) 
     of this Act, is amended--
         (1) by striking ``Subject to'' and inserting the 
     following:
         ``(1) In general.--Subject to''; and
         (2) by inserting after and below the end the following:
         ``(2) Work first and other programs.--(A) Each State that 
     is operating a program in accordance with a plan approved 
     under part F and a program in accordance with part G or H 
     shall be entitled to payments under paragraph (3) for any 
     fiscal year in an amount equal to the sum of the applicable 
     percentages (specified in such paragraph) of its expenditures 
     to carry out such programs (subject to limitations prescribed 
     by or pursuant to such parts or this part on expenditures 
     that may be included for purposes of determining payment 
     under paragraph (3)), but such payments for any fiscal year 
     in the case of any State may not exceed the limitation 
     determined under subparagraph (B) with respect to the State.
         ``(B) The limitation determined under this subparagraph 
     with respect to a State for any fiscal year is the amount 
     that bears the same ratio to the amount specified in 
     subparagraph (C) for such fiscal year as the average monthly 
     number of adult recipients (as defined in subparagraph (D)) 
     in the State in the preceding fiscal year bears to the 
     average monthly number of such recipients in all the States 
     for such preceding year.
         ``(C)(i) The amount specified in this subparagraph is--
         ``(I) $1,600,000,000 for fiscal year 1997;
         ``(II) $1,600,000,000 for fiscal year 1998;
         ``(III) $1,900,000,000 for fiscal year 1999;
         ``(IV) $2,500,000,000 for fiscal year 2000; and
         ``(V) $3,200,000,000 for fiscal year 2001; and
         ``(VI) $4,700,000,000 for fiscal year 2002; and
         ``(VII) the amount determined under clause (ii) for 
     fiscal year 2003 and each succeeding fiscal year.
         ``(ii) The amount determined under this clause for a 
     fiscal year is the product of the following:
         ``(I) The amount specified in this subparagraph for the 
     immediately preceding fiscal year.
         ``(II) 1.00 plus the percentage (if any) by which--

[[Page H10598]]

         ``(aa) the average of the Consumer Price Index (as 
     defined in section 1(f)(5) of the Internal Revenue Code of 
     1986) for the most recent 12-month period for which such 
     information is available; exceeds
         ``(bb) the average of the Consumer Price Index (as so 
     defined) for the 12-month period ending on June 30 of the 2nd 
     preceding fiscal year.
         ``(III) The amount that bears the same ratio to the 
     amount specified in this subparagraph for the immediately 
     preceding fiscal year as the number of individuals whom the 
     Secretary estimates will participate in programs operated 
     under part F, G, or H during the fiscal year bears to the 
     total number of individuals who participated in such programs 
     during such preceding fiscal year.
         ``(D) For purposes of this paragraph, the term `adult 
     recipient' in the case of any State means an individual other 
     than a dependent child (unless such child is the custodial 
     parent of another dependent child) whose needs are met (in 
     whole or in part) with assistance provided under the State 
     plan approved under this part.
         ``(E) For purposes of subparagraph (D), the term 
     `dependent child' means a needy child (i) who has been 
     deprived of parental support or care by reason of the death, 
     continued absence from the home (other than absence 
     occasioned solely by reason of the performance of active duty 
     in the uniformed services of the United States), or physical 
     or mental incapacity of a parent, and who is living with his 
     father, mother, grandfather, grandmother, brother, sister, 
     stepfather, stepmother, stepbrother, stepsister, uncle, aunt, 
     first cousin, nephew, or niece, in a place of residence 
     maintained by one or more of such relatives as his or their 
     own home, and (ii) who is (I) under the age of eighteen, or 
     (II) at the option of the State, under the age of nineteen 
     and a full-time student in a secondary school (or in the 
     equivalent level of vocational or technical training), if, 
     before he attains age nineteen, he may reasonably be expected 
     to complete the program of such secondary school (or such 
     training).
         ``(F) For purposes of subparagraph (E), the term 
     `relative with whom any dependent child is living' means the 
     individual who is one of the relatives specified in 
     subparagraph (E) and with whom such child is living (within 
     the meaning of such subsection) in a place of residence 
     maintained by such individual (himself or together with any 
     one or more of the other relatives so specified) as his (or 
     their) own home.
         ``(3)(A) In lieu of any payment under paragraph (1) 
     therefor, the Secretary shall pay to each State that is 
     operating a program in accordance with a plan approved under 
     part F and a program in accordance with part G or H, with 
     respect to expenditures by the State to carry out such 
     programs, an amount equal to--
         ``(i) with respect to so much of such expenditures in a 
     fiscal year as do not exceed the State's expenditures in the 
     fiscal year 1987 with respect to which payments were made to 
     such State from its allotment for such fiscal year pursuant 
     to part C of this title as then in effect, 90 percent; and
         ``(ii) with respect to so much of such expenditures in a 
     fiscal year as exceed the amount described in clause (i)--
         ``(I) 50 percent, in the case of expenditures for 
     administrative costs made by a State in operating such 
     programs for such fiscal year (other than the personnel costs 
     for staff employed full-time in the operation of such 
     program) and the costs of transportation and other work-
     related supportive services; and
         ``(II) 60 percent or the Federal medical assistance 
     percentage (as defined in the last sentence of section 1118), 
     whichever is the greater, in the case of expenditures made by 
     a State in operating such programs for such fiscal year 
     (other than for costs described in subclause (I)).
         ``(B) With respect to the amount for which payment is 
     made to a State under subparagraph (A)(i), the State's 
     expenditures for the costs of operating such programs may be 
     in cash or in kind, fairly evaluated.
         ``(C) Not more than 10 percent of the amount payable to a 
     State under this paragraph for a quarter may be for 
     expenditures made during the quarter with respect to program 
     participants who are not eligible for assistance under the 
     State plan approved under this part.''.
         (d) Secretary's Special Adjustment Fund.--Section 413(a), 
     as added by section 9101(a) of this Act, is amended by adding 
     at the end the following:
         ``(4) Secretary's Special Adjustment Fund.--(A) There 
     shall be available to the Secretary from the amount 
     appropriated for payments under paragraph (2) for States' 
     programs under parts F and G for fiscal year 1996, 
     $300,000,000 for special adjustments to States' limitations 
     on Federal payments for such programs.
         ``(B) A State may, not later than March 1 and September 1 
     of each fiscal year, submit to the Secretary a request to 
     adjust the limitation on payments under this section with 
     respect to its program under part F (and, in fiscal years 
     after 1997) its program under part G for the following fiscal 
     year. The Secretary shall only consider such a request from a 
     State which has, or which demonstrates convincingly on the 
     basis of estimates that it will, submit allowable claims for 
     Federal payment in the full amount available to it under 
     paragraph (2) in the current fiscal year and obligated 95 
     percent of its full amount in the prior fiscal year. The 
     Secretary shall by regulation prescribe criteria for the 
     equitable allocation among the States of Federal payments 
     pursuant to adjustments of the limitations referred to in the 
     preceding sentence in the case where the requests of all 
     States that the Secretary finds reasonable exceed the amount 
     available, and, within 30 days following the dates specified 
     in this paragraph, will notify each State whether one or more 
     of its limitations will be adjusted in accordance with the 
     State's request and the amount of the adjustment (which may 
     be some or all of the amount requested).
         ``(C) The Secretary may adjust the limitation on Federal 
     payments to a State for a fiscal year under paragraph (2), 
     and upon a determination by the Secretary that (and the 
     amount by which) a State's limitation should be raised, the 
     amount specified in such paragraph shall be considered to be 
     so increased for the following fiscal year.
         ``(D) The amount made available under subparagraph (A) 
     for special adjustments shall remain available to the 
     Secretary until expended. That amount shall be reduced by the 
     sum of the adjustments approved by the Secretary in any 
     fiscal year, and the amount shall be increased in a fiscal 
     year by the amount by which all States' limitations under 
     paragraph (2) of this subsection and section 2008 for a 
     fiscal year exceeded the sum of the Federal payments under 
     such provisons of law for such fiscal year, but for fiscal 
     years after 1997, such amount at the end of such fiscal year 
     shall not exceed $400,000,000.''.
         (e) Conforming Amendments.--
         (1) Section 1115(b)(2)(A) (42 U.S.C. 1315(b)(2)(A)) is 
     amended by striking ``, and 402(a)(19) (relating to the work 
     incentive program)''.
         (2) Section 1108 (42 U.S.C. 1308) is amended--
         (A) in subsection (a), by striking ``or, in the case of 
     part A of title IV, section 403(k)''; and
         (B) in subsection (d), by striking ``(exclusive of any 
     amounts on account of services and items to which, in the 
     case of part A of such title, section 403(k) applies)''.
         (3) Section 1902(a)(10)(A)(i)(I) (42 U.S.C. 
     1396a(a)(19)(A)(i)(I)) is amended--
         (A) by striking ``402(a)(37), 406(h), or''; and
         (B) by striking ``482(e)(6)'' and inserting ``486(f)''.
         (4) Section 1928(a)(1) (42 U.S.C. 1396s(a)(1)) is amended 
     by striking ``482(e)(6)'' and inserting ``486(f)''.
         (f) Intent of the Congress.--The Congress intends for 
     State activities under section 484 of the Social Security Act 
     (as added by the amendment made by section 9301(a) of this 
     Act) to emphasize the use of the funds that would otherwise 
     be used to provide individuals with assistance under part A 
     of title IV of the Social Security Act and with food stamp 
     benefits under the Food Stamp Act of 1977, to subsidize the 
     wages of such individuals in temporary jobs.
         (g) Sense of the Congress.--It is the sense of the 
     Congress that States should target individuals who have not 
     attained 25 years of age for participation in the program 
     established by the State under part F of title IV of the 
     Social Security Act (as added by the amendment made by 
     section 9301(a) of this section) in order to break the cycle 
     of welfare dependency.

     SEC. 9302. REGULATIONS.

         The Secretary of Health and Human Services shall 
     prescribe such regulations as may be necessary to implement 
     the amendments made by this subtitle.

     SEC. 9303. APPLICABILITY TO STATES.

         (a) State Option to Accelerate Applicability.--If a State 
     formally notifies the Secretary of Health and Human Services 
     that the State desires to accelerate the applicability to the 
     State of the amendments made by this subtitle, the amendments 
     shall apply to the State on and after such earlier date as 
     the State may select.
         (b) State Option to Delay Applicability Until Waivers 
     Expire.--The amendments made by this subtitle shall not apply 
     to a State with respect to which there is in effect a waiver 
     issued under section 1115 of the Social Security Act for the 
     State program established under part F of title IV of such 
     Act, until the waiver expires, if the State formally notifies 
     the Secretary of Health and Human Services that the State 
     desires to so delay such effective date.
         (c) Authority of the Secretary of Health and Human 
     Services to Delay Applicability to a State.--If a State 
     formally notifies the Secretary of Health and Human Services 
     that the State desires to delay the applicability to the 
     State of the amendments made by this title, the amendments 
     shall apply to the State on and after any later date agreed 
     upon by the Secretary and the State.
     Subtitle D--Family Responsibility And Improved Child Support 
                              Enforcement

CHAPTER 1--ELIGIBILITY AND OTHER MATTERS CONCERNING TITLE IV-D PROGRAM 
                                CLIENTS

     SEC. 9401. STATE OBLIGATION TO PROVIDE PATERNITY 
                   ESTABLISHMENT AND CHILD SUPPORT ENFORCEMENT 
                   SERVICES.

       (a) State Law Requirements.--Section 466(a) (42 U.S.C. 
     666(a)) is amended by inserting after paragraph (11) the 
     following:
       ``(12) Use of central case registry and centralized 
     collections unit.--Procedures under which--
       ``(A) every child support order established or modified in 
     the State on or after October 

[[Page H10599]]

     1, 1998, is recorded in the central case registry established 
     in accordance with section 454A(e); and
       ``(B) child support payments are collected through the 
     centralized collections unit established in accordance with 
     section 454B--
       ``(i) on and after October 1, 1998, under each order 
     subject to wage withholding under section 466(b); and
       ``(ii) on and after October 1, 1999, under each other order 
     required to be recorded in such central case registry under 
     this paragraph or section 454A(e), except as provided in 
     subparagraph (C); and
       ``(C)(i) parties subject to a child support order described 
     in subparagraph (B)(ii) may opt out of the procedure for 
     payment of support through the centralized collections unit 
     (but not the procedure for inclusion in the central case 
     registry) by filing with the State agency a written 
     agreement, signed by both parties, to an alternative payment 
     procedure; and
       ``(ii) an agreement described in clause (i) becomes void 
     whenever either party advises the State agency of an intent 
     to vacate the agreement.''.
       (b) State Plan Requirements.--Section 454 (42 U.S.C. 654) 
     is amended--
       (1) by striking paragraph (4) and inserting the following:
       ``(4) provide that such State will undertake--
       ``(A) to provide appropriate services under this part to--
       ``(i) each child with respect to whom an assignment is 
     effective under section 403(b)(1)(E)(i), 471(a)(17), or 1912 
     (except in cases where the State agency determines, in 
     accordance with paragraph (25), that it is against the best 
     interests of the child to do so); and
       ``(ii) each child not described in clause (i)--

       ``(I) with respect to whom an individual applies for such 
     services; and
       ``(II) (on and after October 1, 1998) each child with 
     respect to whom a support order is recorded in the central 
     State case registry established under section 454A, 
     regardless of whether application is made for services under 
     this part; and

       ``(B) to enforce the support obligation established with 
     respect to the custodial parent of a child described in 
     subparagraph (A) unless the parties to the order which 
     establishes the support obligation have opted, in accordance 
     with section 466(a)(12)(C), for an alternative payment 
     procedure.''; and
       (2) in paragraph (6)--
       (A) by striking subparagraph (A) and inserting the 
     following:
       ``(A) services under the State plan shall be made available 
     to nonresidents on the same terms as to residents;'';
       (B) in subparagraph (B)--
       (i) by inserting ``on individuals not receiving assistance 
     under part A'' after ``such services shall be imposed''; and
       (ii) by inserting ``but no fees or costs shall be imposed 
     on any absent or custodial parent or other individual for 
     inclusion in the central State registry maintained pursuant 
     to section 454A(e)''; and
       (C) in each of subparagraphs (B), (C), and (D)--
       (i) by indenting such subparagraph and aligning its left 
     margin with the left margin of subparagraph (A); and
       (ii) by striking the final comma and inserting a semicolon.
       (c) Conforming Amendments.--
       (1) Section 452(g)(2)(A) (42 U.S.C. 652(g)(2)(A)) is 
     amended by striking ``454(6)'' each place it appears and 
     inserting ``454(4)(A)(ii)''.
       (2) Section 454(23) (42 U.S.C. 654(23)) is amended, 
     effective October 1, 1998, by striking ``information as to 
     any application fees for such services and''.
       (3) Section 466(a)(3)(B) (42 U.S.C. 666(a)(3)(B)) is 
     amended by striking ``in the case of overdue support which a 
     State has agreed to collect under section 454(6)'' and 
     inserting ``in any other case''.
       (4) Section 466(e) (42 U.S.C. 666(e)) is amended by 
     striking ``or (6)''.

     SEC. 9402. DISTRIBUTION OF PAYMENTS.

       (a) Distributions Through State Child Support Enforcement 
     Agency to Former Assistance Recipients.--Section 454(5) (42 
     U.S.C. 654(5)) is amended--
       (1) in subparagraph (A)--
       (A) by striking section 402(a)(26) is effective,'' and 
     inserting ``section 403(b)(1)(E)(i) is effective, except as 
     otherwise specifically provided in section 464 or 
     466(a)(3),''; and
       (B) by striking ``except that'' and all that follows 
     through the semicolon; and
       (2) in subparagraph (B), by striking ``, except'' and all 
     that follows through ``medical assistance''.
       (b) Distribution to a Family Currently Receiving Temporary 
     Employment Assistance.--Section 457 (42 U.S.C. 657) is 
     amended--
       (1) by striking subsection (a) and redesignating subsection 
     (b) as subsection (a);
       (2) in subsection (a) (as so redesignated)--
       (A) in the matter preceding paragraph (2), to read as 
     follows:
       ``(a) In the Case of a Family Receiving TEA.--Amounts 
     collected under this part during any month as support of a 
     child who is receiving assistance under part A (or a parent 
     or caretaker relative of such a child) shall (except in the 
     case of a State exercising the option under subsection (b)) 
     be distributed as follows:
       ``(1) an amount equal to the amount that will be 
     disregarded pursuant to section 402(d)(2)(C) shall be taken 
     from each of--
       ``(A) the amounts received in a month which represent 
     payments for that month; and
       ``(B) the amounts received in a month which represent 
     payments for a prior month which were made by the absent 
     parent in that prior month;

     and shall be paid to the family without affecting its 
     eligibility for assistance or decreasing any amount otherwise 
     payable as assistance to such family during such month;'';
       (B) in paragraph (4), by striking ``or (B)'' and all that 
     follows through the period and inserting ``; then (B) from 
     any remainder, amounts equal to arrearages of such support 
     obligations assigned, pursuant to part A, to any other State 
     or States shall be paid to such other State or States and 
     used to pay any such arrearages (with appropriate 
     reimbursement of the Federal Government to the extent of its 
     participation in the financing); and then (C) any remainder 
     shall be paid to the family.''; and
       (3) by inserting after subsection (a) (as so redesignated) 
     the following new subsection:
       ``(b) Alternative Distribution in Case of Family Receiving 
     TEA.--In the case of a State electing the option under this 
     subsection, amounts collected as described in subsection (a) 
     shall be distributed as follows:
       ``(1) an amount equal to the amount that will be 
     disregarded pursuant to section 402(d)(2)(C) shall be taken 
     from each of--
       ``(A) the amounts received in a month which represent 
     payments for that month; and
       ``(B) the amounts received in a month which represent 
     payments for a prior month which were made by the absent 
     parent in that prior month;

     and shall be paid to the family without affecting its 
     eligibility for assistance or decreasing any amount otherwise 
     payable as assistance to such family during such month;
       ``(2) second, from any remainder, amounts equal to the 
     balance of support owed for the current month shall be paid 
     to the family;
       ``(3) third, from any remainder, amounts equal to 
     arrearages of such support obligations assigned, pursuant to 
     part A, to the State making the collection shall be retained 
     and used by such State to pay any such arrearages (with 
     appropriate reimbursement of the Federal Government to the 
     extent of its participation in the financing);
       ``(4) fourth, from any remainder, amounts equal to 
     arrearages of such support obligations assigned, pursuant to 
     part A, to any other State or States shall be paid to such 
     other State or States and used to pay any such arrearages 
     (with appropriate reimbursement of the Federal Government to 
     the extent of its participation in the financing); and
       ``(5) fifth, any remainder shall be paid to the family.''.
       (c) Distribution to a Family Not Receiving TEA.--Section 
     457(c) (42 U.S.C. 657(c)) is amended to read as follows:
       ``(c) Distributions In Case of Family Not Receiving TEA.--
     Amounts collected by a State agency under this part during 
     any month as support of a child who is not receiving 
     assistance under part A (or of a parent or caretaker relative 
     of such a child) shall (subject to the remaining provisions 
     of this section) be distributed as follows:
       ``(1) first, amounts equal to the total of such support 
     owed for such month shall be paid to the family;
       ``(2) second, from any remainder, amounts equal to 
     arrearages of such support obligations for months during 
     which such child did not receive assistance under part A 
     shall be paid to the family;
       ``(3) third, from any remainder, amounts equal to 
     arrearages of such support obligations assigned to the State 
     making the collection pursuant to part A shall be retained 
     and used by such State to pay any such arrearages (with 
     appropriate reimbursement of the Federal Government to the 
     extent of its participation in the financing); and
       ``(4) fourth, from any remainder, amounts equal to 
     arrearages of such support obligations assigned to any other 
     State pursuant to part A shall be paid to such other State or 
     States, and used to pay such arrearages, in the order in 
     which such arrearages accrued (with appropriate reimbursement 
     of the Federal Government to the extent of its participation 
     in the financing).''.
       (d) Distribution to a Child Receiving Assistance Under 
     Title IV-E.--Section 457(d) (42 U.S.C. 657(d)) is amended, in 
     the matter preceding paragraph (1), by striking 
     ``Notwithstanding the preceding provisions of this section, 
     amounts'' and inserting the following:
       ``(d) Distributions In Case of a Child Receiving Assistance 
     Under Title IV-E.--Amounts''.
       (e) Regulations.--The Secretary of Health and Human 
     Services shall promulgate regulations under part A of title 
     IV of the Social Security Act, establishing standards 
     applicable to States electing the alternative formula under 
     section 457(b) of such Act for distribution of collections on 
     behalf of families receiving temporary employment assistance, 
     designed to minimize irregular monthly payments to such 
     families.
       (f) Clerical Amendments.--Section 454 (42 U.S.C. 654) is 
     amended--
       (1) in paragraph (11)--
       (A) by striking ``(11)'' and inserting ``(11)(A)''; and
       (B) by inserting after the semicolon ``and''; and

[[Page H10600]]

       (2) by redesignating paragraph (12) as subparagraph (B) of 
     paragraph (11).
       (g) Effective dates.--
       (1) In general.--Execpt as otherwise provided in this 
     subsection, the amendments made by this section shall become 
     effective on October 1, 1996.
       (2) Family not receiving tea.--The amendment made by 
     subsection (c) shall become effective on October 1, 1999.
       (3) Special rules.--
       (A) Applicability.--A State may elect to have the 
     amendments made by any subsection of this section become 
     effective only with respect to child support cases beginning 
     on or after the effective date of such subsection.
       (B) Delayed implementation.--A State may elect to have the 
     amendments made by this section (other than subsection (c)) 
     become effective on a date later than October 1, 1996, which 
     date shall coincide with the operation of the single 
     statewide automated data processing and information retrieval 
     system required by section 454A of the Social Security Act 
     (as added by section 9415(a)(2) of this Act) and the State 
     centralized collection unit required by section 454B of the 
     Social Security Act (as added by section 9422(b) of this 
     Act).

     SEC. 9403. DUE PROCESS RIGHTS.

       (a) In General.--Section 454 (42 U.S.C. 654), as amended by 
     section 9402(f) of this Act, is amended by inserting after 
     paragraph (11) the following new paragraph:
       ``(12) provide for procedures to ensure that--
       ``(A) individuals who are applying for or receiving 
     services under this part, or are parties to cases in which 
     services are being provided under this part--
       ``(i) receive notice of all proceedings in which support 
     obligations might be established or modified; and
       ``(ii) receive a copy of any order establishing or 
     modifying a child support obligation, or (in the case of a 
     petition for modification) a notice of determination that 
     there should be no change in the amount of the child support 
     award, within 14 days after issuance of such order or 
     determination;
       ``(B) individuals applying for or receiving services under 
     this part have access to a fair hearing that meets standards 
     established by the Secretary and ensures prompt consideration 
     and resolution of complaints (but the resort to such 
     procedure shall not stay the enforcement of any support 
     order); and
       ``(C) individuals adversely affected by the establishment 
     or modification of (or, in the case of a petition for 
     modification, the determination that there should be no 
     change in) a child support order shall be afforded not less 
     than 30 days after the receipt of the order or determination 
     to initiate proceedings to challenge such order or 
     determination;''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall become effective on October 1, 1997.

     SEC. 9404. PRIVACY SAFEGUARDS.

       (a) State Plan Requirement.--Section 454 (42 U.S.C. 454) is 
     amended--
       (1) by striking ``and'' at the end of paragraph (23);
       (2) by striking the period at the end of paragraph (24) and 
     inserting ``; and''; and
       (3) by adding after paragraph (24) the following:
       ``(25) will have in effect safeguards applicable to all 
     sensitive and confidential information handled by the State 
     agency designed to protect the privacy rights of the parties, 
     including--
       ``(A) safeguards against unauthorized use or disclosure of 
     information relating to proceedings or actions to establish 
     paternity, or to establish or enforce support;
       ``(B) prohibitions on the release of information on the 
     whereabouts of one party to another party against whom a 
     protective order with respect to the former party has been 
     entered; and
       ``(C) prohibitions on the release of information on the 
     whereabouts of one party to another party if the State has 
     reason to believe that the release of the information may 
     result in physical or emotional harm to the former party.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall become effective on October 1, 1997.

             CHAPTER 2--PROGRAM ADMINISTRATION AND FUNDING

     SEC. 9411. FEDERAL MATCHING PAYMENTS.

       (a) Increased Base Matching Rate.--Section 455(a)(2) (42 
     U.S.C. 655(a)(2)) is amended to read as follows:
       ``(2) The applicable percent for a quarter for purposes of 
     paragraph (1)(A) is--
       ``(A) for fiscal year 1997, 69 percent,
       ``(B) for fiscal year 1998, 72 percent, and
       ``(C) for fiscal year 1999 and succeeding fiscal years, 75 
     percent.''.
       (b) Maintenance of Effort.--Section 455 (42 U.S.C. 655) is 
     amended--
       (1) in subsection (a)(1), in the matter preceding 
     subparagraph (A), by striking ``From'' and inserting 
     ``Subject to subsection (c), from''; and
       (2) by inserting after subsection (b) the following new 
     subsection:
       ``(c) Maintenance of Effort.--Notwithstanding the 
     provisions of subsection (a), total expenditures for the 
     State program under this part for fiscal year 1997 and each 
     succeeding fiscal year, reduced by the percentage specified 
     for such fiscal year under subsection (a)(2)(A), (B), or 
     (C)(i), shall not be less than such total expenditures for 
     fiscal year 1996, reduced by 66 percent.''.

     SEC. 9412. PERFORMANCE-BASED INCENTIVES AND PENALTIES.

       (a) Incentive Adjustments to Federal Matching Rate.--
     Section 458 (42 U.S.C. 658) is amended to read as follows:


                ``incentive adjustments to matching rate

       ``Sec. 458. (a) Incentive Adjustment.--(1) In General.--In 
     order to encourage and reward State child support enforcement 
     programs which perform in an effective manner, the Federal 
     matching rate for payments to a State under section 
     455(a)(1)(A), for each fiscal year beginning on or after 
     October 1, 1998, shall be increased by a factor reflecting 
     the sum of the applicable incentive adjustments (if any) 
     determined in accordance with regulations under this section 
     with respect to Statewide paternity establishment and to 
     overall performance in child support enforcement.
       ``(2) Standards.--(A) In General.--The Secretary shall 
     specify in regulations--
       ``(i) the levels of accomplishment, and rates of 
     improvement as alternatives to such levels, which States must 
     attain to qualify for incentive adjustments under this 
     section; and
       ``(ii) the amounts of incentive adjustment that shall be 
     awarded to States achieving specified accomplishment or 
     improvement levels, which amounts shall be graduated, ranging 
     up to--
       ``(I) 5 percentage points, in connection with Statewide 
     paternity establishment; and
       ``(II) 10 percentage points, in connection with overall 
     performance in child support enforcement.
       ``(B) Limitation.--In setting performance standards 
     pursuant to subparagraph (A)(i) and adjustment amounts 
     pursuant to subparagraph (A)(ii), the Secretary shall ensure 
     that the aggregate number of percentage point increases as 
     incentive adjustments to all States do not exceed such 
     aggregate increases as assumed by the Secretary in estimates 
     of the cost of this section as of June 1995, unless the 
     aggregate performance of all States exceeds the projected 
     aggregate performance of all States in such cost estimates.
       ``(3) Determination of Incentive Adjustment.--The Secretary 
     shall determine the amount (if any) of incentive adjustment 
     due each State on the basis of the data submitted by the 
     State pursuant to section 454(15)(B) concerning the levels of 
     accomplishment (and rates of improvement) with respect to 
     performance indicators specified by the Secretary pursuant to 
     this section.
       ``(4) Fiscal Year Subject to Incentive Adjustment.--The 
     total percentage point increase determined pursuant to this 
     section with respect to a State program in a fiscal year 
     shall apply as an adjustment to the applicable percent under 
     section 455(a)(2) for payments to such State for the 
     succeeding fiscal year.
       ``(5) Recycling of Incentive Adjustment.--A State shall 
     expend in the State program under this part all funds paid to 
     the State by the Federal Government as a result of an 
     incentive adjustment under this section.
       ``(b) Meaning of Terms.--For purposes of this section--
       ``(1) the term `Statewide paternity establishment 
     percentage' means, with respect to a fiscal year, the ratio 
     (expressed as a percentage) of--
       ``(A) the total number of out-of-wedlock children in the 
     State under one year of age for whom paternity is established 
     or acknowledged during the fiscal year, to
       ``(B) the total number of children born out of wedlock in 
     the State during such fiscal year; and
       ``(2) the term `overall performance in child support 
     enforcement' means a measure or measures of the effectiveness 
     of the State agency in a fiscal year which takes into account 
     factors including--
       ``(A) the percentage of cases requiring a child support 
     order in which such an order was established;
       ``(B) the percentage of cases in which child support is 
     being paid;
       ``(C) the ratio of child support collected to child support 
     due; and
       ``(D) the cost-effectiveness of the State program, as 
     determined in accordance with standards established by the 
     Secretary in regulations.''.
       (b) Adjustment of Payments Under Part D of Title IV.--
     Section 455(a)(2) (42 U.S.C. 655(a)(2)), as amended by 
     section 9411(a) of this Act, is amended--
       (1) by striking the period at the end of subparagraph 
     (C)(ii) and inserting a comma; and
       (2) by adding after and below subparagraph (C), flush with 
     the left margin of the subsection, the following:

     ``increased by the incentive adjustment factor (if any) 
     determined by the Secretary pursuant to section 458.''.
       (c) Conforming Amendments.--Section 454(22) (42 U.S.C. 
     654(22)) is amended--
       (1) by striking ``incentive payments'' the first place it 
     appears and inserting ``incentive adjustments''; and
       (2) by striking ``any such incentive payments made to the 
     State for such period'' and inserting ``any increases in 
     Federal payments to the State resulting from such incentive 
     adjustments''.
       (d) Calculation of IV-D Paternity Establishment 
     Percentage.--(1) Section 452(g)(1) (42 U.S.C. 652(g)(1)) is 
     amended in the matter preceding subparagraph (A) by inserting 
     ``its overall performance in child support enforcement is 
     satisfactory (as defined 

[[Page H10601]]

     in section 458(b) and regulations of the Secretary), and'' 
     after ``1994,''.
       (2) Section 452(g)(2) (42 U.S.C. 652(g)(2)) is amended--
       (A) in subparagraph (A), in the matter preceding clause 
     (i)--
       (i) by striking ``paternity establishment percentage'' and 
     inserting ``IV-D paternity establishment percentage''; and
       (ii) by striking ``(or all States, as the case may be)'';
       (B) in subparagraph (A)(i), by striking ``during the fiscal 
     year'';
       (C) in subparagraph (A)(ii)(I), by striking ``as of the end 
     of the fiscal year'' and inserting ``in the fiscal year or, 
     at the option of the State, as of the end of such year'';
       (D) in subparagraph (A)(ii)(II), by striking ``or (E) as of 
     the end of the fiscal year'' and inserting ``in the fiscal 
     year or, at the option of the State, as of the end of such 
     year'';
       (E) in subparagraph (A)(iii)--
       (i) by striking ``during the fiscal year''; and
       (ii) by striking ``and'' at the end; and
       (F) in the matter following subparagraph (A)--
       (i) by striking ``who were born out of wedlock during the 
     immediately preceding fiscal year'' and inserting ``born out 
     of wedlock'';
       (ii) by striking ``such preceding fiscal year'' both places 
     it appears and inserting ``the preceding fiscal year''; and
       (iii) by striking ``or (E)'' the second place it appears.
       (3) Section 452(g)(3) (42 U.S.C. 652(g)(3)) is amended--
       (A) by striking subparagraph (A) and redesignating 
     subparagraphs (B) and (C) as subparagraphs (A) and (B), 
     respectively;
       (B) in subparagraph (A), as redesignated, by striking ``the 
     percentage of children born out-of-wedlock in the State'' and 
     inserting ``the percentage of children in the State who are 
     born out of wedlock or for whom support has not been 
     established''; and
       (C) in subparagraph (B), as redesignated--
       (i) by inserting ``and overall performance in child support 
     enforcement'' after ``paternity establishment percentages''; 
     and
       (ii) by inserting ``and securing support'' before the 
     period.
       (e) Reduction of Payments Under Part D of Title IV.--
       (1) New requirements.--Section 455 (42 U.S.C. 655) is 
     amended by inserting after subsection (b) the following:
       ``(c)(1) If the Secretary finds, with respect to a State 
     program under this part in a fiscal year beginning on or 
     after October 1, 1997--
       ``(A)(i) on the basis of data submitted by a State pursuant 
     to section 454(15)(B), that the State program in such fiscal 
     year failed to achieve the IV-D paternity establishment 
     percentage (as defined in section 452(g)(2)(A)) or the 
     appropriate level of overall performance in child support 
     enforcement (as defined in section 458(b)(2)), or to meet 
     other performance measures that may be established by the 
     Secretary, or
       ``(ii) on the basis of an audit or audits of such State 
     data conducted pursuant to section 452(a)(4)(C), that the 
     State data submitted pursuant to section 454(15)(B) is 
     incomplete or unreliable; and
       ``(B) that, with respect to the succeeding fiscal year--
       ``(i) the State failed to take sufficient corrective action 
     to achieve the appropriate performance levels as described in 
     subparagraph (A)(i) of this paragraph, or
       ``(ii) the data submitted by the State pursuant to section 
     454(15)(B) is incomplete or unreliable,

     the amounts otherwise payable to the State under this part 
     for quarters following the end of such succeeding fiscal 
     year, prior to quarters following the end of the first 
     quarter throughout which the State program is in compliance 
     with such performance requirement, shall be reduced by the 
     percentage specified in paragraph (2).
       ``(2) The reductions required under paragraph (1) shall 
     be--
       ``(A) not less than 6 nor more than 8 percent, or
       ``(B) not less than 8 nor more than 12 percent, if the 
     finding is the second consecutive finding made pursuant to 
     paragraph (1), or
       ``(C) not less than 12 nor more than 15 percent, if the 
     finding is the third or a subsequent consecutive such 
     finding.
       ``(3) For purposes of this subsection, section 405(d), and 
     section 452(a)(4), a State which is determined as a result of 
     an audit to have submitted incomplete or unreliable data 
     pursuant to section 454(15)(B), shall be determined to have 
     submitted adequate data if the Secretary determines that the 
     extent of the incompleteness or unreliability of the data is 
     of a technical nature which does not adversely affect the 
     determination of the level of the State's performance.''.
       (2) Conforming amendments.--
       (A) Section 452(a)(4) (42 U.S.C. 652(a)(4)) is amended by 
     striking ``403(h)'' each place such term appears and 
     inserting ``455(c)''.
       (B) Subsections (d)(3)(A), (g)(1), and (g)(3)(A) of section 
     452 (42 U.S.C. 652) are each amended by striking ``403(h)'' 
     and inserting ``455(c)''.
       (f) Effective Dates.--
       (1) Incentive adjustments.--(A) The amendments made by 
     subsections (a), (b), and (c) shall become effective October 
     1, 1997, except to the extent provided in subparagraph (B).
       (B) Section 458 of the Social Security Act, as in effect 
     prior to the enactment of this section, shall be effective 
     for purposes of incentive payments to States for fiscal years 
     prior to fiscal year 1999.
       (2) Penalty reductions.--(A) The amendments made by 
     subsection (d) shall become effective with respect to 
     calendar quarters beginning on and after the date of 
     enactment of this Act.
       (B) The amendments made by subsection (e) shall become 
     effective with respect to calendar quarters beginning on and 
     after the date one year after the date of enactment of this 
     Act.

     SEC. 9413. FEDERAL AND STATE REVIEWS AND AUDITS.

       (a) State Agency Activities.--Section 454 (42 U.S.C. 654) 
     is amended--
       (1) in paragraph (14), by striking ``(14)'' and inserting 
     ``(14)(A)'';
       (2) by redesignating paragraph (15) as subparagraph (B) of 
     paragraph (14); and
       (3) by inserting after paragraph (14) the following new 
     paragraph:
       ``(15) provide for--
       ``(A) a process for annual reviews of and reports to the 
     Secretary on the State program under this part, which shall 
     include such information as may be necessary to measure State 
     compliance with Federal requirements for expedited procedures 
     and timely case processing, using such standards and 
     procedures as are required by the Secretary, under which the 
     State agency will determine the extent to which such program 
     is in conformity with applicable requirements with respect to 
     the operation of State programs under this part (including 
     the status of complaints filed under the procedure required 
     under paragraph (12)(B)); and
       ``(B) a process of extracting from the State automated data 
     processing system and transmitting to the Secretary data and 
     calculations concerning the levels of accomplishment (and 
     rates of improvement) with respect to applicable performance 
     indicators (including IV-D paternity establishment 
     percentages and overall performance in child support 
     enforcement) to the extent necessary for purposes of sections 
     452(g) and 458.''.
       (b) Federal Activities.--Section 452(a)(4) (42 U.S.C. 
     652(a)(4)) is amended to read as follows:
       ``(4)(A) review data and calculations transmitted by State 
     agencies pursuant to section 454(15)(B) on State program 
     accomplishments with respect to performance indicators for 
     purposes of section 452(g) and 458, and determine the amount 
     (if any) of penalty reductions pursuant to section 455(c) to 
     be applied to the State;
       ``(B) review annual reports by State agencies pursuant to 
     section 454(15)(A) on State program conformity with Federal 
     requirements; evaluate any elements of a State program in 
     which significant deficiencies are indicated by such report 
     on the status of complaints under the State procedure under 
     section 454(12)(B); and, as appropriate, provide to the State 
     agency comments, recommendations for additional or 
     alternative corrective actions, and technical assistance; and
       ``(C) conduct audits, in accordance with the government 
     auditing standards of the United States Comptroller General--
       ``(i) at least once every 3 years (or more frequently, in 
     the case of a State which fails to meet requirements of this 
     part, or of regulations implementing such requirements, 
     concerning performance standards and reliability of program 
     data) to assess the completeness, reliability, and security 
     of the data, and the accuracy of the reporting systems, used 
     for the calculations of performance indicators specified in 
     subsection (g) and section 458;
       ``(ii) of the adequacy of financial management of the State 
     program, including assessments of--
       ``(I) whether Federal and other funds made available to 
     carry out the State program under this part are being 
     appropriately expended, and are properly and fully accounted 
     for; and
       ``(II) whether collections and disbursements of support 
     payments and program income are carried out correctly and are 
     properly and fully accounted for; and
       ``(iii) for such other purposes as the Secretary may find 
     necessary;''.
       (c) Effective Date.--The amendments made by this section 
     shall be effective with respect to calendar quarters 
     beginning on or after the date one year after enactment of 
     this section.

     SEC. 9414. REQUIRED REPORTING PROCEDURES.

       (a) Establishment.--Section 452(a)(5) (42 U.S.C. 652(a)(5)) 
     is amended by inserting ``, and establish procedures to be 
     followed by States for collecting and reporting information 
     required to be provided under this part, and establish 
     uniform definitions (including those necessary to enable the 
     measurement of State compliance with the requirements of this 
     part relating to expedited processes and timely case 
     processing) to be applied in following such procedures'' 
     before the semicolon.
       (b) State Plan Requirement.--Section 454 (42 U.S.C. 654), 
     as amended by section 9404(a) of this Act, is amended--
       (1) by striking ``and'' at the end of paragraph (24);
       (2) by striking the period at the end of paragraph (25) and 
     inserting ``; and''; and
       (3) by adding after paragraph (25) the following:
       ``(26) provide that the State shall use the definitions 
     established under section 452(a)(5) in collecting and 
     reporting information as required under this part.''.

[[Page H10602]]


     SEC. 9415. AUTOMATED DATA PROCESSING REQUIREMENTS.

       (a) Revised Requirements.--(1) Section 454(16) (42 U.S.C. 
     654(16)) is amended--
       (A) by striking ``, at the option of the State,'';
       (B) by inserting ``and operation by the State agency'' 
     after ``for the establishment'';
       (C) by inserting ``meeting the requirements of section 
     454A'' after ``information retrieval system'';
       (D) by striking ``in the State and localities thereof, so 
     as (A)'' and inserting ``so as'';
       (E) by striking ``(i)''; and
       (F) by striking ``(including'' and all that follows and 
     inserting a semicolon.
       (2) Part D of title IV (42 U.S.C. 651-669) is amended by 
     inserting after section 454 the following new section:


                      ``automated data processing

       ``Sec. 454A. (a) In General.--In order to meet the 
     requirements of this section, for purposes of the requirement 
     of section 454(16), a State agency shall have in operation a 
     single statewide automated data processing and information 
     retrieval system which has the capability to perform the 
     tasks specified in this section, and performs such tasks with 
     the frequency and in the manner specified in this part or in 
     regulations or guidelines of the Secretary.
       ``(b) Program Management.--The automated system required 
     under this section shall perform such functions as the 
     Secretary may specify relating to management of the program 
     under this part, including--
       ``(1) controlling and accounting for use of Federal, State, 
     and local funds to carry out such program; and
       ``(2) maintaining the data necessary to meet Federal 
     reporting requirements on a timely basis.
       ``(c) Calculation of Performance Indicators.--In order to 
     enable the Secretary to determine the incentive and penalty 
     adjustments required by sections 452(g) and 458, the State 
     agency shall--
       ``(1) use the automated system--
       ``(A) to maintain the requisite data on State performance 
     with respect to paternity establishment and child support 
     enforcement in the State; and
       ``(B) to calculate the IV-D paternity establishment 
     percentage and overall performance in child support 
     enforcement for the State for each fiscal year; and
       ``(2) have in place systems controls to ensure the 
     completeness, and reliability of, and ready access to, the 
     data described in paragraph (1)(A), and the accuracy of the 
     calculations described in paragraph (1)(B).
       ``(d) Information Integrity and Security.--The State agency 
     shall have in effect safeguards on the integrity, accuracy, 
     and completeness of, access to, and use of data in the 
     automated system required under this section, which shall 
     include the following (in addition to such other safeguards 
     as the Secretary specifies in regulations):
       ``(1) Policies restricting access.--Written policies 
     concerning access to data by State agency personnel, and 
     sharing of data with other persons, which--
       ``(A) permit access to and use of data only to the extent 
     necessary to carry out program responsibilities;
       ``(B) specify the data which may be used for particular 
     program purposes, and the personnel permitted access to such 
     data; and
       ``(C) ensure that data obtained or disclosed for a limited 
     program purpose is not used or redisclosed for another, 
     impermissible purpose.
       ``(2) Systems controls.--Systems controls (such as 
     passwords or blocking of fields) to ensure strict adherence 
     to the policies specified under paragraph (1).
       ``(3) Monitoring of access.--Routine monitoring of access 
     to and use of the automated system, through methods such as 
     audit trails and feedback mechanisms, to guard against and 
     promptly identify unauthorized access or use.
       ``(4) Training and information.--The State agency shall 
     have in effect procedures to ensure that all personnel 
     (including State and local agency staff and contractors) who 
     may have access to or be required to use sensitive or 
     confidential program data are fully informed of applicable 
     requirements and penalties, and are adequately trained in 
     security procedures.
       ``(5) Penalties.--The State agency shall have in effect 
     administrative penalties (up to and including dismissal from 
     employment) for unauthorized access to, or disclosure or use 
     of, confidential data.''.
       (3) Regulations.--Section 452 (42 U.S.C. 652) is amended by 
     adding at the end the following:
       ``(j) The Secretary shall prescribe final regulations for 
     implementation of the requirements of section 454A not later 
     than 2 years after the date of the enactment of this 
     subsection.''.
       (4) Implementation Timetable.--Section 454(24) (42 U.S.C. 
     654(24)), as amended by sections 9404(a)(2) and 9414(b)(1) of 
     this Act, is amended to read as follows:
       ``(24) provide that the State will have in effect an 
     automated data processing and information retrieval system--
       ``(A) by October 1, 1995, meeting all requirements of this 
     part which were enacted on or before the date of enactment of 
     the Family Support Act of 1988; and
       ``(B) by October 1, 1999, meeting all requirements of this 
     part enacted on or before the date of enactment of the 
     Omnibus Budget Reconciliation Act of 1995 (but this provision 
     shall not be construed to alter earlier deadlines specified 
     for elements of such system), except that such deadline shall 
     be extended by 1 day for each day (if any) by which the 
     Secretary fails to meet the deadline imposed by section 
     452(j) of this Act;''.
       (b) Special Federal Matching Rate for Development Costs of 
     Automated Systems.--Section 455(a) (42 U.S.C. 655(a)) is 
     amended--
       (1) in paragraph (1)(B)--
       (A) by striking ``90 percent'' and inserting ``the percent 
     specified in paragraph (3)'';
       (B) by striking ``so much of''; and
       (C) by striking ``which the Secretary'' and all that 
     follows and inserting ``, and''; and
       (2) by adding at the end the following new paragraph:
       ``(3)(A) The Secretary shall pay to each State, for each 
     quarter in fiscal year 1996, 90 percent of so much of State 
     expenditures described in subparagraph (1)(B) as the 
     Secretary finds are for a system meeting the requirements 
     specified in section 454(16), or meeting such requirements 
     without regard to clause (D) thereof.
       ``(B)(i) The Secretary shall pay to each State, for each 
     quarter in fiscal years 1997 through 2001, the percentage 
     specified in clause (ii) of so much of State expenditures 
     described in subparagraph (1)(B) as the Secretary finds are 
     for a system meeting the requirements specified in section 
     454(16) and 454A, subject to clause (iii).
       ``(ii) The percentage specified in this clause, for 
     purposes of clause (i), is the higher of--
       ``(I) 80 percent, or
       ``(II) the percentage otherwise applicable to Federal 
     payments to the State under subparagraph (A) (as adjusted 
     pursuant to section 458).''.
       (c) Conforming Amendment.--Section 123(c) of the Family 
     Support Act of 1988 (102 Stat. 2352; Public Law 100-485) is 
     repealed.
       (d) Additional Provisions.--For additional provisions of 
     section 454A, as added by subsection (a) of this section, see 
     the amendments made by sections 9421, 9422(c), and 9433(d) of 
     this Act.

     SEC. 9416. DIRECTOR OF CSE PROGRAM; STAFFING STUDY.

       (a) Reporting to Secretary.--Section 452(a) (42 U.S.C. 
     652(a)) is amended in the matter preceding paragraph (1) by 
     striking ``directly''.
       (b) Staffing Studies.--
       (1) Scope.--The Secretary of Health and Human Services 
     shall, directly or by contract, conduct studies of the 
     staffing of each State child support enforcement program 
     under part D of title IV of the Social Security Act. Such 
     studies shall include a review of the staffing needs created 
     by requirements for automated data processing, maintenance of 
     a central case registry and centralized collections of child 
     support, and of changes in these needs resulting from changes 
     in such requirements. Such studies shall examine and report 
     on effective staffing practices used by the States and on 
     recommended staffing procedures.
       (2) Frequency of studies.--The Secretary shall complete the 
     first staffing study required under paragraph (1) by October 
     1, 1997, and may conduct additional studies subsequently at 
     appropriate intervals.
       (3) Report to the congress.--The Secretary shall submit a 
     report to the Congress stating the findings and conclusions 
     of each study conducted under this subsection.

     SEC. 9417. FUNDING FOR SECRETARIAL ASSISTANCE TO STATE 
                   PROGRAMS.

       Section 452 (42 U.S.C. 652), as amended by section 
     9415(a)(3) of this Act, is amended by adding at the end the 
     following new subsection:
       ``(k) Funding for Federal Activities Assisting State 
     Programs.--(1) There shall be available to the Secretary, 
     from amounts appropriated for fiscal year 1996 and each 
     succeeding fiscal year for payments to States under this 
     part, the amount specified in paragraph (2) for the costs to 
     the Secretary for--
       ``(A) information dissemination and technical assistance to 
     States, training of State and Federal staff, staffing 
     studies, and related activities needed to improve programs 
     (including technical assistance concerning State automated 
     systems);
       ``(B) research, demonstration, and special projects of 
     regional or national significance relating to the operation 
     of State programs under this part; and
       ``(C) operation of the Federal Parent Locator Service under 
     section 453, to the extent such costs are not recovered 
     through user fees.
       ``(2) The amount specified in this paragraph for a fiscal 
     year is the amount equal to a percentage of the reduction in 
     Federal payments to States under part A on account of child 
     support (including arrearages) collected in the preceding 
     fiscal year on behalf of children receiving assistance under 
     State plans approved under part A in such preceding fiscal 
     year (as determined on the basis of the most recent reliable 
     data available to the Secretary as of the end of the third 
     calendar quarter following the end of such preceding fiscal 
     year), equal to--
       ``(A) 1 percent, for the activities specified in 
     subparagraphs (A) and (B) of paragraph (1); and
       ``(B) 2 percent, for the activities specified in 
     subparagraph (C) of paragraph (1).''.

     SEC. 9418. REPORTS AND DATA COLLECTION BY THE SECRETARY.

       (a) Annual Report to Congress.--(1) Section 452(a)(10)(A) 
     (42 U.S.C. 652(a)(10)(A)) is amended--

[[Page H10603]]

       (A) by striking ``this part;'' and inserting ``this part, 
     including--''; and
       (B) by adding at the end the following indented clauses:
       ``(i) the total amount of child support payments collected 
     as a result of services furnished during such fiscal year to 
     individuals receiving services under this part;
       ``(ii) the cost to the States and to the Federal Government 
     of furnishing such services to those individuals; and
       ``(iii) the number of cases involving families--

       ``(I) who became ineligible for assistance under a State 
     plan approved under part A during a month in such fiscal 
     year; and
       ``(II) with respect to whom a child support payment was 
     received in the same month;''.

       (2) Section 452(a)(10)(C) (42 U.S.C. 652(a)(10)(C)) is 
     amended--
       (A) in the matter preceding clause (i)--
       (i) by striking ``with the data required under each clause 
     being separately stated for cases'' and inserting 
     ``separately stated for (1) cases'';
       (ii) by striking ``cases where the child was formerly 
     receiving'' and inserting ``or formerly received'';
       (iii) by inserting ``or 1912'' after ``471(a)(17)''; and
       (iv) by inserting ``(2)'' before ``all other'';
       (B) in each of clauses (i) and (ii), by striking ``, and 
     the total amount of such obligations'';
       (C) in clause (iii), by striking ``described in'' and all 
     that follows and inserting ``in which support was collected 
     during the fiscal year;'';
       (D) by striking clause (iv); and
       (E) by redesignating clause (v) as clause (vii), and 
     inserting after clause (iii) the following new clauses:
       ``(iv) the total amount of support collected during such 
     fiscal year and distributed as current support;
       ``(v) the total amount of support collected during such 
     fiscal year and distributed as arrearages;
       ``(vi) the total amount of support due and unpaid for all 
     fiscal years; and''.
       (3) Section 452(a)(10)(G) (42 U.S.C. 652(a)(10)(G)) is 
     amended by striking ``on the use of Federal courts and''.
       (4) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is amended by 
     striking all that follows subparagraph (I).
       (b) Data Collection and Reporting.--Section 469 (42 U.S.C. 
     669) is amended--
       (1) by striking subsections (a) and (b) and inserting the 
     following:
       ``(a) The Secretary shall collect and maintain, on a fiscal 
     year basis, up-to-date statistics, by State, with respect to 
     services to establish paternity and services to establish 
     child support obligations, the data specified in subsection 
     (b), separately stated, in the case of each such service, 
     with respect to--
       ``(1) families (or dependent children) receiving assistance 
     under State plans approved under part A (or E); and
       ``(2) families not receiving such assistance.
       ``(b) The data referred to in subsection (a) are--
       ``(1) the number of cases in the caseload of the State 
     agency administering the plan under this part in which such 
     service is needed; and
       ``(2) the number of such cases in which the service has 
     been provided.''; and
       (2) in subsection (c), by striking ``(a)(2)'' and inserting 
     ``(b)(2)''.
       (c) Effective Date.--The amendments made by this section 
     shall be effective with respect to fiscal year 1996 and 
     succeeding fiscal years.

                  CHAPTER 3--LOCATE AND CASE TRACKING

     SEC. 9421. CENTRAL STATE AND CASE REGISTRY.

       Section 454A, as added by section 9415(a)(2) of this Act, 
     is amended by adding at the end the following:
       ``(e) Central Case Registry.--(1) In General.--The 
     automated system required under this section shall perform 
     the functions, in accordance with the provisions of this 
     subsection, of a single central registry containing records 
     with respect to each case in which services are being 
     provided by the State agency (including, on and after October 
     1, 1998, each order specified in section 466(a)(12)), using 
     such standardized data elements (such as names, social 
     security numbers or other uniform identification numbers, 
     dates of birth, and case identification numbers), and 
     containing such other information (such as information on 
     case status) as the Secretary may require.
       ``(2) Payment Records.--Each case record in the central 
     registry shall include a record of--
       ``(A) the amount of monthly (or other periodic) support 
     owed under the support order, and other amounts due or 
     overdue (including arrears, interest or late payment 
     penalties, and fees);
       ``(B) the date on which or circumstances under which the 
     support obligation will terminate under such order;
       ``(C) all child support and related amounts collected 
     (including such amounts as fees, late payment penalties, and 
     interest on arrearages);
       ``(D) the distribution of such amounts collected; and
       ``(E) the birth date of the child for whom the child 
     support order is entered.
       ``(3) Updating and Monitoring.--The State agency shall 
     promptly establish and maintain, and regularly monitor, case 
     records in the registry required by this subsection, on the 
     basis of--
       ``(A) information on administrative actions and 
     administrative and judicial proceedings and orders relating 
     to paternity and support;
       ``(B) information obtained from matches with Federal, 
     State, or local data sources;
       ``(C) information on support collections and distributions; 
     and
       ``(D) any other relevant information.
       ``(f) Data Matches and Other Disclosures of Information.--
     The automated system required under this section shall have 
     the capacity, and be used by the State agency, to extract 
     data at such times, and in such standardized format or 
     formats, as may be required by the Secretary, and to share 
     and match data with, and receive data from, other data bases 
     and data matching services, in order to obtain (or provide) 
     information necessary to enable the State agency (or 
     Secretary or other State or Federal agencies) to carry out 
     responsibilities under this part. Data matching activities of 
     the State agency shall include at least the following:
       ``(1) Data bank of child support orders.--Furnish to the 
     Data Bank of Child Support Orders established under section 
     453(h) (and update as necessary, with information including 
     notice of expiration of orders) minimal information (to be 
     specified by the Secretary) on each child support case in the 
     central case registry.
       ``(2) Federal parent locator service.--Exchange data with 
     the Federal Parent Locator Service for the purposes specified 
     in section 453.
       ``(3) Temporary employment assistance program and medicaid 
     agencies.--Exchange data with State agencies (of the State 
     and of other States) administering the programs under part A 
     and title XIX, as necessary for the performance of State 
     agency responsibilities under this part and under such 
     programs.
       ``(4) Intra- and interstate data matches.--Exchange data 
     with other agencies of the State, agencies of other States, 
     and interstate information networks, as necessary and 
     appropriate to carry out (or assist other States to carry 
     out) the purposes of this part.''.

     SEC. 9422. CENTRALIZED COLLECTION AND DISBURSEMENT OF SUPPORT 
                   PAYMENTS.

       (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), 
     as amended by sections 9404(a) and 9414(b) of this Act, is 
     amended--
       (1) by striking ``and'' at the end of paragraph (25);
       (2) by striking the period at the end of paragraph (26) and 
     inserting ``; and''; and
       (3) by adding after paragraph (26) the following new 
     paragraph:
       ``(27) provide that the State agency, on and after October 
     1, 1998--
       ``(A) will operate a centralized, automated unit for the 
     collection and disbursement of child support under orders 
     being enforced under this part, in accordance with section 
     454B; and
       ``(B) will have sufficient State staff (consisting of State 
     employees), and (at State option) contractors reporting 
     directly to the State agency to monitor and enforce support 
     collections through such centralized unit, including carrying 
     out the automated data processing responsibilities specified 
     in section 454A(g) and to impose, as appropriate in 
     particular cases, the administrative enforcement remedies 
     specified in section 466(c)(1).''.
       (b) Establishment of Centralized Collection Unit.--Part D 
     of title IV (42 U.S.C. 651-669) is amended by adding after 
     section 454A the following new section:


     ``centralized collection and disbursement of support payments

       ``Sec. 454B. (a) In General.--In order to meet the 
     requirement of section 454(27), the State agency must operate 
     a single centralized, automated unit for the collection and 
     disbursement of support payments, coordinated with the 
     automated data system required under section 454A, in 
     accordance with the provisions of this section, which shall 
     be--
       ``(1) operated directly by the State agency (or by two or 
     more State agencies under a regional cooperative agreement), 
     or by a single contractor responsible directly to the State 
     agency; and
       ``(2) used for the collection and disbursement (including 
     interstate collection and disbursement) of payments under 
     support orders in all cases being enforced by the State 
     pursuant to section 454(4).
       ``(b) Required Procedures.--The centralized collections 
     unit shall use automated procedures, electronic processes, 
     and computer-driven technology to the maximum extent 
     feasible, efficient, and economical, for the collection and 
     disbursement of support payments, including procedures--
       ``(1) for receipt of payments from parents, employers, and 
     other States, and for disbursements to custodial parents and 
     other obligees, the State agency, and the State agencies of 
     other States;
       ``(2) for accurate identification of payments;
       ``(3) to ensure prompt disbursement of the custodial 
     parent's share of any payment; and
       ``(4) to furnish to either parent, upon request, timely 
     information on the current status of support payments.''.
       (c) Use of Automated System.--Section 454A, as added by 
     section 9415(a)(2) of this Act and as amended by section 9421 
     of this Act, is amended by adding at the end the following 
     new subsection:

[[Page H10604]]

       ``(g) Centralized Collection and Distribution of Support 
     Payments.--The automated system required under this section 
     shall be used, to the maximum extent feasible, to assist and 
     facilitate collections and disbursement of support payments 
     through the centralized collections unit operated pursuant to 
     section 454B, through the performance of functions including 
     at a minimum--
       ``(1) generation of orders and notices to employers (and 
     other debtors) for the withholding of wages (and other 
     income)--
       ``(A) within two working days after receipt (from the 
     directory of New Hires established under section 453(i) or 
     any other source) of notice of and the income source subject 
     to such withholding; and
       ``(B) using uniform formats directed by the Secretary;
       ``(2) ongoing monitoring to promptly identify failures to 
     make timely payment; and
       ``(3) automatic use of enforcement mechanisms (including 
     mechanisms authorized pursuant to section 466(c)) where 
     payments are not timely made.''.
       (d) Effective Date.--The amendments made by this section 
     shall become effective on October 1, 1998.

     SEC. 9423. AMENDMENTS CONCERNING INCOME WITHHOLDING.

       (a) Mandatory Income Withholding.--(1) Section 466(a)(1) 
     (42 U.S.C. 666(a)(1)) is amended to read as follows:
       ``(1) Income withholding.--(A) Under orders enforced under 
     the state plan.--Procedures described in subsection (b) for 
     the withholding from income of amounts payable as support in 
     cases subject to enforcement under the State plan.
       ``(B) Under certain orders predating change in 
     requirement.--Procedures under which all child support orders 
     issued (or modified) before October 1, 1996, and which are 
     not otherwise subject to withholding under subsection (b), 
     shall become subject to withholding from wages as provided in 
     subsection (b) if arrearages occur, without the need for a 
     judicial or administrative hearing.''.
       (2) Section 466(a)(8) (42 U.S.C. 666(a)(8)) is repealed.
       (3) Section 466(b) (42 U.S.C. 666(b)) is amended--
       (A) in the matter preceding paragraph (1), by striking 
     ``subsection (a)(1)'' and inserting ``subsection (a)(1)(A)'';
       (B) in paragraph (5), by striking all that follows 
     ``administered by'' and inserting ``the State through the 
     centralized collections unit established pursuant to section 
     454B, in accordance with the requirements of such section 
     454B.'';
       (C) in paragraph (6)(A)(i)--
       (i) by inserting ``, in accordance with timetables 
     established by the Secretary,'' after ``must be required''; 
     and
       (ii) by striking ``to the appropriate agency'' and all that 
     follows and inserting ``to the State centralized collections 
     unit within 5 working days after the date such amount would 
     (but for this subsection) have been paid or credited to the 
     employee, for distribution in accordance with this part.'';
       (D) in paragraph (6)(A)(ii), by inserting ``be in a 
     standard format prescribed by the Secretary, and'' after 
     ``shall''; and
       (E) in paragraph (6)(D)--
       (i) by striking ``employer who discharges'' and inserting 
     ``employer who--(A) discharges'';
       (ii) by relocating subparagraph (A), as designated, as an 
     indented subparagraph after and below the introductory 
     matter;
       (iii) by striking the period at the end; and
       (iv) by adding after and below subparagraph (A) the 
     following new subparagraph:
       ``(B) fails to withhold support from wages, or to pay such 
     amounts to the State centralized collections unit in 
     accordance with this subsection.''.
       (b) Conforming Amendment.--Section 466(c) (42 U.S.C. 
     666(c)) is repealed.
       (c) Definition of Terms.--The Secretary shall promulgate 
     regulations providing definitions, for purposes of part D of 
     title IV of the Social Security Act, for the term ``income'' 
     and for such other terms relating to income withholding under 
     section 466(b) of such Act as the Secretary may find it 
     necessary or advisable to define.

     SEC. 9424. LOCATOR INFORMATION FROM INTERSTATE NETWORKS.

       Section 466(a) (42 U.S.C. 666(a)), as amended by section 
     9423(a)(2) of this Act, is amended by inserting after 
     paragraph (7) the following:
       ``(8) Locator information from interstate networks.--
     Procedures ensuring that the State will neither provide 
     funding for, nor use for any purpose (including any purpose 
     unrelated to the purposes of this part), any automated 
     interstate network or system used to locate individuals--
       ``(A) for purposes relating to the use of motor vehicles; 
     or
       ``(B) providing information for law enforcement purposes 
     (where child support enforcement agencies are otherwise 
     allowed access by State and Federal law),

     unless all Federal and State agencies administering programs 
     under this part (including the entities established under 
     section 453) have access to information in such system or 
     network to the same extent as any other user of such system 
     or network.''.

     SEC. 9425. EXPANDED FEDERAL PARENT LOCATOR SERVICE.

       (a) Expanded Authority to Locate Individuals and Assets.--
     Section 453 (42 U.S.C. 653) is amended--
       (1) in subsection (a), by striking all that follows 
     ``subsection (c))'' and inserting the following:

     ``, for the purpose of establishing parentage, establishing, 
     setting the amount of, modifying, or enforcing child support 
     obligations--
       ``(1) information on, or facilitating the discovery of, the 
     location of any individual--
       ``(A) who is under an obligation to pay child support;
       ``(B) against whom such an obligation is sought; or
       ``(C) to whom such an obligation is owed, including such 
     individual's social security number (or numbers), most recent 
     residential address, and the name, address, and employer 
     identification number of such individual's employer; and
       ``(2) information on the individual's wages (or other 
     income) from, and benefits of, employment (including rights 
     to or enrollment in group health care coverage); and
       ``(3) information on the type, status, location, and amount 
     of any assets of, or debts owed by or to, any such 
     individual.''; and
       (2) in subsection (b)--
       (A) in the matter preceding paragraph (1), by striking 
     ``social security'' and all that follows through ``absent 
     parent'' and inserting ``information specified in subsection 
     (a)''; and
       (B) in paragraph (2), by inserting before the period ``, or 
     from any consumer reporting agency (as defined in section 
     603(f) of the Fair Credit Reporting Act (15 U.S.C. 
     1681a(f))'';
       (3) in subsection (e)(1), by inserting before the period 
     ``, or by consumer reporting agencies''.
       (b) Reimbursement for Data From Federal Agencies.--Section 
     453(e)(2) (42 U.S.C. 653(e)(2)) is amended in the fourth 
     sentence by inserting before the period ``in an amount which 
     the Secretary determines to be reasonable payment for the 
     data exchange (which amount shall not include payment for the 
     costs of obtaining, compiling, or maintaining the data)''.
       (c) Access to Consumer Reports Under Fair Credit Reporting 
     Act.--(1) Section 608 of the Fair Credit Reporting Act (15 
     U.S.C. 1681f) is amended--
       (A) by striking ``, limited to'' and inserting ``to a 
     governmental agency (including the entire consumer report, in 
     the case of a Federal, State, or local agency administering a 
     program under part D of title IV of the Social Security Act, 
     and limited to''; and
       (B) by striking ``employment, to a governmental agency'' 
     and inserting ``employment, in the case of any other 
     governmental agency)''.
       (2) Reimbursement for Reports by State Agencies and Credit 
     Bureaus.--Section 453 (42 U.S.C. 653) is amended by adding at 
     the end the following new subsection:
       ``(g) The Secretary is authorized to reimburse costs to 
     State agencies and consumer credit reporting agencies the 
     costs incurred by such entities in furnishing information 
     requested by the Secretary pursuant to this section in an 
     amount which the Secretary determines to be reasonable 
     payment for the data exchange (which amount shall not include 
     payment for the costs of obtaining, compiling, or maintaining 
     the data).''.
       (d) Disclosure of Tax Return Information.--(1) Section 
     6103(1)(6)(A)(ii) of the Internal Revenue Code of 1986 is 
     amended by striking ``, but only if'' and all that follows 
     and inserting a period.
       (2) Section 6103(1)(8)(A) of the Internal Revenue Code of 
     1986 is amended by inserting ``Federal,'' before ``State or 
     local''.
       (e) Technical Amendments.--
       (1) Sections 452(a)(9), 453(a), 453(b), 463(a), and 463(e) 
     (42 U.S.C. 652(a)(9), 653(a), 653(b), 663(a), and 663(e)) are 
     each amended by inserting ``Federal'' before ``Parent'' each 
     place it appears.
       (2) Section 453 (42 U.S.C. 653) is amended in the heading 
     by adding ``federal'' before ``parent''.
       (f) New Components.--Section 453 (42 U.S.C. 653), as 
     amended by subsection (c)(2) of this section, is amended by 
     adding at the end the following:
       ``(h) Data Bank of Child Support Orders.--
       ``(1) In general.--Not later than October 1, 1998, In order 
     to assist States in administering their State plans under 
     this part and parts A, F, and G, and for the other purposes 
     specified in this section, the Secretary shall establish and 
     maintain in the Federal Parent Locator Service an automated 
     registry to be known as the Data Bank of Child Support 
     Orders, which shall contain abstracts of child support orders 
     and other information described in paragraph (2) on each case 
     in each State central case registry maintained pursuant to 
     section 454A(e), as furnished (and regularly updated), 
     pursuant to section 454A(f), by State agencies administering 
     programs under this part.
       ``(2) Case information.--The information referred to in 
     paragraph (1), as specified by the Secretary, shall include 
     sufficient information (including names, social security 
     numbers or other uniform identification numbers, and State 
     case identification numbers) to identify the individuals who 
     owe or are owed support (or with respect to or on behalf of 
     whom support obligations are sought to be established), and 
     the State or States which have established or modified, or 
     are enforcing or seeking to establish, such an order.
       ``(i) Directory of New Hires.--
       ``(1) In general.--Not later than October 1, 1998, In order 
     to assist States in administering their State plans under 
     this part and 

[[Page H10605]]

     parts A, F, and G, and for the other purposes specified in 
     this section, the Secretary shall establish and maintain in 
     the Federal Parent Locator Service an automated directory to 
     be known as the directory of New Hires, containing--
       ``(A) information supplied by employers on each newly hired 
     individual, in accordance with paragraph (2); and
       ``(B) information supplied by State agencies administering 
     State unemployment compensation laws, in accordance with 
     paragraph (3).
       ``(2) Employer information.--
       ``(A) Information required.--Subject to subparagraph (D), 
     each employer shall furnish to the Secretary, for inclusion 
     in the directory established under this subsection, not later 
     than 10 days after the date (on or after October 1, 1998) on 
     which the employer hires a new employee (as defined in 
     subparagraph (C)), a report containing the name, date of 
     birth, and social security number of such employee, and the 
     employer identification number of the employer.
       ``(B) Reporting method and format.--The Secretary shall 
     provide for transmission of the reports required under 
     subparagraph (A) using formats and methods which minimize the 
     burden on employers, which shall include--
       ``(i) automated or electronic transmission of such reports;
       ``(ii) transmission by regular mail; and
       ``(iii) transmission of a copy of the form required for 
     purposes of compliance with section 3402 of the Internal 
     Revenue Code of 1986.
       ``(C) Employee defined.--For purposes of this paragraph, 
     the term `employee' means any individual subject to the 
     requirement of section 3402(f)(2) of the Internal Revenue 
     Code of 1986.
       ``(D) Paperwork reduction requirement.--As required by the 
     information resources management policies published by the 
     Director of the Office of Management and Budget pursuant to 
     section 3504(b)(1) of title 44, United States Code, the 
     Secretary, in order to minimize the cost and reporting burden 
     on employers, shall not require reporting pursuant to this 
     paragraph if an alternative reporting mechanism can be 
     developed that either relies on existing Federal or State 
     reporting or enables the Secretary to collect the needed 
     information in a more cost-effective and equally expeditious 
     manner, taking into account the reporting costs on employers.
       ``(E) Civil money penalty on noncomplying employers.--(i) 
     Any employer that fails to make a timely report in accordance 
     with this paragraph with respect to an individual shall be 
     subject to a civil money penalty, for each calendar year in 
     which the failure occurs, of the lesser of $500 or 1 percent 
     of the wages or other compensation paid by such employer to 
     such individual during such calendar year.
       ``(ii) Subject to clause (iii), the provisions of section 
     1128A (other than subsections (a) and (b) thereof) shall 
     apply to a civil money penalty under clause (i) in the same 
     manner as they apply to a civil money penalty or proceeding 
     under section 1128A(a).
       ``(iii) Any employer with respect to whom a penalty under 
     this subparagraph is upheld after an administrative hearing 
     shall be liable to pay all costs of the Secretary with 
     respect to such hearing.
       ``(3) Employment security information.--
       ``(A) Reporting requirement.--Each State agency 
     administering a State unemployment compensation law approved 
     by the Secretary of Labor under the Federal Unemployment Tax 
     Act shall furnish to the Secretary of Health and Human 
     Services extracts of the reports to the Secretary of Labor 
     concerning the wages and unemployment compensation paid to 
     individuals required under section 303(a)(6), in accordance 
     with subparagraph (B).
       ``(B) Manner of compliance.--The extracts required under 
     subparagraph (A) shall be furnished to the Secretary of 
     Health and Human Services on a quarterly basis, with respect 
     to calendar quarters beginning on and after October 1, 1996, 
     by such dates, in such format, and containing such 
     information as required by that Secretary in regulations.
       ``(j) Data Matches and Other Disclosures.--
       ``(1) Verification by social security administration.--(A) 
     The Secretary shall transmit data on individuals and 
     employers maintained under this section to the Social 
     Security Administration to the extent necessary for 
     verification in accordance with subparagraph (B).
       ``(B) The Social Security Administration shall verify the 
     accuracy of, correct or supply to the extent necessary and 
     feasible, and report to the Secretary, the following 
     information in data supplied by the Secretary pursuant to 
     subparagraph (A):
       ``(i) the name, social security number, and birth date of 
     each individual; and
       ``(ii) the employer identification number of each employer.
       ``(2) Child support locator matches.--For the purpose of 
     locating individuals for purposes of paternity establishment 
     and establishment and enforcement of child support, the 
     Secretary shall--
       ``(A) match data in the directory of New Hires against the 
     child support order abstracts in the Data Bank of Child 
     Support Orders not less often than every 2 working days; and
       ``(B) report information obtained from such a match to 
     concerned State agencies operating programs under this part 
     not later than 2 working days after such match.
       ``(3) Data matches and disclosures of data in all 
     registries for title iv program purposes.--The Secretary 
     shall--
       ``(A) perform matches of data in each component of the 
     Federal Parent Locator Service maintained under this section 
     against data in each other such component (other than the 
     matches required pursuant to paragraph (1)), and report 
     information resulting from such matches to State agencies 
     operating programs under this part and parts A, F, and G; and
       ``(B) disclose data in such registries to such State 
     agencies,

     to the extent, and with the frequency, that the Secretary 
     determines to be effective in assisting such States to carry 
     out their responsibilities under such programs.
       ``(k) Fees.--
       ``(1) For ssa verification.--The Secretary shall reimburse 
     the Commissioner of Social Security, at a rate negotiated 
     between the Secretary and the Commissioner, the costs 
     incurred by the Commissioner in performing the verification 
     services specified in subsection (j).
       ``(2) For information from sesas.--The Secretary shall 
     reimburse costs incurred by State employment security 
     agencies in furnishing data as required by subsection (j)(3), 
     at rates which the Secretary determines to be reasonable 
     (which rates shall not include payment for the costs of 
     obtaining, compiling, or maintaining such data).
       ``(3) For information furnished to state and federal 
     agencies.--State and Federal agencies receiving data or 
     information from the Secretary pursuant to this section shall 
     reimburse the costs incurred by the Secretary in furnishing 
     such data or information, at rates which the Secretary 
     determines to be reasonable (which rates shall include 
     payment for the costs of obtaining, verifying, maintaining, 
     and matching such data or information).
       ``(l) Restriction on Disclosure and Use.--Data in the 
     Federal Parent Locator Service, and information resulting 
     from matches using such data, shall not be used or disclosed 
     except as specifically provided in this section.
       ``(m) Retention of Data.--Data in the Federal Parent 
     Locator Service, and data resulting from matches performed 
     pursuant to this section, shall be retained for such period 
     (determined by the Secretary) as appropriate for the data 
     uses specified in this section.
       ``(n) Information Integrity and Security.--The Secretary 
     shall establish and implement safeguards with respect to the 
     entities established under this section designed to--
       ``(1) ensure the accuracy and completeness of information 
     in the Federal Parent Locator Service; and
       ``(2) restrict access to confidential information in the 
     Federal Parent Locator Service to authorized persons, and 
     restrict use of such information to authorized purposes.
       ``(o) Limit on Liability.--The Secretary shall not be 
     liable to either a State or an individual for inaccurate 
     information provided to a component of the Federal Parent 
     Locator Service section and disclosed by the Secretary in 
     accordance with this section.''.
       (g) Conforming Amendments.--
       (1) To part d of title iv of the social security act.--
     Section 454(8)(B) (42 U.S.C. 654(8)(B)) is amended to read as 
     follows:
       ``(B) the Federal Parent Locator Service established under 
     section 453;''.
       (2) To federal unemployment tax act.--Section 3304(16) of 
     the Internal Revenue Code of 1986 is amended--
       (A) by striking ``Secretary of Health, Education, and 
     Welfare'' each place such term appears and inserting 
     ``Secretary of Health and Human Services'';
       (B) in subparagraph (B), by striking ``such information'' 
     and all that follows and inserting ``information furnished 
     under subparagraph (A) or (B) is used only for the purposes 
     authorized under such subparagraph;'';
       (C) by striking ``and'' at the end of subparagraph (A);
       (D) by redesignating subparagraph (B) as subparagraph (C); 
     and
       (E) by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) wage and unemployment compensation information 
     contained in the records of such agency shall be furnished to 
     the Secretary of Health and Human Services (in accordance 
     with regulations promulgated by such Secretary) as necessary 
     for the purposes of the directory of New Hires established 
     under section 453(i) of the Social Security Act, and''.
       (3) To state grant program under title iii of the social 
     security act.--Section 303(a) (42 U.S.C. 503(a)) is amended--
       (A) by striking ``and'' at the end of paragraph (8);
       (B) by striking the period at the end of paragraph (9) and 
     inserting ``; and''; and
       (C) by adding after paragraph (9) the following new 
     paragraph:
       ``(10) The making of quarterly electronic reports, at such 
     dates, in such format, and containing such information, as 
     required by the Secretary of Health and Human Services under 
     section 453(i)(3), and compliance with such provisions as 
     such Secretary may find necessary to ensure the correctness 
     and verification of such reports.''.

[[Page H10606]]


     SEC. 9426. USE OF SOCIAL SECURITY NUMBERS.

       (a) State Law Requirement.--Section 466(a) (42 U.S.C. 
     666(a)), as amended by section 9401(a) of this Act, is 
     amended by inserting after paragraph (12) the following:
       ``(13) Social security numbers required.--Procedures 
     requiring the recording of social security numbers--
       ``(A) of both parties on marriage licenses and divorce 
     decrees; and
       ``(B) of both parents, on birth records and child support 
     and paternity orders.''.
       (b) Clarification of Federal Policy.--Section 
     205(c)(2)(C)(ii) (42 U.S.C. 405(c)(2)(C)(ii)) is amended by 
     striking the third sentence and inserting ``This clause shall 
     not be considered to authorize disclosure of such numbers 
     except as provided in the preceding sentence.''.

          CHAPTER 4--STREAMLINING AND UNIFORMITY OF PROCEDURES

     SEC. 9431. ADOPTION OF UNIFORM STATE LAWS.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     9401(a) and 9426(a) of this Act, is amended inserting after 
     paragraph (13) the following:
       ``(14) Interstate enforcement.--(A) Adoption of uifsa.--
     Procedures under which the State adopts in its entirety (with 
     the modifications and additions specified in this paragraph) 
     not later than January 1, 1997, and uses on and after such 
     date, the Uniform Interstate Family Support Act, as approved 
     by the National Conference of Commissioners on Uniform State 
     Laws in August, 1992.
       ``(B) Expanded application of uifsa.--The State law adopted 
     pursuant to subparagraph (A) shall be applied to any case--
       ``(i) involving an order established or modified in one 
     State and for which a subsequent modification is sought in 
     another State; or
       ``(ii) in which interstate activity is required to enforce 
     an order.
       ``(C) Jurisdiction to modify orders.--The State law adopted 
     pursuant to subparagraph (A) of this paragraph shall contain 
     the following provision in lieu of section 611(a)(1) of the 
     Uniform Interstate Family Support Act described in such 
     subparagraph (A):
       ```(1) the following requirements are met:
       ```(i) the child, the individual obligee, and the obligor--
       ```(I) do not reside in the issuing State; and
       ```(II) either reside in this State or are subject to the 
     jurisdiction of this State pursuant to section 201; and
       ```(ii) (in any case where another State is exercising or 
     seeks to exercise jurisdiction to modify the order) the 
     conditions of section 204 are met to the same extent as 
     required for proceedings to establish orders; or'.
       ``(D) Service of process.--The State law adopted pursuant 
     to subparagraph (A) shall recognize as valid, for purposes of 
     any proceeding subject to such State law, service of process 
     upon persons in the State (and proof of such service) by any 
     means acceptable in another State which is the initiating or 
     responding State in such proceeding.
       ``(E) Cooperation by employers.--The State law adopted 
     pursuant to subparagraph (A) shall provide for the use of 
     procedures (including sanctions for noncompliance) under 
     which all entities in the State (including for-profit, 
     nonprofit, and governmental employers) are required to 
     provide promptly, in response to a request by the State 
     agency of that or any other State administering a program 
     under this part, information on the employment, compensation, 
     and benefits of any individual employed by such entity as an 
     employee or contractor.''.

     SEC. 9432. IMPROVEMENTS TO FULL FAITH AND CREDIT FOR CHILD 
                   SUPPORT ORDERS.

       Section 1738B of title 28, United States Code, is amended--
       (1) in subsection (a)(2), by striking ``subsection (e)'' 
     and inserting ``subsections (e), (f), and (i)'';
       (2) in subsection (b), by inserting after the 2nd 
     undesignated paragraph the following:
       ```child's home State' means the State in which a child 
     lived with a parent or a person acting as parent for at least 
     six consecutive months immediately preceding the time of 
     filing of a petition or comparable pleading for support and, 
     if a child is less than six months old, the State in which 
     the child lived from birth with any of them. A period of 
     temporary absence of any of them is counted as part of the 
     six-month period.'';
       (3) in subsection (c), by inserting ``by a court of a 
     State'' before ``is made'';
       (4) in subsection (c)(1), by inserting ``and subsections 
     (e), (f), and (g)'' after ``located'';
       (5) in subsection (d)--
       (A) by inserting ``individual'' before ``contestant''; and
       (B) by striking ``subsection (e)'' and inserting 
     ``subsections (e) and (f)'';
       (6) in subsection (e), by striking ``make a modification of 
     a child support order with respect to a child that is made'' 
     and inserting ``modify a child support order issued'';
       (7) in subsection (e)(1), by inserting ``pursuant to 
     subsection (i)'' before the semicolon;
       (8) in subsection (e)(2)--
       (A) by inserting ``individual'' before ``contestant'' each 
     place such term appears; and
       (B) by striking ``to that court's making the modification 
     and assuming'' and inserting ``with the State of continuing, 
     exclusive jurisdiction for a court of another State to modify 
     the order and assume'';
       (9) by redesignating subsections (f) and (g) as subsections 
     (g) and (h), respectively;
       (10) by inserting after subsection (e) the following:
       ``(f) Recognition of Child Support Orders.--If one or more 
     child support orders have been issued in this or another 
     State with regard to an obligor and a child, a court shall 
     apply the following rules in determining which order to 
     recognize for purposes of continuing, exclusive jurisdiction 
     and enforcement:
       ``(1) If only one court has issued a child support order, 
     the order of that court must be recognized.
       ``(2) If two or more courts have issued child support 
     orders for the same obligor and child, and only one of the 
     courts would have continuing, exclusive jurisdiction under 
     this section, the order of that court must be recognized.
       ``(3) If two or more courts have issued child support 
     orders for the same obligor and child, and only one of the 
     courts would have continuing, exclusive jurisdiction under 
     this section, an order issued by a court in the current home 
     State of the child must be recognized, but if an order has 
     not been issued in the current home State of the child, the 
     order most recently issued must be recognized.
       ``(4) If two or more courts have issued child support 
     orders for the same obligor and child, and none of the courts 
     would have continuing, exclusive jurisdiction under this 
     section, a court may issue a child support order, which must 
     be recognized.
       ``(5) The court that has issued an order recognized under 
     this subsection is the court having continuing, exclusive 
     jurisdiction.'';
       (11) in subsection (g) (as so redesignated)--
       (A) by striking ``Prior'' and inserting ``Modified''; and
       (B) by striking ``subsection (e)'' and inserting 
     ``subsections (e) and (f)'';
       (12) in subsection (h) (as so redesignated)--
       (A) in paragraph (2), by inserting ``including the duration 
     of current payments and other obligations of support'' before 
     the comma; and
       (B) in paragraph (3), by inserting ``arrears under'' after 
     ``enforce''; and
       (13) by adding at the end the following:
       ``(i) Registration for Modification.--If there is no 
     individual contestant or child residing in the issuing State, 
     the party or support enforcement agency seeking to modify, or 
     to modify and enforce, a child support order issued in 
     another State shall register that order in a State with 
     jurisdiction over the nonmovant for the purpose of 
     modification.''.

     SEC. 9433. STATE LAWS PROVIDING EXPEDITED PROCEDURES.

       (a) State Law Requirements.--Section 466 (42 U.S.C. 666) is 
     amended--
       (1) in subsection (a)(2), in the first sentence, to read as 
     follows: ``Expedited administrative and judicial procedures 
     (including the procedures specified in subsection (c)) for 
     establishing paternity and for establishing, modifying, and 
     enforcing support obligations.''; and
       (2) by adding after subsection (b) the following new 
     subsection:
       ``(c) Expedited Procedures.--The procedures specified in 
     this subsection are the following:
       ``(1) Administrative action by state agency.--Procedures 
     which give the State agency the authority (and recognize and 
     enforce the authority of State agencies of other States), 
     without the necessity of obtaining an order from any other 
     judicial or administrative tribunal (but subject to due 
     process safeguards, including (as appropriate) requirements 
     for notice, opportunity to contest the action, and 
     opportunity for an appeal on the record to an independent 
     administrative or judicial tribunal), to take the following 
     actions relating to establishment or enforcement of orders:
       ``(A) Genetic testing.--To order genetic testing for the 
     purpose of paternity establishment as provided in section 
     466(a)(5).
       ``(B) Default orders.--To enter a default order, upon a 
     showing of service of process and any additional showing 
     required by State law--
       ``(i) establishing paternity, in the case of any putative 
     father who refuses to submit to genetic testing; and
       ``(ii) establishing or modifying a support obligation, in 
     the case of a parent (or other obligor or obligee) who fails 
     to respond to notice to appear at a proceeding for such 
     purpose.
       ``(C) Subpoenas.--To subpoena any financial or other 
     information needed to establish, modify, or enforce an order, 
     and to sanction failure to respond to any such subpoena.
       ``(D) Access to personal and financial information.--To 
     obtain access, subject to safeguards on privacy and 
     information security, to the following records (including 
     automated access, in the case of records maintained in 
     automated data bases):
       ``(i) records of other State and local government agencies, 
     including--

       ``(I) vital statistics (including records of marriage, 
     birth, and divorce);
       ``(II) State and local tax and revenue records (including 
     information on residence address, employer, income and 
     assets);
       ``(III) records concerning real and titled personal 
     property;
       ``(IV) records of occupational and professional licenses, 
     and records concerning the ownership and control of 
     corporations, partnerships, and other business entities;
       ``(V) employment security records;

[[Page H10607]]

       ``(VI) records of agencies administering public assistance 
     programs;
       ``(VII) records of the motor vehicle department; and
       ``(VIII) corrections records; and

       ``(ii) certain records held by private entities, 
     including--

       ``(I) customer records of public utilities and cable 
     television companies; and
       ``(II) information (including information on assets and 
     liabilities) on individuals who owe or are owed support (or 
     against or with respect to whom a support obligation is 
     sought) held by financial institutions (subject to 
     limitations on liability of such entities arising from 
     affording such access).

       ``(E) Income withholding.--To order income withholding in 
     accordance with subsection (a)(1) and (b) of section 466.
       ``(F) Change in payee.--(In cases where support is subject 
     to an assignment under section 403(b)(1)(E)(i), 471(a)(17), 
     or 1912, or to a requirement to pay through the centralized 
     collections unit under section 454B) upon providing notice to 
     obligor and obligee, to direct the obligor or other payor to 
     change the payee to the appropriate government entity.
       ``(G) Secure assets to satisfy arrearages.--For the purpose 
     of securing overdue support--
       ``(i) to intercept and seize any periodic or lump-sum 
     payment to the obligor by or through a State or local 
     government agency, including--

       ``(I) unemployment compensation, workers' compensation, and 
     other benefits;

       ``(II) judgments and settlements in cases under the 
     jurisdiction of the State or local government; and
       ``(III) lottery winnings;

       ``(ii) to attach and seize assets of the obligor held by 
     financial institutions;
       ``(iii) to attach public and private retirement funds in 
     appropriate cases, as determined by the Secretary; and
       ``(iv) to impose liens in accordance with paragraph (a)(4) 
     and, in appropriate cases, to force sale of property and 
     distribution of proceeds.
       ``(H) Increase monthly payments.--For the purpose of 
     securing overdue support, to increase the amount of monthly 
     support payments to include amounts for arrearages (subject 
     to such conditions or restrictions as the State may provide).
       ``(I) Suspension of drivers' licenses.--To suspend drivers' 
     licenses of individuals owing past-due support, in accordance 
     with subsection (a)(16).
       ``(2) Substantive and procedural rules.--The expedited 
     procedures required under subsection (a)(2) shall include the 
     following rules and authority, applicable with respect to all 
     proceedings to establish paternity or to establish, modify, 
     or enforce support orders:
       ``(A) Locator information; presumptions concerning 
     notice.--Procedures under which--
       ``(i) the parties to any paternity or child support 
     proceedings are required (subject to privacy safeguards) to 
     file with the tribunal before entry of an order, and to 
     update as appropriate, information on location and identity 
     (including Social Security number, residential and mailing 
     addresses, telephone number, driver's license number, and 
     name, address, and telephone number of employer); and
       ``(ii) in any subsequent child support enforcement action 
     between the same parties, the tribunal shall be authorized, 
     upon sufficient showing that diligent effort has been made to 
     ascertain such party's current location, to deem due process 
     requirements for notice and service of process to be met, 
     with respect to such party, by delivery to the most recent 
     residential or employer address so filed pursuant to clause 
     (i).
       ``(B) Statewide jurisdiction.--Procedures under which--
       ``(i) the State agency and any administrative or judicial 
     tribunal with authority to hear child support and paternity 
     cases exerts statewide jurisdiction over the parties, and 
     orders issued in such cases have statewide effect; and
       ``(ii) (in the case of a State in which orders in such 
     cases are issued by local jurisdictions) a case may be 
     transferred between jurisdictions in the State without need 
     for any additional filing by the petitioner, or service of 
     process upon the respondent, to retain jurisdiction over the 
     parties.''.
       (c) Exceptions From State Law Requirements.--Section 466(d) 
     (42 U.S.C. 666(d)) is amended--
       (1) by striking ``(d) If'' and inserting the following:
       ``(d) Exemptions From Requirements.--
       ``(1) In general.--Subject to paragraph (2), if''; and
       (2) by adding at the end the following new paragraph:
       ``(2) Nonexempt requirements.--The Secretary shall not 
     grant an exemption from the requirements of--
       ``(A) subsection (a)(5) (concerning procedures for 
     paternity establishment);
       ``(B) subsection (a)(10) (concerning modification of 
     orders);
       ``(C) subsection (a)(12) (concerning recording of orders in 
     the central State case registry);
       ``(D) subsection (a)(13) (concerning recording of Social 
     Security numbers);
       ``(E) subsection (a)(14) (concerning interstate 
     enforcement); or
       ``(F) subsection (c) (concerning expedited procedures), 
     other than paragraph (1)(A) thereof (concerning establishment 
     or modification of support amount).''.
       (d) Automation of State Agency Functions.--Section 454A, as 
     added by section 9415(a)(2) of this Act and as amended by 
     sections 9421 and 9422(c) of this Act, is amended by adding 
     at the end the following new subsection:
       ``(h) Expedited Administrative Procedures.--The automated 
     system required under this section shall be used, to the 
     maximum extent feasible, to implement any expedited 
     administrative procedures required under section 466(c).''.

                   CHAPTER 5--PATERNITY ESTABLISHMENT

     SEC. 9441. SENSE OF THE CONGRESS.

       It is the sense of the Congress that social services should 
     be provided in hospitals to women who have become pregnant as 
     a result of rape or incest.

     SEC. 9442. AVAILABILITY OF PARENTING SOCIAL SERVICES FOR NEW 
                   FATHERS.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     9401(a), 9426(a), and 9431 of this Act, is amended by 
     inserting after paragraph (14) the following:
       ``(15) Procedures for providing new fathers with positive 
     parenting counseling that stresses the importance of paying 
     child support in a timely manner, in accordance with 
     regulations prescribed by the Secretary.''.

     SEC. 9443. COOPERATION REQUIREMENT AND GOOD CAUSE EXCEPTION.

       (a) In General.--Section 454 (42 U.S.C. 654) is amended--
       (1) by striking ``and'' at the end of paragraph (23);
       (2) by striking the period at the end of paragraph (24) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (24) the following:
       ``(25) provide that the State agency administering the plan 
     under this part--
       ``(A) will make the determination specified under paragraph 
     (4), as to whether an individual is cooperating with efforts 
     to establish paternity and secure support (or has good cause 
     not to cooperate with such efforts) for purposes of the 
     requirements of sections 403(b)(1)(E)(i) and 1912;
       ``(B) will advise individuals, both orally and in writing, 
     of the grounds for good cause exceptions to the requirement 
     to cooperate with such efforts;
       ``(C) will take the best interests of the child into 
     consideration in making the determination whether such 
     individual has good cause not to cooperate with such efforts;
       ``(D)(i) will make the initial determination as to whether 
     an individual is cooperating (or has good cause not to 
     cooperate) with efforts to establish paternity within 10 days 
     after such individual is referred to such State agency by the 
     State agency administering the program under part A of title 
     XIX;
       ``(ii) will make redeterminations as to cooperation or good 
     cause at appropriate intervals; and
       ``(iii) will promptly notify the individual, and the State 
     agencies administering such programs, of each such 
     determination and redetermination;
       ``(E) with respect to any child born on or after the date 
     10 months after enactment of this provision, will not 
     determine (or redetermine) the mother (or other custodial 
     relative) of such child to be cooperating with efforts to 
     establish paternity unless such individual furnishes--
       ``(i) the name of the putative father (or fathers); and
       ``(ii) sufficient additional information to enable the 
     State agency, if reasonable efforts were made, to verify the 
     identity of the person named as the putative father 
     (including such information as the putative father's present 
     address, telephone number, date of birth, past or present 
     place of employment, school previously or currently attended, 
     and names and addresses of parents, friends, or relatives 
     able to provide location information, or other information 
     that could enable service of process on such person), and
       ``(F)(i) (where a custodial parent who was initially 
     determined not to be cooperating (or to have good cause not 
     to cooperate) is later determined to be cooperating or to 
     have good cause not to cooperate) will immediately notify the 
     State agencies administering the programs under part A of 
     title XIX that this eligibility condition has been met; and
       ``(ii) (where a custodial parent was initially determined 
     to be cooperating (or to have good cause not to cooperate)) 
     will not later determine such individual not to be 
     cooperating (or not to have good cause not to cooperate) 
     until such individual has been afforded an opportunity for a 
     hearing.''.
       (b) Medicaid Amendments.--Section 1912(a) (42 U.S.C. 
     1396k(a)) is amended--
       (1) in paragraph (1)(B), by inserting ``(except as provided 
     in paragraph (2))'' after ``to cooperate with the State'';
       (2) in subparagraphs (B) and (C) of paragraph (1) by 
     striking ``, unless'' and all that follows and inserting a 
     semicolon; and
       (3) by redesignating paragraph (2) as paragraph (5), and 
     inserting after paragraph (1) the following new paragraphs:
       ``(2) provide that the State agency will immediately refer 
     each applicant or recipient requiring paternity establishment 
     services to the State agency administering the program under 
     part D of title IV;
       ``(3) provide that an individual will not be required to 
     cooperate with the State, as provided under paragraph (1), if 
     the individual is found to have good cause for refusing to 
     cooperate, as determined in accordance with standards 
     prescribed by the Secretary, which 

[[Page H10608]]

     standards shall take into consideration the best interests of 
     the individuals involved--
       ``(A) to the satisfaction of the State agency administering 
     the program under part D, as determined in accordance with 
     section 454(25), with respect to the requirements to 
     cooperate with efforts to establish paternity and to obtain 
     support (including medical support) from a parent; and
       ``(B) to the satisfaction of the State agency administering 
     the program under this title, with respect to other 
     requirements to cooperate under paragraph (1);
       ``(4) provide that (except as provided in paragraph (5)) an 
     applicant requiring paternity establishment services (other 
     than an individual presumptively eligible pursuant to section 
     1920) shall not be eligible for medical assistance under this 
     title until such applicant--
       ``(i) has furnished to the agency administering the State 
     plan under part D of title IV the information specified in 
     section 454(25)(E); or
       ``(ii) has been determined by such agency to have good 
     cause not to cooperate; and
       ``(5) provide that the provisions of paragraph (4) shall 
     not apply with respect to an applicant--
       ``(i) if such agency has not, within 10 days after such 
     individual was referred to such agency, provided the 
     notification required by section 454(25)(D)(iii), until such 
     notification is received); and
       ``(ii) if such individual appeals a determination that the 
     individual lacks good cause for noncooperation, until after 
     such determination is affirmed after notice and opportunity 
     for a hearing.''.
       (c) Effective Date.--The amendments made by this section 
     shall be effective with respect to applications filed in or 
     after the first calendar quarter beginning 10 months or more 
     after the date of the enactment of this Act (or such earlier 
     quarter as the State may select) for assistance under a State 
     plan approved under part A of title IV of the Social Security 
     Act or for medical assistance under a State plan approved 
     under title XIX of such Act.

     SEC. 9444. FEDERAL MATCHING PAYMENTS.

       (a) Increased Base Matching Rate.--Section 455(a)(2) (42 
     U.S.C. 655(a)(2)) is amended to read as follows:
       ``(2) The applicable percent for a quarter for purposes of 
     paragraph (1)(A) is--
       ``(A) for fiscal year 1996, 69 percent;
       ``(B) for fiscal year 1997, 72 percent; and
       ``(C) for fiscal year 1998 and succeeding fiscal years, 75 
     percent.''.
       (b) Maintenance of Effort.--Section 455 (42 U.S.C. 655) is 
     amended--
       (1) in subsection (a)(1), in the matter preceding 
     subparagraph (A), by striking ``From'' and inserting 
     ``Subject to subsection (c), from''; and
       (2) by inserting after subsection (b) the following:
       ``(c) Maintenance of Effort.--Notwithstanding subsection 
     (a), total expenditures for the State program under this part 
     for fiscal year 1996 and each succeeding fiscal year, reduced 
     by the percentage specified for such fiscal year under 
     subparagraph (A), (B), or (C)(i) of paragraph (2), shall not 
     be less than such total expenditures for fiscal year 1995, 
     reduced by 66 percent.''.

     SEC. 9445. STATE LAWS CONCERNING PATERNITY ESTABLISHMENT.

       (a) State Laws Required.--Section 466(a)(5) (42 U.S.C. 
     666(a)(5)) is amended--
       (1) by striking ``(5)'' and inserting the following:
       ``(5) Procedures concerning paternity establishment.--'';
       (2) in subparagraph (A)--
       (A) by striking ``(A)(i)'' and inserting the following:
       ``(A) Establishment process available from birth until age 
     eighteen.--(i)''; and
       (B) by indenting clauses (i) and (ii) so that the left 
     margin of such clauses is 2 ems to the right of the left 
     margin of paragraph (4);
       (3) in subparagraph (B)--
       (A) by striking ``(B)'' and inserting the following:
       ``(B) Procedures concerning genetic testing.--(i)'';
       (B) in clause (i), as redesignated, by inserting before the 
     period ``, where such request is supported by a sworn 
     statement (I) by such party alleging paternity setting forth 
     facts establishing a reasonable possibility of the requisite 
     sexual contact of the parties, or (II) by such party denying 
     paternity setting forth facts establishing a reasonable 
     possibility of the nonexistence of sexual contact of the 
     parties;'';
       (C) by inserting after and below clause (i) (as 
     redesignated) the following new clause:
       ``(ii) Procedures which require the State agency, in any 
     case in which such agency orders genetic testing--
       ``(I) to pay costs of such tests, subject to recoupment 
     (where the State so elects) from the putative father if 
     paternity is established; and
       ``(II) to obtain additional testing in any case where an 
     original test result is disputed, upon request and advance 
     payment by the disputing party.'';
       (4) by striking subparagraphs (C) and (D) and inserting the 
     following:
       ``(C) Paternity acknowledgment.--(i) Procedures for a 
     simple civil process for voluntarily acknowledging paternity 
     under which the State must provide that, before a mother and 
     a putative father can sign an acknowledgment of paternity, 
     the putative father and the mother must be given notice, 
     orally, in writing, and in a language that each can 
     understand, of the alternatives to, the legal consequences 
     of, and the rights (including, if 1 parent is a minor, any 
     rights afforded due to minority status) and responsibilities 
     that arise from, signing the acknowledgment.
       ``(ii) Such procedures must include a hospital-based 
     program for the voluntary acknowledgment of paternity 
     focusing on the period immediately before or after the birth 
     of a child.
       ``(iii) Such procedures must require the State agency 
     responsible for maintaining birth records to offer voluntary 
     paternity establishment services.
       ``(iv) The Secretary shall prescribe regulations governing 
     voluntary paternity establishment services offered by 
     hospitals and birth record agencies. The Secretary shall 
     prescribe regulations specifying the types of other entities 
     that may offer voluntary paternity establishment services, 
     and governing the provision of such services, which shall 
     include a requirement that such an entity must use the same 
     notice provisions used by, the same materials used by, 
     provide the personnel providing such services with the same 
     training provided by, and evaluate the provision of such 
     services in the same manner as, voluntary paternity 
     establishment programs of hospitals and birth record 
     agencies.
       ``(v) Such procedures must require the State and those 
     required to establish paternity to use only the affidavit 
     developed under section 452(a)(7) for the voluntary 
     acknowledgment of paternity, and to give full faith and 
     credit to such an affidavit signed in any other State.
       ``(D) Status of signed paternity acknowledgment.--(i) 
     Procedures under which a signed acknowledgment of paternity 
     is considered a legal finding of paternity, subject to the 
     right of any signatory to rescind the acknowledgment within 
     60 days.
       ``(ii)(I) Procedures under which, after the 60-day period 
     referred to in clause (i), a signed acknowledgment of 
     paternity may be challenged in court only on the basis of 
     fraud, duress, or material mistake of fact, with the burden 
     of proof upon the challenger, and under which the legal 
     responsibilities (including child support obligations) of any 
     signatory arising from the acknowledgment may not be 
     suspended during the challenge, except for good cause shown.
       ``(II) Procedures under which, after the 60-day period 
     referred to in clause (i), a minor who signs an 
     acknowledgment of paternity other than in the presence of a 
     parent or court-appointed guardian ad litem may rescind the 
     acknowledgment in a judicial or administrative proceeding, 
     until the earlier of--
       ``(aa) attaining the age of majority; or
       ``(bb) the date of the first judicial or administrative 
     proceeding brought (after the signing) to establish a child 
     support obligation, visitation rights, or custody rights with 
     respect to the child whose paternity is the subject of the 
     acknowledgment, and at which the minor is represented by a 
     parent, guardian ad litem, or attorney.'';
       (5) by striking subparagraph (E) and inserting the 
     following:
       ``(E) Bar on acknowledgment ratification proceedings.--
     Procedures under which no judicial or administrative 
     proceedings are required or permitted to ratify an 
     unchallenged acknowledgment of paternity.'';
       (6) by striking subparagraph (F) and inserting the 
     following:
       ``(F) Admissibility of genetic testing results.--
     Procedures--
       ``(i) requiring that the State admit into evidence, for 
     purposes of establishing paternity, results of any genetic 
     test that is--

       ``(I) of a type generally acknowledged, by accreditation 
     bodies designated by the Secretary, as reliable evidence of 
     paternity; and
       ``(II) performed by a laboratory approved by such an 
     accreditation body;

       ``(ii) that any objection to genetic testing results must 
     be made in writing not later than a specified number of days 
     before any hearing at which such results may be introduced 
     into evidence (or, at State option, not later than a 
     specified number of days after receipt of such results); and
       ``(iii) that, if no objection is made, the test results are 
     admissible as evidence of paternity without the need for 
     foundation testimony or other proof of authenticity or 
     accuracy.''; and
       (7) by adding after subparagraph (H) the following new 
     subparagraphs:
       ``(I) No right to jury trial.--Procedures providing that 
     the parties to an action to establish paternity are not 
     entitled to jury trial.
       ``(J) Temporary support order based on probable paternity 
     in contested cases.--Procedures which require that a 
     temporary order be issued, upon motion by a party, requiring 
     the provision of child support pending an administrative or 
     judicial determination of parentage, where there is clear and 
     convincing evidence of paternity (on the basis of genetic 
     tests or other evidence).
       ``(K) Proof of certain support and paternity establishment 
     costs.--Procedures under which bills for pregnancy, 
     childbirth, and genetic testing are admissible as evidence 
     without requiring third-party foundation testimony, and shall 
     constitute prima facie evidence of amounts incurred for such 
     services and testing on behalf of the child.
       ``(L) Waiver of state debts for cooperation.--At the option 
     of the State, procedures under which the tribunal 
     establishing paternity and support has discretion to waive 
     rights to all or part of amounts owed to the 

[[Page H10609]]

     State (but not to the mother) for costs related to pregnancy, 
     childbirth, and genetic testing and for public assistance 
     paid to the family where the father cooperates or 
     acknowledges paternity before or after genetic testing.
       ``(M) Standing of putative fathers.--Procedures ensuring 
     that the putative father has a reasonable opportunity to 
     initiate a paternity action.''.
       (b) National Paternity Acknowledgment Affidavit.--Section 
     452(a)(7) (42 U.S.C. 652(a)(7)) is amended by inserting ``, 
     and develop an affidavit to be used for the voluntary 
     acknowledgment of paternity which shall include the social 
     security account number of each parent'' before the 
     semicolon.
       (c) Technical Amendment.--Section 468 (42 U.S.C. 668) is 
     amended by striking ``a simple civil process for voluntarily 
     acknowledging paternity and''.

     SEC. 9446. OUTREACH FOR VOLUNTARY PATERNITY ESTABLISHMENT.

       (a) State Plan Requirement.--Section 454(23) (42 U.S.C. 
     654(23)) is amended by adding at the end the following new 
     subparagraph:
       ``(C) publicize the availability and encourage the use of 
     procedures for voluntary establishment of paternity and child 
     support through a variety of means, which--
       ``(i) include distribution of written materials at health 
     care facilities (including hospitals and clinics), and other 
     locations such as schools;
       ``(ii) may include pre-natal programs to educate expectant 
     couples on individual and joint rights and responsibilities 
     with respect to paternity (and may require all expectant 
     recipients of assistance under part A to participate in such 
     pre-natal programs, as an element of cooperation with efforts 
     to establish paternity and child support);
       ``(iii) include, with respect to each child discharged from 
     a hospital after birth for whom paternity or child support 
     has not been established, reasonable follow-up efforts 
     (including at least one contact of each parent whose 
     whereabouts are known, except where there is reason to 
     believe such follow-up efforts would put mother or child at 
     risk), providing--

       ``(I) in the case of a child for whom paternity has not 
     been established, information on the benefits of and 
     procedures for establishing paternity; and
       ``(II) in the case of a child for whom paternity has been 
     established but child support has not been established, 
     information on the benefits of and procedures for 
     establishing a child support order, and an application for 
     child support services;''.

       (b) Enhanced Federal Matching.--Section 455(a)(1)(C) (42 
     U.S.C. 655(a)(1)(C)) is amended--
       (1) by inserting ``(i)'' before ``laboratory costs'', and
       (2) by inserting before the semicolon ``, and (ii) costs of 
     outreach programs designed to encourage voluntary 
     acknowledgment of paternity''.
       (c) Effective Dates.--(1) The amendments made by subsection 
     (a) shall become effective October 1, 1997.
       (2) The amendments made by subsection (b) shall be 
     effective with respect to calendar quarters beginning on and 
     after October 1, 1996.

      CHAPTER 6--ESTABLISHMENT AND MODIFICATION OF SUPPORT ORDERS

     SEC. 9451. NATIONAL CHILD SUPPORT GUIDELINES COMMISSION.

       (a) Establishment.--There is hereby established a 
     commission to be known as the ``National Child Support 
     Guidelines Commission'' (in this section referred to as the 
     ``Commission'').
       (b) General Duties.--The Commission shall develop a 
     national child support guideline for consideration by the 
     Congress that is based on a study of various guideline 
     models, the benefits and deficiencies of such models, and any 
     needed improvements.
       (c) Membership.--
       (1) Number; appointment.--
       (A) In general.--The Commission shall be composed of 12 
     individuals appointed jointly by the Secretary of Health and 
     Human Services and the Congress, not later than January 15, 
     1997, of which--
       (i) 2 shall be appointed by the Chairman of the Committee 
     on Finance of the Senate, and 1 shall be appointed by the 
     ranking minority member of the Committee;
       (ii) 2 shall be appointed by the Chairman of the Committee 
     on Ways and Means of the House of Representatives, and 1 
     shall be appointed by the ranking minority member of the 
     Committee; and
       (iii) 6 shall be appointed by the Secretary of Health and 
     Human Services.
       (B) Qualifications of members.--Members of the Commission 
     shall have expertise and experience in the evaluation and 
     development of child support guidelines. At least 1 member 
     shall represent advocacy groups for custodial parents, at 
     least 1 member shall represent advocacy groups for 
     noncustodial parents, and at least 1 member shall be the 
     director of a State program under part D of title IV of the 
     Social Security Act.
       (2) Terms of office.--Each member shall be appointed for a 
     term of 2 years. A vacancy in the Commission shall be filled 
     in the manner in which the original appointment was made.
       (d) Commission Powers, Compensation, Access to Information, 
     and Supervision.--The first sentence of subparagraph (C), the 
     first and third sentences of subparagraph (D), subparagraph 
     (F) (except with respect to the conduct of medical studies), 
     clauses (ii) and (iii) of subparagraph (G), and subparagraph 
     (H) of section 1886(e)(6) of the Social Security Act shall 
     apply to the Commission in the same manner in which such 
     provisions apply to the Prospective Payment Assessment 
     Commission.
       (e) Report.--Not later than 2 years after the appointment 
     of members, the Commission shall submit to the President, the 
     Committee on Ways and Means of the House of Representatives, 
     and the Committee on Finance of the Senate, a recommended 
     national child support guideline and a final assessment of 
     issues relating to such a proposed national child support 
     guideline.
       (f) Termination.--The Commission shall terminate 6 months 
     after the submission of the report described in subsection 
     (e).

     SEC. 9452. SIMPLIFIED PROCESS FOR REVIEW AND ADJUSTMENT OF 
                   CHILD SUPPORT ORDERS.

       (a) In General.--Section 466(a)(10) (42 U.S.C. 666(a)(10)) 
     is amended to read as follows:
       ``(10) Procedures for modification of support orders.--
       ``(A)(i) Procedures under which--
       ``(I) every 3 years, at the request of either parent 
     subject to a child support order, the State shall review and, 
     as appropriate, adjust the order in accordance with the 
     guidelines established under section 467(a) if the amount of 
     the child support award under the order differs from the 
     amount that would be awarded in accordance with such 
     guidelines, without a requirement for any other change in 
     circumstances; and
       ``(II) upon request at any time of either parent subject to 
     a child support order, the State shall review and, as 
     appropriate, adjust the order in accordance with the 
     guidelines established under section 467(a) based on a 
     substantial change in the circumstances of either such 
     parent.
       ``(ii) Such procedures shall require both parents subject 
     to a child support order to be notified of their rights and 
     responsibilities provided for under clause (i) at the time 
     the order is issued and in the annual information exchange 
     form provided under subparagraph (B).
       ``(B) Procedures under which each child support order 
     issued or modified in the State after the effective date of 
     this subparagraph shall require the parents subject to the 
     order to provide each other with a complete statement of 
     their respective financial condition annually on a form which 
     shall be established by the Secretary and provided by the 
     State. The Secretary shall establish regulations for the 
     enforcement of such exchange of information.''.

                CHAPTER 7--ENFORCEMENT OF SUPPORT ORDERS

     SEC. 9461. FEDERAL INCOME TAX REFUND OFFSET.

       (a) Changed Order of Refund Distribution Under Internal 
     Revenue Code.--Section 6402(c) of the Internal Revenue Code 
     of 1986 is amended by striking the 3rd sentence.
       (b) Elimination of Disparities in Treatment of Assigned and 
     Non-Assigned Arrearages.--(1) Section 464(a) (42 U.S.C. 
     664(a)) is amended--
       (A) by striking ``(a)'' and inserting ``(a) Offset 
     Authorized.--'';
       (B) in paragraph (1)--
       (i) in the first sentence, by striking ``which has been 
     assigned to such State pursuant to section 402(a)(26) or 
     section 471(a)(17)''; and
       (ii) in the second sentence, by striking ``in accordance 
     with section 457 (b)(4) or (d)(3)'' and inserting ``as 
     provided in paragraph (2)'';
       (C) in paragraph (2), to read as follows:
       ``(2) The State agency shall distribute amounts paid by the 
     Secretary of the Treasury pursuant to paragraph (1)--
       ``(A) in accordance with section 457(a)(4) or (d)(3), in 
     the case of past-due support assigned to a State pursuant to 
     section 403(b)(1)(E)(i) or 471(a)(17); and
       ``(B) to or on behalf of the child to whom the support was 
     owed, in the case of past-due support not so assigned.'';
       (D) in paragraph (3)--
       (i) by striking ``or (2)'' each place it appears; and
       (ii) in subparagraph (B), by striking ``under paragraph 
     (2)'' and inserting ``on account of past-due support 
     described in paragraph (2)(B)''.
       (2) Section 464(b) (42 U.S.C. 664(b)) is amended--
       (A) by striking ``(b)(1)'' and inserting ``(b) 
     Regulations.--''; and
       (B) by striking paragraph (2).
       (3) Section 464(c) (42 U.S.C. 664(c)) is amended--
       (A) by striking ``(c)(1) Except as provided in paragraph 
     (2), as'' and inserting ``(c) Definition.--As''; and
       (B) by striking paragraphs (2) and (3).
       (c) Effective Date.--The amendments made by this section 
     shall become effective October 1, 1999.

     SEC. 9462. INTERNAL REVENUE SERVICE COLLECTION OF ARREARS.

       (a) Amendment to Internal Revenue Code.--Section 6305(a) of 
     the Internal Revenue Code of 1986 is amended--
       (1) in paragraph (1), by inserting ``except as provided in 
     paragraph (5)'' after ``collected'';
       (2) by striking ``and'' at the end of paragraph (3);
       (3) by striking the period at the end of paragraph (4) and 
     inserting a comma;
       (4) by adding after paragraph (4) the following new 
     paragraph:

[[Page H10610]]

       ``(5) no additional fee may be assessed for adjustments to 
     an amount previously certified pursuant to such section 
     452(b) with respect to the same obligor.''; and
       (5) by striking ``Secretary of Health, Education, and 
     Welfare'' each place it appears and inserting ``Secretary of 
     Health and Human Services''.
       (b) Effective Date.--The amendments made by this section 
     shall become effective October 1, 1997.

     SEC. 9463. AUTHORITY TO COLLECT SUPPORT FROM FEDERAL 
                   EMPLOYEES.

       (a) Consolidation and Streamlining of Authorities.--
       (1) Section 459 (42 U.S.C. 659) is amended in the caption 
     by inserting ``income withholding,'' before ``garnishment''.
       (2) Section 459(a) (42 U.S.C. 659(a)) is amended--
       (A) by striking ``(a)'' and inserting ``(a) Consent To 
     Support Enforcement.--
       (B) by striking ``section 207'' and inserting ``section 207 
     of this Act and 38 U.S.C. 5301''; and
       (C) by striking all that follows ``a private person,'' and 
     inserting ``to withholding in accordance with State law 
     pursuant to subsections (a)(1) and (b) of section 466 and 
     regulations of the Secretary thereunder, and to any other 
     legal process brought, by a State agency administering a 
     program under this part or by an individual obligee, to 
     enforce the legal obligation of such individual to provide 
     child support or alimony.''.
       (3) Section 459(b) (42 U.S.C. 659(b)) is amended to read as 
     follows:
       ``(b) Consent to Requirements Applicable to Private 
     Person.-- Except as otherwise provided herein, each entity 
     specified in subsection (a) shall be subject, with respect to 
     notice to withhold income pursuant to subsection (a)(1) or 
     (b) of section 466, or to any other order or process to 
     enforce support obligations against an individual (if such 
     order or process contains or is accompanied by sufficient 
     data to permit prompt identification of the individual and 
     the moneys involved), to the same requirements as would apply 
     if such entity were a private person.''.
       (4) Section 459(c) (42 U.S.C. 659(c)) is redesignated and 
     relocated as paragraph (2) of subsection (f), and is 
     amended--
       (A) by striking ``responding to interrogatories pursuant to 
     requirements imposed by section 461(b)(3)'' and inserting 
     ``taking actions necessary to comply with the requirements of 
     subsection (A) with regard to any individual''; and
       (B) by striking ``any of his duties'' and all that follows 
     and inserting ``such duties.''.
       (5) Section 461 (42 U.S.C. 661) is amended by striking 
     subsection (b), and section 459 (42 U.S.C. 659) is amended by 
     inserting after subsection (b) (as added by paragraph (3) of 
     this subsection) the following:
       ``(c) Designation of Agent; Response to Notice or 
     Process.--(1) The head of each agency subject to the 
     requirements of this section shall--
       ``(A) designate an agent or agents to receive orders and 
     accept service of process; and
       ``(B) publish (i) in the appendix of such regulations, (ii) 
     in each subsequent republication of such regulations, and 
     (iii) annually in the Federal Register, the designation of 
     such agent or agents, identified by title of position, 
     mailing address, and telephone number.''.
       (6) Section 459 (42 U.S.C. 659) is amended by striking 
     subsection (d) and by inserting after subsection (c)(1) (as 
     added by paragraph (5) of this subsection) the following:
       ``(2) Whenever an agent designated pursuant to paragraph 
     (1) receives notice pursuant to subsection (a)(1) or (b) of 
     section 466, or is effectively served with any order, 
     process, or interrogatories, with respect to an individual's 
     child support or alimony payment obligations, such agent 
     shall--
       ``(A) as soon as possible (but not later than fifteen days) 
     thereafter, send written notice of such notice or service 
     (together with a copy thereof) to such individual at his duty 
     station or last-known home address;
       ``(B) within 30 days (or such longer period as may be 
     prescribed by applicable State law) after receipt of a notice 
     pursuant to subsection (a)(1) or (b) of section 466, comply 
     with all applicable provisions of such section 466; and
       ``(C) within 30 days (or such longer period as may be 
     prescribed by applicable State law) after effective service 
     of any other such order, process, or interrogatories, respond 
     thereto.''.
       (7) Section 461 (42 U.S.C. 661) is amended by striking 
     subsection (c), and section 459 (42 U.S.C. 659) is amended by 
     inserting after subsection (c) (as added by paragraph (5) and 
     amended by paragraph (6) of this subsection) the following:
       ``(d) Priority of Claims.--In the event that a governmental 
     entity receives notice or is served with process, as provided 
     in this section, concerning amounts owed by an individual to 
     more than one person--
       ``(1) support collection under section 466(b) must be given 
     priority over any other process, as provided in section 
     466(b)(7);
       ``(2) allocation of moneys due or payable to an individual 
     among claimants under section 466(b) shall be governed by the 
     provisions of such section 466(b) and regulations thereunder; 
     and
       ``(3) such moneys as remain after compliance with 
     subparagraphs (A) and (B) shall be available to satisfy any 
     other such processes on a first-come, first-served basis, 
     with any such process being satisfied out of such moneys as 
     remain after the satisfaction of all such processes which 
     have been previously served.''.
       (8) Section 459(e) (42 U.S.C. 659(e)) is amended by 
     striking ``(e)'' and inserting the following:
       ``(e) No Requirement To Vary Pay Cycles.--''.
       (9) Section 459(f) (42 U.S.C. 659(f)) is amended by 
     striking ``(f)'' and inserting the following:
       ``(f) Relief From Liability.--(1)''.
       (10) Section 461(a) (42 U.S.C. 661(a)) is redesignated and 
     relocated as section 459(g), and is amended--
       (A) by striking ``(g)'' and inserting the following:
       ``(g) Regulations.--''; and
       (B) by striking ``section 459'' and inserting ``this 
     section''.
       (11) Section 462 (42 U.S.C. 662) is amended by striking 
     subsection (f), and section 459 (42 U.S.C. 659) is amended by 
     inserting the following after subsection (g) (as added by 
     paragraph (10) of this subsection):
       ``(h) Moneys Subject to Process.--(1) Subject to subsection 
     (i), moneys paid or payable to an individual which are 
     considered to be based upon remuneration for employment, for 
     purposes of this section--
       ``(A) consist of--
       ``(i) compensation paid or payable for personal services of 
     such individual, whether such compensation is denominated as 
     wages, salary, commission, bonus, pay, allowances, or 
     otherwise (including severance pay, sick pay, and incentive 
     pay);
       ``(ii) periodic benefits (including a periodic benefit as 
     defined in section 228(h)(3)) or other payments--
       ``(I) under the insurance system established by title II;
       ``(II) under any other system or fund established by the 
     United States which provides for the payment of pensions, 
     retirement or retired pay, annuities, dependents' or 
     survivors' benefits, or similar amounts payable on account of 
     personal services performed by the individual or any other 
     individual;
       ``(III) as compensation for death under any Federal 
     program;
       ``(IV) under any Federal program established to provide 
     `black lung' benefits; or
       ``(V) by the Secretary of Veterans Affairs as pension, or 
     as compensation for a service-connected disability or death 
     (except any compensation paid by such Secretary to a former 
     member of the Armed Forces who is in receipt of retired or 
     retainer pay if such former member has waived a portion of 
     his retired pay in order to receive such compensation); and
       ``(iii) worker's compensation benefits paid under Federal 
     or State law; but
       ``(B) do not include any payment--
       ``(i) by way of reimbursement or otherwise, to defray 
     expenses incurred by such individual in carrying out duties 
     associated with his employment; or
       ``(ii) as allowances for members of the uniformed services 
     payable pursuant to chapter 7 of title 37, United States 
     Code, as prescribed by the Secretaries concerned (defined by 
     section 101(5) of such title) as necessary for the efficient 
     performance of duty.''.
       (12) Section 462(g) (42 U.S.C. 662(g)) is redesignated and 
     relocated as section 459(i) (42 U.S.C. 659(i)).
       (13)(A) Section 462 (42 U.S.C. 662) is amended--
       (i) in subsection (e)(1), by redesignating subparagraphs 
     (A), (B), and (C) as clauses (i), (ii), and (iii); and
       (ii) in subsection (e), by redesignating paragraphs (1) and 
     (2) as subparagraphs (A) and (B).
       (B) Section 459 (42 U.S.C. 659) is amended by adding at the 
     end the following:
       ``(j) Definitions.--For purposes of this sec- tion--''.
       (C) Subsections (a) through (e) of section 462 (42 U.S.C. 
     662), as amended by subparagraph (A) of this paragraph, are 
     relocated and redesignated as paragraphs (1) through (4), 
     respectively of section 459(j) (as added by subparagraph (B) 
     of this paragraph, (42 U.S.C. 659(j)), and the left margin of 
     each of such paragraphs (1) through (4) is indented 2 ems to 
     the right of the left margin of subsection (i) (as added by 
     paragraph (12) of this subsection).
       (b) Conforming Amendments.--
       (1) To part d of title iv.--Sections 461 and 462 (42 U.S.C. 
     661), as amended by subsection (a) of this section, are 
     repealed.
       (2) To title 5, united states code.--Section 5520a of title 
     5, United States Code, is amended, in subsections (h)(2) and 
     (i), by striking ``sections 459, 461, and 462 of the Social 
     Security Act (42 U.S.C. 659, 661, and 662)'' and inserting 
     ``section 459 of the Social Security Act (42 U.S.C. 659)''.
       (c) Military Retired and Retainer Pay.--(1) Definition of 
     Court.--Section 1408(a)(1) of title 10, United States Code, 
     is amended--
       (A) by striking ``and'' at the end of subparagraph (B);
       (B) by striking the period at the end of subparagraph (C) 
     and inserting ``; and''; and
       (C) by adding after subparagraph (C) the following new 
     paragraph:
       ``(D) any administrative or judicial tribunal of a State 
     competent to enter orders for support or maintenance 
     (including a State agency administering a State program under 
     part D of title IV of the Social Security Act).'';
       (2) Definition of Court Order.--Section 1408(a)(2) of such 
     title is amended by inserting ``or a court order for the 
     payment of child support not included in or accompanied by 
     such a decree or settlement,'' before ``which--''.

[[Page H10611]]

       (3) Public Payee.--Section 1408(d) of such title is 
     amended--
       (A) in the heading, by striking ``to spouse'' and inserting 
     ``to (or for benefit of)''; and
       (B) in paragraph (1), in the first sentence, by inserting 
     ``(or for the benefit of such spouse or former spouse to a 
     State central collections unit or other public payee 
     designated by a State, in accordance with part D of title IV 
     of the Social Security Act, as directed by court order, or as 
     otherwise directed in accordance with such part D)'' before 
     ``in an amount sufficient''.
       (4) Relationship to Part D of Title IV.--Section 1408 of 
     such title is amended by adding at the end the following new 
     subsection:
       ``(j) Relationship to Other Laws.--In any case involving a 
     child support order against a member who has never been 
     married to the other parent of the child, the provisions of 
     this section shall not apply, and the case shall be subject 
     to the provisions of section 459 of the Social Security 
     Act.''.
       (d) Effective Date.--The amendments made by this section 
     shall become effective 6 months after the date of the 
     enactment of this Act.

     SEC. 9464. ENFORCEMENT OF CHILD SUPPORT OBLIGATIONS OF 
                   MEMBERS OF THE ARMED FORCES.

       (a) Availability of Locator Information.--
       (1) Maintenance of address information.--The Secretary of 
     Defense shall establish a centralized personnel locator 
     service that includes the address of each member of the Armed 
     Forces under the jurisdiction of the Secretary. Upon request 
     of the Secretary of Transportation, addresses for members of 
     the Coast Guard shall be included in the centralized 
     personnel locator service.
       (2) Type of address.--
       (A) Residential address.--Except as provided in 
     subparagraph (B), the address for a member of the Armed 
     Forces shown in the locator service shall be the residential 
     address of that member.
       (B) Duty address.--The address for a member of the Armed 
     Forces shown in the locator service shall be the duty address 
     of that member in the case of a member--
       (i) who is permanently assigned overseas, to a vessel, or 
     to a routinely deployable unit; or
       (ii) with respect to whom the Secretary concerned makes a 
     determination that the member's residential address should 
     not be disclosed due to national security or safety concerns.
       (3) Updating of locator information.--Within 30 days after 
     a member listed in the locator service establishes a new 
     residential address (or a new duty address, in the case of a 
     member covered by paragraph (2)(B)), the Secretary concerned 
     shall update the locator service to indicate the new address 
     of the member.
       (4) Availability of information.--The Secretary of Defense 
     shall make information regarding the address of a member of 
     the Armed Forces listed in the locator service available, on 
     request, to the Federal Parent Locator Service.
       (b) Facilitating Granting of Leave for Attendance at 
     Hearings.--
       (1) Regulations.--The Secretary of each military 
     department, and the Secretary of Transportation with respect 
     to the Coast Guard when it is not operating as a service in 
     the Navy, shall prescribe regulations to facilitate the 
     granting of leave to a member of the Armed Forces under the 
     jurisdiction of that Secretary in a case in which--
       (A) the leave is needed for the member to attend a hearing 
     described in paragraph (2);
       (B) the member is not serving in or with a unit deployed in 
     a contingency operation (as defined in section 101 of title 
     10, United States Code); and
       (C) the exigencies of military service (as determined by 
     the Secretary concerned) do not otherwise require that such 
     leave not be granted.
       (2) Covered hearings.--Paragraph (1) applies to a hearing 
     that is conducted by a court or pursuant to an administrative 
     process established under State law, in connection with a 
     civil action--
       (A) to determine whether a member of the Armed Forces is a 
     natural parent of a child; or
       (B) to determine an obligation of a member of the Armed 
     Forces to provide child support.
       (3) Definitions.--For purposes of this subsection:
       (A) The term ``court'' has the meaning given that term in 
     section 1408(a) of title 10, United States Code.
       (B) The term ``child support'' has the meaning given such 
     term in section 462 of the Social Security Act (42 U.S.C. 
     662).
       (c) Payment of Military Retired Pay in Compliance With 
     Child Support Orders.--
       (1) Date of certification of court order.--Section 1408 of 
     title 10, United States Code, is amended--
       (A) by redesignating subsection (i) as subsection (j); and
       (B) by inserting after subsection (h) the following new 
     subsection (i):
       ``(i) Certification Date.--It is not necessary that the 
     date of a certification of the authenticity or completeness 
     of a copy of a court order or an order of an administrative 
     process established under State law for child support 
     received by the Secretary concerned for the purposes of this 
     section be recent in relation to the date of receipt by the 
     Secretary.''.
       (2) Payments consistent with assignments of rights to 
     states.--Section 1408(d)(1) of such title is amended by 
     inserting after the first sentence the following: ``In the 
     case of a spouse or former spouse who, pursuant to section 
     403(b)(1)(E)(i) of the Social Security Act, assigns to a 
     State the rights of the spouse or former spouse to receive 
     support, the Secretary concerned may make the child support 
     payments referred to in the preceding sentence to that State 
     in amounts consistent with that assignment of rights.''.
       (3) Arrearages owed by members of the uniformed services.--
     Section 1408(d) of such title is amended by adding at the end 
     the following new paragraph:
       ``(6) In the case of a court order or an order of an 
     administrative process established under State law for which 
     effective service is made on the Secretary concerned on or 
     after the date of the enactment of this paragraph and which 
     provides for payments from the disposable retired pay of a 
     member to satisy the amount of child support set forth in the 
     order, the authority provided in paragraph (1) to make 
     payments from the disposable retired pay of a member to 
     satisy the amount of child support set forth in a court order 
     or an order of an administrative process established under 
     State law shall apply to payment of any amount of child 
     support arrearages set forth in that order as well as to 
     amounts of child support that currently become due.''.

     SEC. 9465. MOTOR VEHICLE LIENS.

       Section 466(a)(4) (42 U.S.C. 666(a)(4)) is amended--
       (1) by striking ``(4) Procedures'' and inserting the 
     following:
       ``(4) Liens.--
       ``(A) In general.--Procedures''; and
       (2) by adding at the end the following new subparagraph:
       ``(B) Motor vehicle liens.--Procedures for placing liens 
     for arrears of child support on motor vehicle titles of 
     individuals owing such arrears equal to or exceeding two 
     months of support, under which--
       ``(i) any person owed such arrears may place such a lien;
       ``(ii) the State agency administering the program under 
     this part shall systematically place such liens;
       ``(iii) expedited methods are provided for--

       ``(I) ascertaining the amount of arrears;
       ``(II) affording the person owing the arrears or other 
     titleholder to contest the amount of arrears or to obtain a 
     release upon fulfilling the support obligation;

       ``(iv) such a lien has precedence over all other 
     encumbrances on a vehicle title other than a purchase money 
     security interest; and
       ``(v) the individual or State agency owed the arrears may 
     execute on, seize, and sell the property in accordance with 
     State law.''.

     SEC. 9466. VOIDING OF FRAUDULENT TRANSFERS.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     9401(a), 9426(a), 9431, and 9442 of this Act, is amended by 
     inserting after paragraph (15) the following:
       ``(16) Fraudulent transfers.--Procedures under which--
       ``(A) the State has in effect--
       ``(i) the Uniform Fraudulent Conveyance Act of 1981,
       ``(ii) the Uniform Fraudulent Transfer Act of 1984, or
       ``(iii) another law, specifying indicia of fraud which 
     create a prima facie case that a debtor transferred income or 
     property to avoid payment to a child support creditor, which 
     the Secretary finds affords comparable rights to child 
     support creditors; and
       ``(B) in any case in which the State knows of a transfer by 
     a child support debtor with respect to which such a prima 
     facie case is established, the State must--
       ``(i) seek to void such transfer; or
       ``(ii) obtain a settlement in the best interests of the 
     child support creditor.''.

     SEC. 9467. STATE LAW AUTHORIZING SUSPENSION OF LICENSES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     9401(a), 9426(a), 9431, 9442, and 9466 of this Act, is 
     amended by inserting after paragraph (16) the following:
       ``(17) Authority to withhold or suspend licenses.--
     Procedures under which the State has (and uses in appropriate 
     cases) authority (subject to appropriate due process 
     safeguards) to withhold or suspend, or to restrict the use of 
     driver's licenses, and professional and occupational licenses 
     of individuals owing overdue child support or failing, after 
     receiving appropriate notice, to comply with subpoenas or 
     warrants relating to paternity or child support 
     proceedings.''.

     SEC. 9468. REPORTING ARREARAGES TO CREDIT BUREAUS.

       Section 466(a)(7) (42 U.S.C. 666(a)(7)) is amended to read 
     as follows:
       ``(7) Reporting arrearages to credit bureaus.--(A) 
     Procedures (subject to safeguards pursuant to subparagraph 
     (B)) requiring the State to report periodically to consumer 
     reporting agencies (as defined in section 603(f) of the Fair 
     Credit Reporting Act (15 U.S.C. 1681a(f)) the name of any 
     absent parent who is delinquent by 90 days or more in the 
     payment of support, and the amount of overdue support owed by 
     such parent.
       ``(B) Procedures ensuring that, in carrying out 
     subparagraph (A), information with respect to an absent 
     parent is reported--
       ``(i) only after such parent has been afforded all due 
     process required under State 

[[Page H10612]]

     law, including notice and a reasonable opportunity to contest 
     the accuracy of such information; and
       ``(ii) only to an entity that has furnished evidence 
     satisfactory to the State that the entity is a consumer 
     reporting agency.''.

     SEC. 9469. EXTENDED STATUTE OF LIMITATION FOR COLLECTION OF 
                   ARREARAGES.

       (a) Amendments.--Section 466(a)(9) (42 U.S.C. 666(a)(9)) is 
     amended--
       (1) by striking ``(9) Procedures'' and inserting the 
     following:
       ``(9) Legal treatment of arrears.--
       ``(A) Finality.--Procedures'';
       (2) by redesignating subparagraphs (A), (B), and (C) as 
     clauses (i), (ii), and (iii), respectively, and by indenting 
     each of such clauses 2 additional ems to the right; and
       (3) by adding after and below subparagraph (A), as 
     redesignated, the following new subparagraph:
       ``(B) Statute of limitations.--Procedures under which the 
     statute of limitations on any arrearages of child support 
     extends at least until the child owed such support is 30 
     years of age.''.
       (b) Application of Requirement.--The amendment made by this 
     section shall not be read to require any State law to revive 
     any payment obligation which had lapsed prior to the 
     effective date of such State law.

     SEC. 9470. CHARGES FOR ARREARAGES.

       (a) State Law Requirement.--Section 466(a) (42 U.S.C. 
     666(a)), as amended by sections 9401(a), 9426(a), 9431, 9442, 
     9466, and 9467 of this Act, is amended by inserting after 
     paragraph (17) the following:
       ``(18) Charges for arrearages.--Procedures providing for 
     the calculation and collection of interest or penalties for 
     arrearages of child support, and for distribution of such 
     interest or penalties collected for the benefit of the child 
     (except where the right to support has been assigned to the 
     State).''.
       (b) Regulations.--The Secretary of Health and Human 
     Services shall establish by regulation a rule to resolve 
     choice of law conflicts arising in the implementation of the 
     amendment made by subsection (a).
       (c) Conforming Amendment.--Section 454(21) (42 U.S.C. 
     654(21)) is repealed.
       (d) Effective Date.--The amendments made by this section 
     shall be effective with respect to arrearages accruing on or 
     after October 1, 1998.

     SEC. 9471. DENIAL OF PASSPORTS FOR NONPAYMENT OF CHILD 
                   SUPPORT.

       (a) HHS Certification Procedure.--
       (1) Secretarial responsibility.--Section 452 (42 U.S.C. 
     652), as amended by sections 9415(a)(3) and 9417 of this Act, 
     is amended by adding at the end the following new subsection:
       ``(l) Certifications for Purposes of Passport 
     Restrictions.--
       ``(1) In general.--Where the Secretary receives a 
     certification by a State agency in accordance with the 
     requirements of section 454(28) that an individual owes 
     arrearages of child support in an amount exceeding $5,000 or 
     in an amount exceeding 24 months' worth of child support, the 
     Secretary shall transmit such certification to the Secretary 
     of State for action (with respect to denial, revocation, or 
     limitation of passports) pursuant to section 9471(b) of the 
     Omnibus Budget Reconciliation Act of 1995.
       ``(2) Limit on liability.--The Secretary shall not be 
     liable to an individual for any action with respect to a 
     certification by a State agency under this section.''.
       (2) State cse agency responsibility.--Section 454 (42 
     U.S.C. 654), as amended by sections 9404(a), 9414(b), and 
     9422(a) of this Act, is amended--
       (A) by striking ``and'' at the end of paragraph (26);
       (B) by striking the period at the end of paragraph (27) and 
     inserting ``; and''; and
       (C) by adding after paragraph (27) the following new 
     paragraph:
       ``(28) provide that the State agency will have in effect a 
     procedure (which may be combined with the procedure for tax 
     refund offset under section 464) for certifying to the 
     Secretary, for purposes of the procedure under section 452(l) 
     (concerning denial of passports) determinations that 
     individuals owe arrearages of child support in an amount 
     exceeding $5,000 or in an amount exceeding 24 months' worth 
     of child support, under which procedure--
       ``(A) each individual concerned is afforded notice of such 
     determination and the consequences thereof, and an 
     opportunity to contest the determination; and
       ``(B) the certification by the State agency is furnished to 
     the Secretary in such format, and accompanied by such 
     supporting documentation, as the Secretary may require.''.
       (b) State Department Procedure for Denial of Passports.--
       (1) In general.--The Secretary of State, upon certification 
     by the Secretary of Health and Human Services, in accordance 
     with section 452(l) of the Social Security Act, that an 
     individual owes arrearages of child support in excess of 
     $5,000, shall refuse to issue a passport to such individual, 
     and may revoke, restrict, or limit a passport issued 
     previously to such individual.
       (2) Limit on liability.--The Secretary of State shall not 
     be liable to an individual for any action with respect to a 
     certification by a State agency under this section.
       (c) Effective Date.--This section and the amendments made 
     by this section shall become effective October 1, 1996.

     SEC. 9472. INTERNATIONAL CHILD SUPPORT ENFORCEMENT.

       (a) Sense of the Congress That the United States Should 
     Ratify the United Nations Convention of 1956.--It is the 
     sense of the Congress that the United States should ratify 
     the United Nations Convention of 1956.
       (b) Treatment of International Child Support Cases as 
     Interstate Cases.--Section 454 (42 U.S.C. 654), as amended by 
     sections 9404(a), 9414(b), 9422(a), and 9471(a)(2) of this 
     Act, is amended--
       (1) by striking ``and'' at the end of paragraph (27);
       (2) by striking the period at the end of paragraph (28) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (28) the following:
       ``(29) provide that the State must treat international 
     child support cases in the same manner as the State treats 
     interstate child support cases.''.

     SEC. 9473. SEIZURE OF LOTTERY WINNINGS, SETTLEMENTS, PAYOUTS, 
                   AWARDS, AND BEQUESTS, AND SALE OF FORFEITED 
                   PROPERTY, TO PAY CHILD SUPPORT ARREARAGES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     9401(a), 9426(a), 9431, 9442, 9466, 9467, and 9470(a) of this 
     Act, is amended by inserting after paragraph (18) the 
     following:
       ``(19) Procedures, in addition to other income withholding 
     procedures, under which a lien is imposed against property 
     with the following effect:
       ``(A) The distributor of the winnings from a State lottery 
     or State-sanctioned or tribal-sanctioned gambling house or 
     casino shall--
       ``(i) suspend payment of the winnings from the person 
     otherwise entitled to the payment until an inquiry is made to 
     and a response is received from the State child support 
     enforcement agency as to whether the person owes a child 
     support arrearage; and
       ``(ii) if there is such an arrearage, withhold from the 
     payment the lesser of the amount of the payment or the amount 
     of the arrearage, and pay the amount withheld to the agency 
     for distribution.
       ``(B) The person required to make a payment under a policy 
     of insurance or a settlement of a claim made with respect to 
     the policy shall--
       ``(i) suspend the payment until an inquiry is made to and a 
     response received from the agency as to whether the person 
     otherwise entitled to the payment owes a child support 
     arrearage; and
       ``(ii) if there is such an arrearage, withhold from the 
     payment the lesser of the amount of the payment or the amount 
     of the arrearage, and pay the amount withheld to the agency 
     for distribution.
       ``(C) The payor of any amount pursuant to an award, 
     judgment, or settlement in any action brought in Federal or 
     State court shall--
       ``(i) suspend the payment of the amount until an inquiry is 
     made to and a response is received from the agency as to 
     whether the person otherwise entitled to the payment owes a 
     child support arrearage; and
       ``(ii) if there is such an arrearage, withhold from the 
     payment the lesser of the amount of the payment or the amount 
     of the arrearage, and pay the amount withheld to the agency 
     for distribution.
       ``(D) If the State seizes property forfeited to the State 
     by an individual by reason of a criminal conviction, the 
     State shall--
       ``(i) hold the property until an inquiry is made to and a 
     response is received from the agency as to whether the 
     individual owes a child support arrearage; and
       ``(ii) if there is such an arrearage, sell the property 
     and, after satisfying the claims of all other private or 
     public claimants to the property and deducting from the 
     proceeds of the sale the attendant costs (such as for towing, 
     storage, and the sale), pay the lesser of the remaining 
     proceeds or the amount of the arrearage directly to the 
     agency for distribution.
       ``(E) Any person required to make a payment in respect of a 
     decedent shall--
       ``(i) suspend the payment until an inquiry is made to and a 
     response received from the agency as to whether the person 
     otherwise entitled to the payment owes a child support 
     arrearage; and
       ``(ii) if there is such an arrearage, withhold from the 
     payment the lesser of the amount of the payment or the amount 
     of the arrearage, and pay the amount withheld to the agency 
     for distribution.''.

     SEC. 9474. LIABILITY OF GRANDPARENTS FOR FINANCIAL SUPPORT OF 
                   CHILDREN OF THEIR MINOR CHILDREN.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     9401(a), 9426(a), 9431, 9442, 9466, 9467, 9470(a), and 9473 
     of this Act, is amended by inserting after paragraph (19) the 
     following:
       ``(20) Procedures under which each parent of an individual 
     who has not attained 18 years of age is liable for the 
     financial support of any child of the individual to the 
     extent that the individual is unable to provide such support. 
     The preceding sentence shall not apply to the State if the 
     State plan explicitly provides for such inapplicability.''.

     SEC. 9475. SENSE OF THE CONGRESS REGARDING PROGRAMS FOR 
                   NONCUSTODIAL PARENTS UNABLE TO MEET CHILD 
                   SUPPORT OBLIGATIONS.

       It is the sense of the Congress that the States should 
     develop programs, such as the program of the State of 
     Wisconsin known as the ``Children's First Program'', that are 
     designed to work with noncustodial parents who are unable to 
     meet their child support obligations.

[[Page H10613]]


                       CHAPTER 8--MEDICAL SUPPORT

     SEC. 9481. TECHNICAL CORRECTION TO ERISA DEFINITION OF 
                   MEDICAL CHILD SUPPORT ORDER.

       (a) In General.--Section 609(a)(2)(B) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1169(a)(2)(B)) is amended--
       (1) by striking ``issued by a court of competent 
     jurisdiction'';
       (2) by striking the period at the end of clause (ii) and 
     inserting a comma; and
       (3) by adding, after and below clause (ii), the following:

     ``if such judgment, decree, or order (I) is issued by a court 
     of competent jurisdiction or (II) is issued by an 
     administrative adjudicator and has the force and effect of 
     law under applicable State law.''.
       (b) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     take effect on the date of the enactment of this Act.
       (2) Plan amendments not required until january 1, 1996.--
     Any amendment to a plan required to be made by an amendment 
     made by this section shall not be required to be made before 
     the first plan year beginning on or after January 1, 1996, 
     if--
       (A) during the period after the date before the date of the 
     enactment of this Act and before such first plan year, the 
     plan is operated in accordance with the requirements of the 
     amendments made by this section, and
       (B) such plan amendment applies retroactively to the period 
     after the date before the date of the enactment of this Act 
     and before such first plan year.

     A plan shall not be treated as failing to be operated in 
     accordance with the provisions of the plan merely because it 
     operates in accordance with this paragraph.

               CHAPTER 9--FOOD STAMP PROGRAM REQUIREMENTS

     SEC. 9491. COOPERATION WITH CHILD SUPPORT AGENCIES.

       Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015) is 
     amended adding at the end the following:
       ``(i) Custodial Parent's Cooperation With Child Support 
     Agencies.--
       ``(1) In general.--At the option of a State agency, subject 
     to paragraphs (2) and (3), no natural or adoptive parent or 
     other individual (collectively referred to in this subsection 
     as `the individual') who is living with and exercising 
     parental control over a child under the age of 18 who has an 
     absent parent shall be eligible to participate in the food 
     stamp program unless the individual cooperates with the State 
     agency administering the program established under part D of 
     title IV of the Social Security Act (42 U.S.C. 651 et seq.)--
       ``(A) in establishing the paternity of the child (if the 
     child is born out of wedlock); and
       ``(B) in obtaining support for--
       ``(i) the child; or
       ``(ii) the individual and the child.
       ``(2) Good cause for noncooperation.--Paragraph (1) shall 
     not apply to the individual if good cause is found for 
     refusing to cooperate, as determined by the State agency in 
     accordance with standards prescribed by the Secretary in 
     consultation with the Secretary of Health and Human Services. 
     The standards shall take into consideration circumstances 
     under which cooperation may be against the best interests of 
     the child.
       ``(3) Fees.--Paragraph (1) shall not require the payment of 
     a fee or other cost for services provided under part D of 
     title IV of the Social Security Act (42 U.S.C. 651 et seq.).
       ``(j) Non-Custodial Parent's Cooperation With Child Support 
     Agencies.--
       ``(1) In general.--At the option of a State agency, subject 
     to paragraphs (2) and (3), a putative or identified non-
     custodial parent of a child under the age of 18 (referred to 
     in this subsection as `the individual') shall not be eligible 
     to participate in the food stamp program if the individual 
     refuses to cooperate with the State agency administering the 
     program established under part D of title IV of the Social 
     Security Act (42 U.S.C. 651 et seq.)--
       ``(A) in establishing the paternity of the child (if the 
     child is born out of wedlock); and
       ``(B) in providing support for the child.
       ``(2) Refusal to cooperate.--
       ``(A) Guidelines.--The Secretary, in consultation with the 
     Secretary of Health and Human Services, shall develop 
     guidelines on what constitutes a refusal to cooperate under 
     paragraph (1).
       ``(B) Procedures.--The State agency shall develop 
     procedures, using guidelines developed under subparagraph 
     (A), for determining whether an individual is refusing to 
     cooperate under paragraph (1).
       ``(3) Fees.--Paragraph (1) shall not require the payment of 
     a fee or other cost for services provided under part D of 
     title IV of the Social Security Act (42 U.S.C. 651 et seq.).
       ``(4) Privacy.--The State agency shall provide safeguards 
     to restrict the use of information collected by a State 
     agency administering the program established under part D of 
     title IV of the Social Security Act (42 U.S.C. 651 et seq.) 
     to purposes for which the information is collected.''.

     SEC. 9492. DISQUALIFICATION FOR CHILD SUPPORT ARREARS.

       Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as 
     amended by section 9491 of this Act, is amended by adding at 
     the end the following:
       ``(k) Disqualification for Child Support Arrears.--
       ``(1) In general.--At the option of a State agency, except 
     as provided in paragraph (2), no individual shall be eligible 
     to participate in the food stamp program as a member of any 
     household during any month that the individual is delinquent 
     in any payment due under a court order for the support of a 
     child of the individual.
       ``(2) Exceptions.--Paragraph (1) shall not apply if--
       ``(A) a court is allowing the individual to delay payment; 
     or
       ``(B) the individual is complying with a payment plan 
     approved by a court or the State agency designated under part 
     D of title IV of the Social Security Act (42 U.S.C. 651 et 
     seq.) to provide support for the child of the individual.''.

                    CHAPTER 10--EFFECT OF ENACTMENT

     SEC. 9498. EFFECTIVE DATES.

       (a) In General.--Except as otherwise specifically provided 
     (but subject to subsections (b) and (c))--
       (1) provisions of this title requiring enactment or 
     amendment of State laws under section 466 of the Social 
     Security Act, or revision of State plans under section 454 of 
     such Act, shall be effective with respect to periods 
     beginning on and after October 1, 1996; and
       (2) all other provisions of this title shall become 
     effective upon enactment.
       (b) Grace Period for State Law Changes.--The provisions of 
     this title shall become effective with respect to a State on 
     the later of--
       (1) the date specified in this title, or
       (2) the effective date of laws enacted by the legislature 
     of such State implementing such provisions,
     but in no event later than the first day of the first 
     calendar quarter beginning after the close of the first 
     regular session of the State legislature that begins after 
     the date of enactment of this Act. 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.
       (c) Grace Period for State Constitutional Amendment.--A 
     State shall not be found out of compliance with any 
     requirement enacted by this title if it is unable to comply 
     without amending the State constitution until the earlier 
     of--
       (1) the date one year after the effective date of the 
     necessary State constitutional amendment, or
       (2) the date five years after enactment of this title.

     SEC. 9499. SEVERABILITY.

       If any provision of this title or the application thereof 
     to any person or circumstance is held invalid, the invalidity 
     shall not affect other provisions or applications of this 
     title which can be given effect without regard to the invalid 
     provision or application, and to this end the provisions of 
     this title shall be severable.
            Subtitle E--Teen Pregnancy And Family Stability

     SEC. 9501. STATE OPTION TO DENY TEMPORARY EMPLOYMENT 
                   ASSISTANCE FOR ADDITIONAL CHILDREN.

       (a) In General.--Section 402(d)(1), as added by section 
     9101(a) of this Act, is amended--
       (1) by striking ``(1) Determination of need.--'' and 
     inserting the following:
       ``(1) Determination of need.--
       ``(A) In general.--''; and
       (2) by adding at the end the following:
       ``(B) Optional denial of assistance to families having 
     additional children while receiving assistance.--At the 
     option of the State, the State plan may provide that--
       ``(i)(I) a child shall not be considered a needy child if 
     the child is born (other than as a result of rape or incest) 
     to a member of a family--

       ``(aa) while the family was a recipient of assistance under 
     the State plan; or
       ``(bb) during the 6-month period ending with the date the 
     family applied for such assistance; and

       ``(II) if the value of assistance to a family under the 
     State plan approved under this part is reduced by reason of 
     subclause (I), each member of the family shall be considered 
     to be receiving such assistance for purposes of eligibility 
     for medical assistance under the State plan approved under 
     title XIX for so long as assistance to the family under the 
     State plan approved under this part would otherwise not be so 
     reduced; and
       ``(ii) if the State exercises the option, the State may 
     provide the family with vouchers, in amounts not exceeding 
     the amount of any such reduction in assistance, that may be 
     used only to pay for particular goods and services specified 
     by the State as suitable for the care of the child of the 
     parent (such as diapers, clothing, or school supplies).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     of this section shall take effect in the same manner as the 
     amendment made by section 9101(a) takes effect.

     SEC. 9502. SUPERVISED LIVING ARRANGEMENTS FOR MINORS.

       (a) In General.--Section 402(c), as added by section 
     9101(a) of this Act, is amended by adding at the end the 
     following:
       ``(8) Supervised living arrangements for minors.--The State 
     plan shall provide that--
       ``(A) except as provided in subparagraph (B), in the case 
     of any individual who is under age 18 and has never married, 
     and who has a needy child in his or her care (or is pregnant 
     and is eligible for temporary employment assistance under the 
     State plan)--
       ``(i) such individual may receive such assistance for the 
     individual and such child (or 

[[Page H10614]]

     for herself in the case of a pregnant woman) only if such 
     individual and child (or such pregnant woman) reside in a 
     place of residence maintained by a parent, legal guardian, or 
     other adult relative of such individual as such parent's, 
     guardian's, or adult relative's own home; and
       ``(ii) such assistance (where possible) shall be provided 
     to the parent, legal guardian, or other adult relative on 
     behalf of such individual and child; and
       ``(B)(i) in the case of an individual described in clause 
     (ii)--
       ``(I) the State agency shall assist such individual in 
     locating an appropriate adult-supervised supportive living 
     arrangement taking into consideration the needs and concerns 
     of the individual, unless the State agency determines that 
     the individual's current living arrangement is appropriate, 
     and thereafter shall require that the individual (and child, 
     if any) reside in such living arrangement as a condition of 
     the continued receipt of assistance under the plan (or in an 
     alternative appropriate arrangement, should circumstances 
     change and the current arrangement cease to be appropriate), 
     or
       ``(II) if the State agency is unable, after making diligent 
     efforts, to locate any such appropriate living arrangement, 
     the State agency shall provide for comprehensive case 
     management, monitoring, and other social services consistent 
     with the best interests of the individual (and child) while 
     living independently (as determined by the State agency); and
       ``(ii) for purposes of clause (i), an individual is 
     described in this clause if--
       ``(I) such individual has no parent or legal guardian of 
     his or her own who is living and whose whereabouts are known;
       ``(II) no living parent or legal guardian of such 
     individual allows the individual to live in the home of such 
     parent or guardian;
       ``(III) the State agency determines that the physical or 
     emotional health of such individual or any needy child of the 
     individual would be jeopardized if such individual and such 
     needy child lived in the same residence with such 
     individual's own parent or legal guardian; or
       ``(IV) the State agency otherwise determines (in accordance 
     with regulations issued by the Secretary) that it is in the 
     best interest of the needy child to waive the requirement of 
     subparagraph (A) with respect to such individual.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     of this section shall take effect in the same manner as the 
     amendment made by section 9101(a) takes effect.

     SEC. 9503. NATIONAL CLEARINGHOUSE ON ADOLESCENT PREGNANCY.

       (a) In General.--Title XX (42 U.S.C. 1397-1397f), as 
     amended by section 9205(b) of this Act, is amended by adding 
     at the end the following:

     ``SEC. 2010. NATIONAL CLEARINGHOUSE ON ADOLESCENT PREGNANCY.

       ``(a) National Clearinghouse on Adolescent Pregnancy.--
       ``(1) Establishment.--The responsible Federal officials 
     shall establish, through grant or contract, a national center 
     for the collection and provision of programmatic information 
     and technical assistance that relates to adolescent pregnancy 
     prevention programs, to be known as the `National 
     Clearinghouse on Adolescent Pregnancy Prevention Programs'.
       ``(2) Functions.--The national center established under 
     paragraph (1) shall serve as a national information and data 
     clearinghouse, and as a training, technical assistance, and 
     material development source for adolescent pregnancy 
     prevention programs. Such center shall--
       ``(A) develop and maintain a system for disseminating 
     information on all types of adolescent pregnancy prevention 
     program and on the state of adolescent pregnancy prevention 
     program development, including information concerning the 
     most effective model programs;
       ``(B) develop and sponsor a variety of training institutes 
     and curricula for adolescent pregnancy prevention program 
     staff;
       ``(C) identify model programs representing the various 
     types of adolescent pregnancy prevention programs;
       ``(D) develop technical assistance materials and activities 
     to assist other entities in establishing and improving 
     adolescent pregnancy prevention programs;
       ``(E) develop networks of adolescent pregnancy prevention 
     programs for the purpose of sharing and disseminating 
     information; and
       ``(F) conduct such other activities as the responsible 
     Federal officials find will assist in developing and carrying 
     out programs or activities to reduce adolescent pregnancy.
       ``(b) Funding.--The responsible Federal officials shall 
     make grants to eligible entities for the establishment and 
     operation of a National Clearinghouse on Adolescent Pregnancy 
     Prevention Programs under subsection (a) so that in the 
     aggregate the expenditures for such grants do not exceed 
     $2,000,000 for fiscal year 1996, $4,000,000 for fiscal year 
     1997, $8,000,000 for fiscal year 1998, and $10,000,000 for 
     fiscal year 1999 and each subsequent fiscal year.
       ``(c) Definitions.--As used in this section:
       ``(1) Adolescents.--The term `adolescents' means youth who 
     are ages 10 through 19.
       ``(2) Eligible entity.--The term `eligible entity' means a 
     partnership that includes--
       ``(A) a local education agency, acting on behalf of one or 
     more schools, together with
       ``(B) one or more community-based organizations, 
     institutions of higher education, or public or private 
     agencies or organizations.
       ``(3) Eligible area.--The term `eligible area' means a 
     school attendance area in which--
       ``(A) at least 75 percent of the children are from low-
     income families as that term is used in part A of title I of 
     the Elementary and Secondary Education Act of 1965; or
       ``(B) the number of children receiving assistance under a 
     State plan approved under part A of title IV of this Act is 
     substantial as determined by the responsible Federal 
     officials; or
       ``(C) the unmarried adolescent birth rate is high, as 
     determined by the responsible Federal officials.
       ``(4) School.--The term `school' means a public elementary, 
     middle, or secondary school.
       ``(5) Responsible federal officials.--The term `responsible 
     Federal officials' means the Secretary of Education, the 
     Secretary of Health and Human Services, and the Chief 
     Executive Officer of the Corporation for National and 
     Community Service.''.
       (b) Effective Date.--The amendment made by this section 
     shall become effective January 1, 1996.

     SEC. 9504. REQUIRED COMPLETION OF HIGH SCHOOL OR OTHER 
                   TRAINING FOR TEENAGE PARENTS.

       (a) In General.--Section 403(b)(1)(D), as added by section 
     9101(a) of this Act, is amended--
       (1) by inserting ``(i)'' after ``(D)''; and
       (2) by adding at the end the following:
       ``(ii) in the case of a client who is a custodial parent 
     who is under age 18 (or age 19, at the option of the State), 
     has not successfully completed a high-school education (or 
     its equivalent), and is required to participate in the Work 
     First program (including an individual who would otherwise be 
     exempt from participation in the program), shall provide 
     that--
       ``(I) such parent participate in--

       ``(aa) educational activities directed toward the 
     attainment of a high school diploma or its equivalent on a 
     full-time (as defined by the educational provider) basis; or
       ``(bb) an alternative educational or training program on a 
     full-time (as defined by the provider) basis; and

       ``(II) child care be provided in accordance with section 
     2009 with respect to the family.''.
       (b) State Option To Provide Additional Incentives and 
     Penalties to Encourage Teen Parents to Complete High School 
     and Participate in Parenting Activities.--
       (1) State plan.--Section 403(b)(1)(D), as amended by 
     subsection (a) of this section, is amended by adding at the 
     end the following:
       ``(iii) at the option of the State, may provide that the 
     client who is a custodial parent or pregnant woman who is 
     under age 19 (or age 21, at the option of the State) 
     participate in a program of monetary incentives and penalties 
     which--
       ``(I) may, at the option of the State, require full-time 
     participation by such custodial parent or pregnant woman in 
     secondary school or equivalent educational activities, or 
     participation in a course or program leading to a skills 
     certificate found appropriate by the State agency or 
     parenting education activities (or any combination of such 
     activities and secondary education);
       ``(II) shall require that the needs of such custodial 
     parent or pregnant woman be reviewed and the program assure 
     that, either in the initial development or revision of such 
     individual's individual responsibility plan, there will be 
     included a description of the services that will be provided 
     to the client and the way in which the program and service 
     providers will coordinate with the educational or skills 
     training activities in which the client is participating;
       ``(III) shall provide monetary incentives (to be treated as 
     assistance under the State plan) for more than minimally 
     acceptable performance of required educational activities;
       ``(IV) shall provide penalties (which may be those required 
     by subsection (e) or, with the approval of the Secretary, 
     other monetary penalties that the State finds will better 
     achieve the objectives of the program) for less than 
     minimally acceptable performance of required activities;
       ``(V) shall provide that when a monetary incentive is 
     payable because of the more than minimally acceptable 
     performance of required educational activities by a custodial 
     parent, the incentive be paid directly to such parent, 
     regardless of whether the State agency makes payment of 
     assistance under the State plan directly to such parent; and
       ``(VI) for purposes of any other Federal or federally-
     assisted program based on need, shall not consider any 
     monetary incentive paid under the State plan as income in 
     determining a family's eligibility for or amount of benefits 
     under such program, and if assistance is reduced by reason of 
     a penalty under this clause, such other program shall treat 
     the family involved as if no such penalty has been 
     applied.''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect in the same manner as the amendment made by 
     section 9101(a) takes effect.

     SEC. 9505. DENIAL OF FEDERAL HOUSING BENEFITS TO MINORS WHO 
                   BEAR CHILDREN OUT-OF-WEDLOCK.

       (a) Prohibition of Assistance.--Notwithstanding any other 
     provision of law, a household whose head of household is an 
     individual who has borne a child out-of-wedlock before 
     attaining 18 years of age may not be 

[[Page H10615]]

     provided Federal housing assistance for a dwelling unit until 
     attaining such age, unless--
       (1) after the birth of the child--
       (A) the individual marries an individual who has been 
     determined by the relevant State to be the biological father 
     of the child; or
       (B) the biological parent of the child has legal custody of 
     the child and marries an individual who legally adopts the 
     child;
       (2) the individual is a biological and custodial parent of 
     another child who was not born out-of-wedlock; or
       (3) eligibility for such Federal housing assistance is 
     based in whole or in part on any disability or handicap of a 
     member of the household.
       (b) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Covered program.--The term ``covered program'' means--
       (A) the program of rental assistance on behalf of low-
     income families provided under section 8 of the United States 
     Housing Act of 1937 (42 U.S.C. 1437f);
       (B) the public housing program under title I of the United 
     States Housing Act of 1937 (42 U.S.C. 1437 et seq.);
       (C) the program of rent supplement payments on behalf of 
     qualified tenants pursuant to contracts entered into under 
     section 101 of the Housing and Urban Development Act of 1965 
     (12 U.S.C. 1701s);
       (D) the program of interest reduction payments pursuant to 
     contracts entered into by the Secretary of Housing and Urban 
     Development under section 236 of the National Housing Act (12 
     U.S.C. 1715z-1);
       (E) the program for mortgage insurance provided pursuant to 
     sections 221(d) (3) or (4) of the National Housing Act (12 
     U.S.C. 1715l(d)) for multifamily housing for low- and 
     moderate-income families;
       (F) the rural housing loan program under section 502 of the 
     Housing Act of 1949 (42 U.S.C. 1472);
       (G) the rural housing loan guarantee program under section 
     502(h) of the Housing Act of 1949 (42 U.S.C. 1472(h));
       (H) the loan and grant programs under section 504 of the 
     Housing Act of 1949 (42 U.S.C. 1474) for repairs and 
     improvements to rural dwellings;
       (I) the program of loans for rental and cooperative rural 
     housing under section 515 of the Housing Act of 1949 (42 
     U.S.C. 1485);
       (J) the program of rental assistance payments pursuant to 
     contracts entered into under section 521(a)(2)(A) of the 
     Housing Act of 1949 (42 U.S.C. 1490a(a)(2)(A));
       (K) the loan and assistance programs under sections 514 and 
     516 of the Housing Act of 1949 (42 U.S.C. 1484, 1486) for 
     housing for farm labor;
       (L) the program of grants and loans for mutual and self-
     help housing and technical assistance under section 523 of 
     the Housing Act of 1949 (42 U.S.C. 1490c);
       (M) the program of grants for preservation and 
     rehabilitation of housing under section 533 of the Housing 
     Act of 1949 (42 U.S.C. 1490m); and
       (N) the program of site loans under section 524 of the 
     Housing Act of 1949 (42 U.S.C. 1490d).
       (2) Covered project.--The term ``covered project'' means 
     any housing for which Federal housing assistance is provided 
     that is attached to the project or specific dwelling units in 
     the project.
       (3) Federal housing assistance.--The term ``Federal housing 
     assistance'' means--
       (A) assistance provided under a covered program in the form 
     of any contract, grant, loan, subsidy, cooperative agreement, 
     loan or mortgage guarantee or insurance, or other financial 
     assistance; or
       (B) occupancy in a dwelling unit that is--
       (i) provided assistance under a covered program; or
       (ii) located in a covered project and subject to occupancy 
     limitations under a covered program that are based on income.
       (4) State.--The term ``State'' means the States of the 
     United States, the District of Columbia, the Commonwealth of 
     Puerto Rico, the Commonwealth of the Northern Mariana 
     Islands, Guam, the Virgin Islands, American Samoa, and any 
     other territory or possession of the United States.
       (c) Limitations on Applicability.--Subsection (a) shall not 
     apply to Federal housing assistance provided for a household 
     pursuant to an application or request for such assistance 
     made by such household before the effective date of this Act 
     if the household was receiving such assistance on the 
     effective date of this Act.

     SEC. 9506. STATE OPTION TO DENY TEMPORARY EMPLOYMENT 
                   ASSISTANCE TO MINOR PARENTS.

       (a) In General.--Section 402(d)(1), as added by section 
     9101(a) of this Act and as amended by section 9501(a) of this 
     Act, is amended by adding at the end the following:
       ``(C) Optional denial of assistance to minor parents.--At 
     the option of the State, the State plan may provide that--
       ``(i)(I) in determining the need of a family, the State may 
     disregard the needs of any family member who is a parent and 
     has not attained 18 years of age or such lesser age as the 
     State may prescribe; and
       ``(II) if the value of the assistance provided to a family 
     under the State plan approved under this part is reduced by 
     reason of subclause (I), each member of the family shall be 
     considered to be receiving such assistance for purposes of 
     eligibility for medical assistance under the State plan 
     approved under title XIX for so long as such assistance under 
     the State plan approved under this part would otherwise not 
     be so reduced; and
       ``(ii) if the State exercises the option, the State may 
     provide the family with vouchers, in amounts not exceeding 
     the value of any such reduction in assistance, that may be 
     used only to pay for--
       ``(I) particular goods and services specified by the State 
     as suitable for the care of the child of the parent (such as 
     diapers, clothing, or cribs); and
       ``(II) the costs associated with a maternity home, foster 
     home, or other adult-supervised supportive living arrangement 
     in which the parent and the child live.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect in the same manner in which the amendment 
     made by section 9101(a) takes effect.

     Title IX, Subtitle F

                         Subtitle F--SSI Reform

     SEC. 9601. DEFINITION AND ELIGIBILITY RULES.

       (a) Definition of Childhood Disability.--Section 1614(a)(3) 
     (42 U.S.C. 1382c(a)(3)) is amended--
       (1) in subparagraph (A), by striking ``An individual'' and 
     inserting ``Except as provided in subparagraph (C), an 
     individual'';
       (2) in subparagraph (A), by striking ``(or, in the case of 
     an individual under the age of 18, if he suffers from any 
     medically determinable physical or mental impairment of 
     comparable severity)'';
       (3) by redesignating subparagraphs (C) through (H) as 
     subparagraphs (D) through (I), respectively;
       (4) by inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) An individual under the age of 18 shall be considered 
     disabled for the purposes of this title if that individual 
     has a medically determinable physical or mental impairment, 
     which results in marked and severe functional limitations, 
     and which can be expected to result in death or which has 
     lasted or can be expected to last for a continuous period of 
     not less than 12 months.''; and
       (5) in subparagraph (F), as so redesignated by paragraph 
     (3) of this subsection, by striking ``(D)'' and inserting 
     ``(E)''.
       (b) Changes to Childhood SSI Regulations.--
       (1) Modification to medical criteria for evaluation of 
     mental and emotional disorders.--The Commissioner of Social 
     Security shall modify sections 112.00C.2. and 112.02B.2.c.(2) 
     of appendix 1 to subpart P of part 404 of title 20, Code of 
     Federal Regulations, to eliminate references to maladaptive 
     behavior in the domain of personal/behavorial function.
       (2) Discontinuance of individualized functional 
     assessment.--The Commissioner of Social Security shall 
     discontinue the individualized functional assessment for 
     children set forth in sections 416.924d and 416.924e of title 
     20, Code of Federal Regulations.
       (c) Effective Date; Regulations; Application to Current 
     Recipients.--
       (1) In general.--The amendments made by subsections (a) and 
     (b) shall apply to applicants for benefits for months 
     beginning on or after the date of the enactment of this Act, 
     without regard to whether regulations have been issued to 
     implement such amendments.
       (2) Regulations.--The Commissioner of Social Security shall 
     issue such regulations as the Commissioner determines to be 
     necessary to implement the amendments made by subsections (a) 
     and (b) not later than 60 days after the date of the 
     enactment of this Act.
       (3) Application to current recipients.--
       (A) Eligibility determinations.--Not later than 1 year 
     after the date of the enactment of this Act, the Commissioner 
     of Social Security shall redetermine the eligibility of any 
     individual under age 18 who is receiving supplemental 
     security income benefits based on a disability under title 
     XVI of the Social Security Act as of the date of the 
     enactment of this Act and whose eligibility for such benefits 
     may terminate by reason of the amendments made by subsection 
     (a) or (b). With respect to any redetermination under this 
     subparagraph--
       (i) section 1614(a)(4) of the Social Security Act (42 
     U.S.C. 1382c(a)(4)) shall not apply;
       (ii) the Commissioner of Social Security shall apply the 
     eligibility criteria for new applicants for benefits under 
     title XVI of such Act;
       (iii) the Commissioner shall give such redetermination 
     priority over all continuing eligibility reviews and other 
     reviews under such title; and
       (iv) such redetermination shall be counted as a review or 
     redetermination otherwise required to be made under section 
     208 of the Social Security Independence and Program 
     Improvements Act of 1994 or any other provision of title XVI 
     of the Social Security Act.
       (B) Grandfather provision.--The amendments made by 
     subsections (a) and (b), and the redetermination under 
     subparagraph (A), shall only apply with respect to the 
     benefits of an individual described in subparagraph (A) for 
     months beginning on or after January 1, 1997.
       (C) Notice.--Not later than 90 days after the date of the 
     enactment of this Act, the Commissioner of Social Security 
     shall notify an individual described in subparagraph (A) of 
     the provisions of this paragraph.

     SEC. 9602. ELIGIBILITY REDETERMINATIONS AND CONTINUING 
                   DISABILITY REVIEWS.

       (a) Continuing Disability Reviews Relating to Certain 
     Children.--Section 1614(a)(3)(H) (42 U.S.C. 1382c(a)(3)(H)), 
     as so redesignated by section 9601(a)(3) of this Act, is 
     amended--

[[Page H10616]]

       (1) by inserting ``(i)'' after ``(H)''; and
       (2) by adding at the end the following new clause:
       ``(ii)(I) Not less frequently than once every 3 years, the 
     Commissioner shall review in accordance with paragraph (4) 
     the continued eligibility for benefits under this title of 
     each individual who has not attained 18 years of age and is 
     eligible for such benefits by reason of an impairment (or 
     combination of impairments) which may improve (or, which is 
     unlikely to improve, at the option of the Commissioner).
       ``(II) A parent or guardian of a recipient whose case is 
     reviewed under this clause shall present, at the time of 
     review, evidence demonstrating that the recipient is, and has 
     been, receiving treatment, to the extent considered medically 
     necessary and available, of the condition which was the basis 
     for providing benefits under this title.''.
       (b) Disability Eligibility Redeterminations Required for 
     SSI Recipients Who Attain 18 Years of Age.--
       (1) In general.--Section 1614(a)(3)(H) (42 U.S.C. 
     1382c(a)(3)(H)), as so redesignated by section 9601(a)(3) of 
     this Act and as amended by subsection (a) of this section, is 
     amended by adding at the end the following new clause:
       ``(iii) If an individual is eligible for benefits under 
     this title by reason of disability for the month preceding 
     the month in which the individual attains the age of 18 
     years, the Commissioner shall redetermine such eligibility--
       ``(I) during the 1-year period beginning on the 
     individual's 18th birthday; and
       ``(II) by applying the criteria used in determining the 
     initial eligibility for applicants who have attained the age 
     of 18 years.
     With respect to a redetermination under this clause, 
     paragraph (4) shall not apply and such redetermination shall 
     be considered a substitute for a review or redetermination 
     otherwise required under any other provision of this 
     subparagraph during that 1-year period.''.
       (2) Conforming repeal.--Section 207 of the Social Security 
     Independence and Program Improvements Act of 1994 (42 U.S.C. 
     1382 note; 108 Stat. 1516) is hereby repealed.
       (c) Continuing Disability Review Required for Low Birth 
     Weight Babies.--Section 1614(a)(3)(H) (42 U.S.C. 
     1382c(a)(3)(H)), as so redesignated by section 9601(a)(3) of 
     this Act and as amended by subsections (a) and (b) of this 
     section, is amended by adding at the end the following new 
     clause:
       ``(iv)(I) Not later than 12 months after the birth of an 
     individual, the Commissioner shall review in accordance with 
     paragraph (4) the continuing eligibility for benefits under 
     this title by reason of disability of such individual whose 
     low birth weight is a contributing factor material to the 
     Commissioner's determination that the individual is disabled.
       ``(II) A review under subclause (I) shall be considered a 
     substitute for a review otherwise required under any other 
     provision of this subparagraph during that 12-month period.
       ``(III) A parent or guardian of a recipient whose case is 
     reviewed under this clause shall present, at the time of 
     review, evidence demonstrating that the recipient is, and has 
     been, receiving treatment, to the extent considered medically 
     necessary and available, of the condition which was the basis 
     for providing benefits under this title.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to benefits for months beginning on or after the 
     date of the enactment of this Act, without regard to whether 
     regulations have been issued to implement such amendments.

     SEC. 9603. ADDITIONAL ACCOUNTABILITY REQUIREMENTS.

       (a) Tightening of Representative Payee Requirements.--
       (1) Clarification of role.--Section 1631(a)(2)(B)(ii) (42 
     U.S.C. 1383(a)(2)(B)(ii)) is amended by striking ``and'' at 
     the end of subclause (II), by striking the period at the end 
     of subclause (IV) and inserting ``; and'', and by adding 
     after subclause (IV) the following new subclause:
       ``(V) advise such person through the notice of award of 
     benefits, and at such other times as the Commissioner of 
     Social Security deems appropriate, of specific examples of 
     appropriate expenditures of benefits under this title and the 
     proper role of a representative payee.''.
       (2) Documentation of expenditures required.--
       (A) In general.--Subparagraph (C)(i) of section 1631(a)(2) 
     (42 U.S.C. 1383(a)(2)) is amended to read as follows:
       ``(C)(i) In any case where payment is made to a 
     representative payee of an individual or spouse, the 
     Commissioner of Social Security shall--
       ``(I) require such representative payee to document 
     expenditures and keep contemporaneous records of transactions 
     made using such payment; and
       ``(II) implement statistically valid procedures for 
     reviewing a sample of such contemporaneous records in order 
     to identify instances in which such representative payee is 
     not properly using such payment.''.
       (B) Conforming amendment with respect to parent payees.--
     Clause (ii) of section 1631(a)(2)(C) (42 U.S.C. 
     1383(a)(2)(C)) is amended by striking ``Clause (i)'' and 
     inserting ``Subclauses (II) and (III) of clause (i)''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to benefits paid after the date of the enactment 
     of this Act.
       (b) Dedicated Savings Accounts.--
       (1) In general.--Section 1631(a)(2)(B) (42 U.S.C. 
     1383(a)(2)(B)) is amended by adding at the end the following:
       ``(xiv) Notwithstanding clause (x), the Commissioner of 
     Social Security may, at the request of the representative 
     payee, pay any lump sum payment for the benefit of a child 
     into a dedicated savings account that could only be used to 
     purchase for such child--
       ``(I) education and job skills training;
       ``(II) special equipment or housing modifications or both 
     specifically related to, and required by the nature of, the 
     child's disability; and
       ``(III) appropriate therapy and rehabilitation.''.
       (2) Disregard of trust funds.--Section 1613(a) (42 U.S.C. 
     1382b(a)) is amended--
       (A) by striking ``and'' at the end of paragraph (10),
       (B) by striking the period at the end of paragraph (11) and 
     inserting ``; and'', and
       (C) by inserting after paragraph (11) the following:
       ``(12) all amounts deposited in, or interest credited to, a 
     dedicated savings account described in section 
     1631(a)(2)(B)(xiv).''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to payments made after the date of the enactment 
     of this Act.

     SEC. 9604. DENIAL OF SSI BENEFITS BY REASON OF DISABILITY TO 
                   DRUG ADDICTS AND ALCOHOLICS.

       (a) In General.--Section 1614(a)(3) (42 U.S.C. 
     1382c(a)(3)), as amended by section 9601(a)(3) of this Act, 
     is amended by adding at the end the following:
       ``(J) Notwithstanding subparagraph (A), an individual shall 
     not be considered to be disabled for purposes of this title 
     if alcoholism or drug addiction would (but for this 
     subparagraph) be a contributing factor material to the 
     Commissioner's determination that the individual is 
     disabled.''.
       (b) Conforming Amendments.--
       (1) Section 1611(e) (42 U.S.C. 1382(e)) is amended by 
     striking paragraph (3).
       (2) Section 1613(a)(12) (42 U.S.C. 1382b(a)(12)) is amended 
     by striking ``1631(a)(2)(B)(xiv)'' and inserting 
     ``1631(a)(2)(B)(xiii)''.
       (3) Section 1631(a)(2)(A)(ii) (42 U.S.C. 1383(a)(2)(A)(ii)) 
     is amended--
       (A) by striking ``(I)''; and
       (B) by striking subclause (II).
       (4) Section 1631(a)(2)(B) (42 U.S.C. 1383(a)(2)(B)) is 
     amended--
       (A) by striking clause (vii);
       (B) in clause (viii), by striking ``(ix)'' and inserting 
     ``(viii)'';
       (C) in clause (ix)--
       (i) by striking ``(viii)'' and inserting ``(vii)''; and
       (ii) in subclause (II), by striking all that follows ``15 
     years'' and inserting a period;
       (D) in clause (xiii)--
       (i) by striking ``(xii)'' and inserting ``(xi)''; and
       (ii) by striking ``(xi)'' and inserting ``(x)'';
       (E) in clause (xiv) (as added by section 9603(b)(1) of this 
     Act), by striking ``(x)'' and inserting ``(ix)''; and
       (F) by redesignating clauses (viii) through (xiv) as 
     clauses (vii) through (xiii), respectively.
       (5) Section 1631(a)(2)(D)(i)(II) (42 U.S.C. 
     1383(a)(2)(D)(i)(II)) is amended by striking all that follows 
     ``$25.00 per month'' and inserting a period.
       (6) Section 1634 (42 U.S.C. 1383c) is amended by striking 
     subsection (e).
       (7) Section 201(c)(1) of the Social Security Independence 
     and Program Improvements Act of 1994 (42 U.S.C. 425 note) is 
     amended--
       (A) by striking ``--'' and all that follows through ``(A)'' 
     the 1st place such term appears;
       (B) by striking ``and'' the 3rd place such term appears;
       (C) by striking subparagraph (B);
       (D) by striking ``either subparagraph (A) or subparagraph 
     (B)'' and inserting ``the preceding sentence''; and
       (E) by striking ``subparagraph (A) or (B)'' and inserting 
     ``the preceding sentence''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on October 1, 1995, and shall apply with 
     respect to months beginning on or after such date.
       (d) Funding of Certain Programs for Drug Addicts and 
     Alcoholics.--Out of any money in the Treasury of the United 
     States not otherwise appropriated, the Secretary of the 
     Treasury shall pay to the Director of the National Institute 
     on Drug Abuse--
       (1) $95,000,000, for each of fiscal years 1997, 1998, 1999, 
     and 2000, for expenditure through the Federal Capacity 
     Expansion Program to expand the availability of drug 
     treatment; and
       (2) $5,000,000 for each of fiscal years 1997, 1998, 1999, 
     and 2000 to be expended solely on the medication development 
     project to improve drug abuse and drug treatment research.

     SEC. 9605. DENIAL OF SSI BENEFITS FOR 10 YEARS TO INDIVIDUALS 
                   FOUND TO HAVE FRAUDULENTLY MISREPRESENTED 
                   RESIDENCE IN ORDER TO OBTAIN BENEFITS 
                   SIMULTANEOUSLY IN 2 OR MORE STATES.

       Section 1614(a) (42 U.S.C. 1382c(a)) is amended by adding 
     at the end the following:
       ``(5) An individual shall not be considered an eligible 
     individual for purposes of this title during the 10-year 
     period beginning on the date the individual is found by a 
     State to have made, or is convicted in Federal or State court 
     of having made, a fraudulent 

[[Page H10617]]

     statement or representation with respect to the place of 
     residence of the individual in order to receive benefits 
     simultaneously from 2 or more States under programs that are 
     funded under part A of title IV, or title XIX of this Act, 
     the consolidated program of food assistance under chapter 2 
     of subtitle E of title XIV of the Omnibus Budget 
     Reconciliation Act of 1995, or the Food Stamp Act of 1977 (as 
     in effect before the effective date of such chapter), or 
     benefits in 2 or more States under the supplemental security 
     income program under title XVI of this Act.''.

     SEC. 9606. DENIAL OF SSI BENEFITS FOR FUGITIVE FELONS AND 
                   PROBATION AND PAROLE VIOLATORS.

       (a) In General.--Section 1611(e) (42 U.S.C. 1382(e)), as 
     amended by section 9604(b)(1) of this Act, is amended by 
     inserting after paragraph (2) the following:
       ``(3) A person shall not be an eligible individual or 
     eligible spouse for purposes of this title with respect to 
     any month if, throughout the month, the person is--
       ``(A) fleeing to avoid prosecution, or custody or 
     confinement after conviction, under the laws of the place 
     from which the person flees, for a crime, or an attempt to 
     commit a crime, which is a felony under the laws of the place 
     from which the person flees, or which, in the case of the 
     State of New Jersey, is a high misdemeanor under the laws of 
     such State; or
       ``(B) violating a condition of probation or parole imposed 
     under Federal or State law.''.
       (b) Exchange of Information With Law Enforcement 
     Agencies.--Section 1631(e) of such Act (42 U.S.C. 1383(e)) is 
     amended by inserting after paragraph (3) the following:
       ``(4) Notwithstanding any other provision of law, the 
     Commissioner shall furnish any Federal, State, or local law 
     enforcement officer, upon the request of the officer, with 
     the current address of any recipient of benefits under this 
     title, if the officer furnishes the agency with the name of 
     the recipient and notifies the agency that--
       ``(A) the recipient--
       ``(i) is fleeing to avoid prosecution, or custody or 
     confinement after conviction, under the laws of the place 
     from which the person flees, for a crime, or an attempt to 
     commit a crime, which is a felony under the laws of the place 
     from which the person flees, or which, in the case of the 
     State of New Jersey, is a high misdemeanor under the laws of 
     such State;
       ``(ii) is violating a condition of probation or parole 
     imposed under Federal or State law; or
       ``(iii) has information that is necessary for the officer 
     to conduct the officer's official duties;
       ``(B) the location or apprehension of the recipient is 
     within the official duties of the officer; and
       ``(C) the request is made in the proper exercise of such 
     duties.''.

     SEC. 9607. REAPPLICATION REQUIREMENTS FOR ADULTS RECEIVING 
                   SSI BENEFITS BY REASON OF DISABILITY.

       (a) In General.--Section 1614(a)(3)(H) (42 U.S.C. 
     1382c(a)(3)(H)), as so redesignated by section 9601(a)(3) of 
     this Act and as amended by section 9602 of this Act, is 
     amended by adding at the end the following:
       ``(v) In the case of an individual who has attained 18 
     years of age and for whom a determination has been made of 
     eligibility for a benefit under this title by reason of 
     disability, the following applies:
       ``(I) Subject to the provisions of this clause, the 
     determination of eligibility is effective for the 3-year 
     period beginning on the date of the determination, and the 
     eligibility of the individual lapses unless a determination 
     of continuing eligibility is made before the end of such 
     period, and before the end of each subsequent 3-year period. 
     This subclause ceases to apply to the individual upon the 
     individual attaining 65 years of age. This subclause does not 
     apply to the individual if the individual has an impairment 
     that is not expected to improve (or a combination of 
     impairments that are not expected to improve).
       ``(II) With respect to a determination under subclause (I) 
     of whether the individual continues to be eligible for the 
     benefit (in this clause referred to as a `redetermination'), 
     the Commissioner may not make the redetermination unless the 
     individual submits to the Commissioner an application 
     requesting the redetermination. If such an application is 
     submitted, the Commissioner shall make the redetermination. 
     This subclause is subject to subclause (V).
       ``(III) If as of the date on which this clause takes effect 
     the individual has been receiving the benefit for three years 
     or less, the first period under subclause (I) for the 
     individual is deemed to end on the expiration of the period 
     beginning on the date on which this clause takes effect and 
     continuing through a number of months equal to 12 plus a 
     number equal to 36 minus the number of months the individual 
     has been receiving the benefit.
       ``(IV) If as of the date on which this clause takes effect 
     the individual has been receiving the benefit for five years 
     or less, but for more than three years, the first period 
     under subclause (I) for the individual is deemed to end on 
     the expiration of the 1-year period beginning on the date on 
     which this clause takes effect.
       ``(V) If as of the date on which this clause takes effect 
     the individual has been receiving the benefit for more than 
     five years, the Commissioner shall make redeterminations 
     under subclause (I) and may not require the individual to 
     submit applications for the redeterminations. The first 3-
     year period under subclause (I) for the individual is deemed 
     to begin upon the expiration of the period beginning on the 
     date on which this clause takes effect and ending upon the 
     termination of a number of years equal to the lowest number 
     (greater than zero) that can be obtained by subtracting the 
     number of years that the individual has been receiving the 
     benefit from a number that is a multiple of three.
       ``(VI) If the individual first attains 18 years of age on 
     or after the date on which this clause takes effect, the 
     first 3-year period under subclause (I) for the individual is 
     deemed to end on the date on which the individual attains 
     such age.
       ``(VII) Not later than one year prior to the date on which 
     a determination under subclause (I) expires, the Commissioner 
     shall (except in the case of an individual to whom subclause 
     (V) applies) provide to the individual a written notice 
     explaining the applicability of this clause to the 
     individual, including an explanation of the effect of failing 
     to submit the application. If the individual submits the 
     application not later than 180 days prior to such date and 
     the Commissioner does not make the redetermination before 
     such date, the Commissioner shall continue to provide the 
     benefit pending the redetermination and shall publish in the 
     Federal Register a notice that the Commissioner was unable to 
     make the redetermination by such date.
       ``(VIII) If the individual fails to submit the application 
     under subclause (II) by the end of the applicable period 
     under subclause (I), the individual may apply for a 
     redetermination. The Commissioner shall make the 
     redetermination for the individual only after making 
     redeterminations for individuals for whom eligibility has not 
     lapsed pursuant to subclause (I).''.
       (b) Limitations on Authorization of Appropriations.--For 
     redeterminations of eligibility pursuant to section 
     1614(a)(3)(H)(v) of the Social Security Act, there are 
     authorized to be appropriated to the Commissioner of Social 
     Security not more than $100,000,000 for fiscal years 1996 
     through 2000.
       (c) Effective Date.--The amendment made by subsection (a) 
     takes effect upon the expiration of the 9-month period 
     beginning on the date of the enactment of this Act.

     SEC. 9608. NARROWING OF SSI ELIGIBILITY ON BASIS OF MENTAL 
                   IMPAIRMENTS.

       (a) In General.--Section 1614(a)(3)(A) (42 U.S.C. 
     1382c(a)(3)(A)) is amended by adding at the end the following 
     sentence: ``In making determinations under this clause 
     regarding the severity of mental impairments, the Secretary 
     shall revise the regulations under subpart P of part 404 of 
     title 20, Code of Federal Regulations, to accomplish the 
     result that (relative to such regulations as in effect prior 
     to the date on which this sentence takes effect) less weight 
     is given to criteria regarding concentration, persistence 
     (and pace), and ability to tolerate increased mental demand 
     associated with competitive work, and that, accordingly, the 
     eligibility criteria regarding mental impairments are 
     narrowed.''.
       (b) Final Regulations.--The final rule for the regulations 
     required in subsection (a) shall be issued before the 
     expiration of the 9-month period beginning on the date of the 
     enactment of this Act,and shall take effect upon the 
     expiration of such period.

     SEC. 9609. REDUCTION IN UNEARNED INCOME EXCLUSION.

       (a) In General.--Section 1612(b)(3)(A) (42 U.S.C. 
     1382a(b)(3)(A)) is amended by striking ``$20'' and inserting 
     ``$15''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to benefits for months beginning after December 
     31, 1995.

                      Subtitle G--Food Assistance

                     CHAPTER 1--FOOD STAMP PROGRAM

     SEC. 9701. APPLICATION OF AMENDMENTS.

       The amendments made by this chapter shall not apply with 
     respect to certification periods beginning before the 
     effective date of this chapter.

     SEC. 9702. AMENDMENTS TO THE FOOD STAMP ACT OF 1977.

       (a) Certification Period.--(1) Section 3(c) of the Food 
     Stamp Act of 1977 (7 U.S.C. 2012(c)) is amended to read as 
     follows:
       ``(c) `Certification period' means the period specified by 
     the State agency for which households shall be eligible to 
     receive authorization cards, except that such period shall 
     be--
       ``(1) 24 months for households in which all adult members 
     are elderly or disabled; and
       ``(2) not more than 12 months for all other households.''.
       (2) Section 6(c)(1)(C) of the Food Stamp Act of 1977 (7 
     U.S.C. 2015(c)(1)(C)) is amended--
       (A) in clause (ii) by adding ``and'' at the end;
       (B) in clause (iii) by striking ``; and'' at the end and 
     inserting a period; and
       (C) by striking clause (iv).
       (b) Energy Assistance Counted As Income.--
       (1) Limiting exclusion.--Section 5(d)(11) of the Food Stamp 
     Act of 1977 (7 U.S.C. 2014(d)(11)) is amended--
       (A) by striking ``(A) under any Federal law, or (B)''; and
       (B) by inserting before the comma at the end the following: 
     ``, except that no benefits provided under the State program 
     under part A of title IV of the Social Security Act (42 

[[Page H10618]]

     U.S.C. 601 et seq.) shall be excluded under this clause''.
       (2) Conforming amendments.--
       (A) Section 5(e) of the Food Stamp Act of 1977 (7 U.S.C. 
     2014(e)) is amended by striking the ninth through the twelfth 
     sentences.
       (B) Section 5(k)(2) of the Food Stamp Act of 1977 (7 U.S.C. 
     2014(k)(2)) is amended by striking subparagraph (C) and 
     redesignating subparagraphs (D) through (H) as subparagraphs 
     (C) through (G), respectively.
       (C) Section 5(k) of the Food Stamp Act of 1977 (7 U.S.C. 
     2014(k)) is amended by adding at the end the following:
       ``(4) For purposes of subsection (d)(1), any payments or 
     allowances made under any Federal or State law for the 
     purposes of energy assistance shall be treated as money 
     payable directly to the household.''.
       (D) Section 2605(f) of the Low-Income Home Energy 
     Assistance Act of 1981 (42 U.S.C. 8634(f)) is amended--
       (i) in paragraph (1), by striking ``food stamps'';
       (ii) by striking ``(f)(1) Notwithstanding'' and inserting 
     ``(f) Notwithstanding''; and
       (iii) by striking paragraph (2).
       (c) Exclusion of Certain JTPA Income.--Section 5 of the 
     Food Stamp Act of 1977 (7 U.S.C. 2014) is amended--
       (1) in subsection (d)--
       (A) by striking ``and (16)'' and inserting ``(16)''; and
       (B) by inserting before the period at the end the 
     following: ``, and (17) income received under the Job 
     Training Partnership Act (29 U.S.C. 1501 et seq.) by a 
     household member who is less than 19 years of age''; and
       (2) in subsection (l), by striking ``under section 
     204(b)(1)(C)'' and all that follows and inserting ``shall be 
     considered earned income for purposes of the food stamp 
     program.''.
       (d) Exclusion of Life Insurance Policies.--Section 5(g) of 
     the Food Stamp Act of 1977 (7 U.S.C. 2014(g)) is amended by 
     adding at the end the following:
       ``(6) The Secretary shall exclude from financial resources 
     the cash value of any life insurance policy owned by a member 
     of a household.''.
       (e) In-Tandem Exclusions From Income.--Section 5 of the 
     Food Stamp Act of 1977 (7 U.S.C. 2014) is amended by adding 
     at the end the following:
       ``(n) Whenever a Federal statute enacted after the date of 
     the enactment of this Act excludes funds from income for 
     purposes of determining eligibility, benefit levels, or both 
     under State plans approved under part A of title IV of the 
     Social Security Act, then such funds shall be excluded from 
     income for purposes of determining eligibility, benefit 
     levels, or both, respectively, under the food stamp program 
     of households all of whose members receive benefits under a 
     State plan approved under part A of title IV of the Social 
     Security Act.''.

     SEC. 9703. AUTHORITY TO ESTABLISH AUTHORIZATION PERIODS.

       Section 9(a)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
     2018(a)(1)) is amended by adding at the end the following: 
     ``The Secretary is authorized to issue regulations 
     establishing specific time periods during which authorization 
     to accept and redeem coupons under the food stamp program 
     shall be valid.''.

     SEC. 9704. SPECIFIC PERIOD FOR PROHIBITING PARTICIPATION OF 
                   STORES BASED ON LACK OF BUSINESS INTEGRITY.

       Section 9(a)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
     2018(a)(1)), as amended by section 9703, is amended by adding 
     at the end the following: ``The Secretary is authorized to 
     issue regulations establishing specific time periods during 
     which a retail food store or wholesale food concern that has 
     an application for approval to accept and redeem coupons 
     denied or that has such an approval withdrawn on the basis of 
     business integrity and reputation cannot submit a new 
     application for approval. Such periods shall reflect the 
     severity of business integrity infractions that are the basis 
     of such denials or withdrawals.''.

     SEC. 9705. INFORMATION FOR VERIFYING ELIGIBILITY FOR 
                   AUTHORIZATION.

       Section 9(c) of the Food Stamp Act of 1977 (7 U.S.C. 
     2018(c)) is amended--
       (1) in the first sentence by inserting ``, which may 
     include relevant income and sales tax filing documents,'' 
     after ``submit information'' ; and
       (2) by inserting after the first sentence the following: 
     ``The regulations may require retail food stores and 
     wholesale food concerns to provide written authorization for 
     the Secretary to verify all relevant tax filings with 
     appropriate agencies and to obtain corroborating 
     documentation from other sources in order that the accuracy 
     of information provided by such stores and concerns may be 
     verified.''.

     SEC. 9706. WAITING PERIOD FOR STORES THAT INITIALLY FAIL TO 
                   MEET AUTHORIZATION CRITERIA.

       Section 9(d) of the Food Stamp Act of 1977 (7 U.S.C. 
     2018(d)) is amended by adding at the end the following: 
     ``Regulations issued pursuant to this Act shall prohibit a 
     retail food store or wholesale food concern that has an 
     application for approval to accept and redeem coupons denied 
     because it does not meet criteria for approval established by 
     the Secretary in regulations from submitting a new 
     application for six months from the date of such denial.''.

     SEC. 9707. BASES FOR SUSPENSIONS AND DISQUALIFICATIONS.

       Section 12(a) of the Food Stamp Act of 1977 (7 U.S.C. 
     2021(a)) is amended by adding at the end the following: 
     ``Regulations issued pursuant to this Act shall provide 
     criteria for the finding of violations and the suspension or 
     disqualification of a retail food store or wholesale food 
     concern on the basis of evidence which may include, but is 
     not limited to, facts established through on-site 
     investigations, inconsistent redemption data, or evidence 
     obtained through transaction reports under electronic benefit 
     transfer systems.''.

     SEC. 9708. AUTHORITY TO SUSPEND STORES VIOLATING PROGRAM 
                   REQUIREMENTS PENDING ADMINISTRATIVE AND 
                   JUDICIAL REVIEW.

       (a) Section 12(a) of the Food Stamp Act of 1977 (7 U.S.C. 
     2021(a)), as amended by section 9707, is amended by adding at 
     the end the following: ``Such regulations may establish 
     criteria under which the authorization of a retail food store 
     or wholesale food concern to accept and redeem coupons may be 
     suspended at the time such store or concern is initially 
     found to have committed violations of program requirements. 
     Such suspension may coincide with the period of a review as 
     provided in section 14. The Secretary shall not be liable for 
     the value of any sales lost during any suspension or 
     disqualification period.''.
       (b) Section 14(a) of the Food Stamp Act of 1977 (7 U.S.C. 
     2023(a)) is amended--
       (1) in the first sentence by inserting ``suspended,'' 
     before ``disqualified or subjected'';
       (2) in the fifth sentence by inserting before the period at 
     the end the following: ``, except that in the case of the 
     suspension of a retail food store or wholesale food concern 
     pursuant to section 12(a), such suspension shall remain in 
     effect pending any administrative or judicial review of the 
     proposed disqualification action, and the period of 
     suspension shall be deemed a part of any period of 
     disqualification which is imposed.''; and
       (3) by striking the last sentence.

     SEC. 9709. DISQUALIFICATION OF RETAILERS WHO ARE DISQUALIFIED 
                   FROM THE WIC PROGRAM.

       Section 12 of the Food Stamp Act of 1977 (7 U.S.C. 2021) is 
     amended by adding at the end the following:
       ``(g) The Secretary shall issue regulations providing 
     criteria for the disqualification of approved retail food 
     stores and wholesale food concerns that are otherwise 
     disqualified from accepting benefits under the Special 
     Supplemental Nutrition Program for Women, Infants and 
     Children (WIC) authorized under section 17 of the Child 
     Nutrition Act of 1966. Such disqualification--
       ``(1) shall be for the same period as the disqualification 
     from the WIC Program;
       ``(2) may begin at a later date; and
       ``(3) notwithstanding section 14 of this Act, shall not be 
     subject to administrative or judicial review.''.

     SEC. 9710. PERMANENT DEBARMENT OF RETAILERS WHO INTENTIONALLY 
                   SUBMIT FALSIFIED APPLICATIONS.

       Section 12 of the Food Stamp Act of 1977 (7 U.S.C. 2021), 
     as amended by section 9709, is amended by adding at the end 
     the following:
       ``(h) The Secretary shall issue regulations providing for 
     the permanent disqualification of a retail food store or 
     wholesale food concern that is determined to have knowingly 
     submitted an application for approval to accept and redeem 
     coupons which contains false information about one or more 
     substantive matters which were the basis for providing 
     approval. Any disqualification imposed under this subsection 
     shall be subject to administrative and judicial review 
     pursuant to section 14, but such disqualification shall 
     remain in effect pending such review.''.

     SEC. 9711. EXPANDED CIVIL AND CRIMINAL FORFEITURE FOR 
                   VIOLATIONS OF THE FOOD STAMP ACT.

       (a) Forfeiture of Items Exchanged in Food Stamp 
     Trafficking.--Section 15(g) of the Food Stamp Act of 1977 (7 
     U.S.C. 2024(g)) is amended by striking ``or intended to be 
     furnished''.
       (b) Civil and Criminal Forfeiture.--Section 15 of the Food 
     Stamp Act of 1977 (7 U.S.C. 2024)) is amended by adding at 
     the end the following:
       ``(h)(1) Civil Forfeiture for Food Stamp Benefit 
     Violations.--
       ``(A) Any food stamp benefits and any property, real or 
     personal--
       ``(i) constituting, derived from, or traceable to any 
     proceeds obtained directly or indirectly from, or
       ``(ii) used, or intended to be used, to commit, or to 
     facilitate,
     the commission of a violation of subsection (b) or subsection 
     (c) involving food stamp benefits having an aggregate value 
     of not less than $5,000, shall be subject to forfeiture to 
     the United States.
       ``(B) The provisions of chapter 46 of title 18, United 
     States Code, relating to civil forfeitures shall extend to a 
     seizure or forfeiture under this subsection, insofar as 
     applicable and not inconsistent with the provisions of this 
     subsection.
       ``(2) Criminal Forfeiture for Food Stamp Benefit 
     Violations.--
       ``(A)(i) Any person convicted of violating subsection (b) 
     or subsection (c) involving food stamp benefits having an 
     aggregate value of not less than $5,000, shall forfeit to the 
     United States, irrespective of any State law--
       ``(I) any food stamp benefits and any property 
     constituting, or derived from, or traceable to any proceeds 
     such person obtained directly or indirectly as a result of 
     such violation; and
       ``(II) any food stamp benefits and any of such person's 
     property used, or intended to be used, in any manner or part, 
     to commit, 

[[Page H10619]]

     or to facilitate the commission of such violation.
       ``(ii) In imposing sentence on such person, the court shall 
     order that the person forfeit to the United States all 
     property described in this subsection.
       ``(B) All food stamp benefits and any property subject to 
     forfeiture under this subsection, any seizure and disposition 
     thereof, and any administrative or judicial proceeding 
     relating thereto, shall be governed by subsections (b), (c), 
     (e), and (g) through (p) of section 413 of the Comprehensive 
     Drug Abuse Prevention and Control Act of 1970 (21 U.S.C. 
     853), insofar as applicable and not inconsistent with the 
     provisions of this subsection.
       ``(3) Applicability.--This subsection shall not apply to 
     property specified in subsection (g) of this section.
       ``(4) Rules.--The Secretary may prescribe such rules and 
     regulations as may be necessary to carry out this 
     subsection.''.

     SEC. 9712. EXPANDED AUTHORITY FOR SHARING INFORMATION 
                   PROVIDED BY RETAILERS.

       (a) Section 205(c)(2)(C)(iii) of the Social Security Act 
     (42 U.S.C. 405(c)(2)(C)(iii)) (as amended by section 316(a) 
     of the Social Security Administrative Reform Act of 1994 
     (Public Law 103-296; 108 Stat. 1464) is amended--
       (1) by inserting in the first sentence of subclause (II) 
     after ``instrumentality of the United States'' the following: 
     ``, or State government officers and employees with law 
     enforcement or investigative responsibilities, or State 
     agencies that have the responsibility for administering the 
     Special Supplemental Nutrition Program for Women, Infants and 
     Children (WIC)'';
       (2) by inserting in the last sentence of subclause (II) 
     immediately after ``other Federal'' the words ``or State''; 
     and
       (3) by inserting ``or a State'' in subclause (III) 
     immediately after ``United States''.
       (b) Section 6109(f)(2) of the Internal Revenue Code of 1986 
     (26 U.S.C. 6109(f)(2)) (as added by section 316(b) of the 
     Social Security Administrative Reform Act of 1994 (Public Law 
     103-296; 108 Stat. 1464)) is amended--
       (1) by inserting in subparagraph (A) after 
     ``instrumentality of the United States'' the following: ``, 
     or State government officers and employees with law 
     enforcement or investigative responsibilities, or State 
     agencies that have the responsibility for administering the 
     Special Supplemental Nutrition Program for Women, Infants and 
     Children (WIC)'';
       (2) in the last sentence of subparagraph (A) by inserting 
     ``or State'' after ``other Federal''; and
       (3) in subparagraph (B) by inserting ``or a State'' after 
     ``United States''.

     SEC. 9713. EXPANDED DEFINITION OF ``COUPON''.

       Section 3(d) of the Food Stamp Act of 1977 (7 U.S.C. 
     2012(d)) is amended by striking ``or type of certificate'' 
     and inserting ``type of certificate, authorization cards, 
     cash or checks issued of coupons or access devices, 
     including, but not limited to, electronic benefit transfer 
     cards and personal identification numbers''.

     SEC. 9714. DOUBLED PENALTIES FOR VIOLATING FOOD STAMP PROGRAM 
                   REQUIREMENTS.

       Section 6(b)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
     2015(b)(1)) is amended--
       (1) in clause (i)--
       (A) by striking ``six months'' and inserting ``1 year''; 
     and
       (B) by adding ``and'' at the end; and
       (2) striking clauses (ii) and (iii) and inserting the 
     following:
       ``(ii) permanently upon--
       ``(I) the second occasion of any such determination; or
       ``(II) the first occasion of a finding by a Federal, State, 
     or local court of the trading of a controlled substance (as 
     defined in section 102 of the Controlled Substances Act (21 
     U.S.C. 802)), firearms, ammunition, or explosives for 
     coupons.''.

     SEC. 9715. MANDATORY CLAIMS COLLECTION METHODS.

       (a) Section 11(e)(8) of the Food Stamp Act of 1977 (7 
     U.S.C. 2020(e)(8)) is amended by inserting ``or refunds of 
     Federal taxes as authorized pursuant to 31 U.S.C. 3720A'' 
     before the semicolon at the end.
       (b) Section 13(d) of the Food Stamp Act of 1977 (7 U.S.C. 
     2022(d)) is amended--
       (1) by striking ``may'' and inserting ``shall''; and
       (2) by inserting ``or refunds of Federal taxes as 
     authorized pursuant to 31 U.S.C. 3720A'' before the period at 
     the end.
       (c) Section 6103(1) of the Internal Revenue Code (26 U.S.C. 
     6103(1)) is amended--
       (1) by striking ``officers and employees'' in paragraph 
     (10)(A) and inserting ``officers, employees or agents, 
     including State agencies''; and
       (2) by striking ``officers and employees'' in paragraph 
     (10)(B) and inserting ``officers, employees or agents, 
     including State agencies''.

     SEC. 9716. PROMOTING EXPANSION OF ELECTRONIC BENEFITS 
                   TRANSFER.

       Section 7(i) of the Food Stamp Act of 1977 (7 U.S.C. 
     2016(i)(1)) is amended--
       (1) by amending paragraph (1) to read:
       ``(1)(A) State agencies are encouraged to implement an on-
     line electronic benefit transfer system in which household 
     benefits determined under section 8(a) are issued from and 
     stored in a central data bank and electronically accessed by 
     household members at the point-of-sale.
       ``(B) Subject to paragraph (2), a State agency is 
     authorized to procure and implement an electronic benefit 
     transfer system under the terms, conditions, and design that 
     the State agency deems appropriate.
       ``(C) The Secretary shall, upon request of a State agency, 
     waive any provision of this subsection prohibiting the 
     effective implementation of an electronic benefit transfer 
     system consistent with the purposes of this Act. The 
     Secretary shall act upon any request for such a waiver within 
     90 days of receipt of a complete application.'';
       (2) in paragraph (2), by striking ``for the approval''; and
       (3) in paragraph (3), by striking ``the Secretary shall not 
     approve such a system unless'' and inserting ``the State 
     agency shall ensure that''.

     SEC. 9717. REDUCTION OF BASIC BENEFIT LEVEL.

       Section 3(o) of the Food Stamp Act of 1977 (7 U.S.C. 
     2012(o)) is amended--
       (1) by striking ``and (11)'' and inserting ``(11)'';
       (2) in clause (11) by inserting ``through October 1, 1994'' 
     after ``each October 1 thereafter''; and
       (3) by inserting before the period at the end the 
     following:
     ``, and (12) on October 1, 1995, and on each October 1 
     thereafter, adjust the cost of such diet to reflect 100 
     percent of the cost, in the preceding June (without regard to 
     any previous adjustment made under this clause or clauses (4) 
     through (11) of this subsection) and round the result to the 
     nearest lower dollar increment for each household size''.

     SEC. 9718. 2-YEAR FREEZE OF STANDARD DEDUCTION.

       The second sentence of section 5(e)(4) (7 U.S.C. 
     2014(e)(4)) is amended by inserting ``, except October 1, 
     1995, and October 1, 1996'' after ``thereafter''.

     SEC. 9719. PRO-RATING BENEFITS AFTER INTERRUPTIONS IN 
                   PARTICIPATION.

       Section 8(c)(2)(B) of the Food Stamp Act of 1977 (7 U.S.C. 
     2017(c)(2)(B)) is amended by striking ``of more than one 
     month''.

     SEC. 9720. DISQUALIFICATION FOR PARTICIPATING IN 2 OR MORE 
                   STATES.

       Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as 
     amended by sections 9491 and 9492, is amended by adding at 
     the end the following:
       ``(l) Disqualification for Participating in 2 or More 
     States.--An individual shall be ineligible to participate in 
     the food stamp program as a member of any household during a 
     10-year period beginning on the date the individual is found 
     by a State to have made, or is convicted in Federal or State 
     court of having made, a fraudulent statement or 
     representation with respect to the place of residence of the 
     individual to receive benefits simultaneously from 2 or more 
     States under--
       ``(1) the food stamp program;
       ``(2) a State program funded under part A of title IV of 
     the Social Security Act (42 U.S.C. 601 et seq.) or under 
     title XIX of the Act (42 U.S.C. 1396 et seq.); or
       ``(3) the supplemental security income program under title 
     XVI of the Act (42 U.S.C. 1381 et seq.).''.

     SEC. 9721. DISQUALIFICATION RELATING TO CHILD SUPPORT 
                   ARREARS.

       Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as 
     amended by sections 9491, 9492, and 9720, is amended by 
     adding at the end the following:
       ``(m) Disqualification for Child Support Arrears.--
       ``(1) In general.--At the option of a State agency, except 
     as provided in paragraph (2), no individual shall be eligible 
     to participate in the food stamp program as a member of any 
     household during any month that the individual is delinquent 
     in any payment due under a court order for the support of a 
     child of the individual.
       ``(2) Exceptions.--Paragraph (1) shall not apply if--
       ``(A) a court is allowing the individual to delay payment; 
     or
       ``(B) the individual is complying with a payment plan 
     approved by a court or the State agency designated under part 
     D of title IV of the Social Security Act (42 U.S.C. 651 et 
     seq.) to provide support for the child of the individual.''.

     SEC. 9722. STATE AUTHORIZATION TO ASSIST LAW ENFORCEMENT 
                   OFFICERS IN LOCATING FUGITIVE FELONS.

       Section 11(e)(8)(B) of the Food Stamp Act of 1977 (7 U.S.C. 
     2020(e)(8)(B)) is amended by striking ``Act, and'' and 
     inserting ``Act or of locating a fugitive felon (as defined 
     by a State), and''.

     SEC. 9723. WORK REQUIREMENT FOR ABLE-BODIED RECIPIENTS.

       (a) In General.--Section 6 of the Food Stamp Act of 1977 (7 
     U.S.C. 2015), as amended by sections 9491, 9492, 9720, and 
     9721, is amended by adding at the end the following:
       ``(n) Work Requirement.--
       ``(1) Definition of work program.--In this subsection, the 
     term `work program' means--
       ``(A) a program under the Job Training Partnership Act (29 
     U.S.C. 1501 et seq.);
       ``(B) a program under section 236 of the Trade Act of 1974 
     (19 U.S.C. 2296); or
       ``(C) a program of employment or training operated or 
     supervised by a State or local government, as determined 
     appropriate by the Secretary.
       ``(2) Work requirement.--No individual shall be eligible to 
     participate in the food stamp program as a member of any 
     household if, during the preceding 12 months, the individual 
     received food stamp benefits for not less than 6 months 
     during which the individual did not--
       ``(A) work 20 hours or more per week, averaged monthly;

[[Page H10620]]

       ``(B) participate in a workfare program under section 20 or 
     a comparable State or local workfare program;
       ``(C) participate in and comply with the requirements of an 
     approved employment and training program under subsection 
     (d)(4); or
       ``(D) participate in and comply with the requirements of a 
     work program for 20 hours or more per week.
       ``(3) Exception.--Paragraph (2) shall not apply to an 
     individual if the individual is--
       ``(A) under 18 or over 50 years of age;
       ``(B) medically certified as physically or mentally unfit 
     for employment;
       ``(C) a parent or other member of a household with a 
     dependent child under 18 years of age; or
       ``(D) otherwise exempt under subsection (d)(2).
       ``(4) Waiver.--
       ``(A) In general.--The Secretary may waive the 
     applicability of paragraph (2) to any group of individuals in 
     the State if the Secretary makes a determination that the 
     area in which the individuals reside--
       ``(i) has an unemployment rate of over 8 percent; or
       ``(ii) does not have a sufficient number of jobs to provide 
     employment for the individuals.
       ``(B) Report.--The Secretary shall report the basis for a 
     waiver under subparagraph (A) to the Committee on Agriculture 
     of the House of Representatives and the Committee on 
     Agriculture, Nutrition, and Forestry of the Senate.''.
       (b) Work and Training Programs.--Section 6(d)(4) of the 
     Food Stamp Act of 1977 (7 U.S.C. 2015(d)(4)) is amended by 
     adding at the end the following:
       ``(O) Required participation in work and training 
     programs.--A State agency shall provide an opportunity to 
     participate in the employment and training program under this 
     paragraph to any individual who would otherwise become 
     subject to disqualification under subsection (i).
       ``(P) Coordinating work requirements.--
       ``(i) In general.--Notwithstanding any other provision of 
     this paragraph, a State agency that meets the participation 
     requirements of clause (ii) may operate the employment and 
     training program of the State for individuals who are members 
     of households receiving allotments under this Act as part of 
     a program operated by the State under part F of title IV of 
     the Social Security Act (42 U.S.C. 681 et seq.), subject to 
     the requirements of the Act.
       ``(ii) Participation requirements.--A State agency may 
     exercise the option under clause (i) if the State agency 
     provides an opportunity to participate in an approved 
     employment and training program to an individual who is--

       ``(I) subject to subsection (i);
       ``(II) not employed at least an average of 20 hours per 
     week;
       ``(III) not participating in a workfare program under 
     section 20 (or a comparable State or local program); and
       ``(IV) not subject to a waiver under subsection (i)(4).''.

       (c) Enhanced Employment and Training Program.--Section 
     16(h)(1) of the Food Stamp Act of 1977 (7 U.S.C. 2025(h)(1)) 
     is amended--
       (1) in subparagraph (A), by striking ``$75,000,000 for each 
     of the fiscal years 1991 through 1995'' and inserting 
     ``$150,000,000 for each of fiscal years 1996 through 2000'';
       (2) by striking subparagraphs (B), (C), (E), and (F);
       (3) by redesignating subparagraph (D) as subparagraph (B); 
     and
       (4) in subparagraph (B) (as redesignated by paragraph (3)), 
     by striking ``for each'' and all that follows through ``of 
     $60,000,000'' and inserting ``, the Secretary shall allocate 
     funding''.

     SEC. 9724. COORDINATION OF EMPLOYMENT AND TRAINING PROGRAMS.

       Section 8(d) of the Food Stamp Act of 1977 (7 U.S.C. 
     2019(d)) is amended--
       (1) by striking ``(d) A household'' and inserting the 
     following:
       ``(d) Noncompliance With Other Welfare or Work Programs.--
       ``(1) In general.--A household''; and
       (2) by inserting ``or a work requirement under a welfare or 
     public assistance program'' after ``assistance program''; and
       (3) by adding at the end the following:
       ``(2) Work requirement.--If a household fails to comply 
     with a work requirement under a State program funded under 
     part A of title IV of the Social Security Act (42 U.S.C. 601 
     et seq.), for the duration of the reduction--
       ``(A) the household may not receive an increased allotment 
     as the result of a decrease in the income of the household to 
     the extent that the decrease is the result of a penalty 
     imposed for the failure to comply; and
       ``(B) the State agency may reduce the allotment of the 
     household by not more than 25 percent.''.

     SEC. 9725. EXTENDING CURRENT CLAIMS RETENTION RATES.

       Section 16(a) of the Food Stamp Act of 1977 (7 U.S.C. 
     2025(a)) is amended by striking ``September 30, 1995'' each 
     place it appears and inserting ``September 30, 2002''.

     SEC. 9726. NUTRITION ASSISTANCE FOR PUERTO RICO.

       Section 19(a)(1)(A) of the Food Stamp Act of 1977 (7 U.S.C. 
     2028(a)(1)(A)) is amended--
       (1) by striking ``1994, and'' and inserting ``1994,''; and
       (2) by inserting ``and $1,143,000,000 for each of the 
     fiscal years 1996 through 2002,'' before ``to finance''.

     SEC. 9727. TREATMENT OF CHILDREN LIVING AT HOME.

       The second sentence of section 3(i) of the Food Stamp Act 
     of 1977 (7 U.S.C. 2012(i)) is amended by striking ``(who are 
     not themselves parents living with their children or married 
     and living with their spouses)''.

                   CHAPTER 2--COMMODITY DISTRIBUTION

     SEC. 9751. SHORT TITLE.

       This chapter may be cited as the ``Commodity Distribution 
     Act of 1995''.

     SEC. 9752. AVAILABILITY OF COMMODITIES.

       (a) Notwithstanding any other provision of law, the 
     Secretary of Agriculture (hereinafter in this chapter 
     referred to as the ``Secretary'') is authorized during fiscal 
     years 1996 through 2000 to purchase a variety of nutritious 
     and useful commodities and distribute such commodities to the 
     States for distribution in accordance with this chapter.
       (b) In addition to the commodities described in subsection 
     (a), the Secretary may expend funds made available to carry 
     out the section 32 of the Act of August 24, 1935 (7 U.S.C. 
     612c), which are not expended or needed to carry out such 
     section, to purchase, process, and distribute commodities of 
     the types customarily purchased under such section to the 
     States for distribution in accordance to this chapter.
       (c) In addition to the commodities described in subsections 
     (a) and (b), agricultural commodities and the products 
     thereof made available under clause (2) of the second 
     sentence of section 32 of the Act of August 24, 1935 (7 
     U.S.C. 612c), may be made available by the Secretary to the 
     States for distribution in accordance with this chapter.
       (d) In addition to the commodities described in subsections 
     (a), (b), and (c), commodities acquired by the Commodity 
     Credit Corporation that the Secretary determines, in the 
     discretion of the Secretary, are in excess of quantities 
     needed to--
       (1) carry out other domestic donation programs;
       (2) meet other domestic obligations;
       (3) meet international market development and food aid 
     commitments, and
       (4) carry out the farm price and income stabilization 
     purposes of the Agricultural Adjustment Act of 1938, the 
     Agricultural Act of 1949, and the Commodity Credit 
     Corporation Charter Act; shall be made available by the 
     Secretary, without charge or credit for such commodities, to 
     the States for distribution in accordance with this chapter.
       (e) During each fiscal year, the types, varieties, and 
     amounts of commodities to be purchased under this chapter 
     shall be determined by the Secretary. In purchasing such 
     commodities, except those commodities purchased pursuant to 
     section 9760, the Secretary shall, to the extent practicable 
     and appropriate, make purchases based on--
       (1) agricultural market conditions;
       (2) the preferences and needs of States and distributing 
     agencies; and
       (3) the preferences of the recipients.

     SEC. 9753. STATE, LOCAL AND PRIVATE SUPPLEMENTATION OF 
                   COMMODITIES.

       (a) The Secretary shall establish procedures under which 
     State and local agencies, recipient agencies, or any other 
     entity or person may supplement the commodities distributed 
     under this chapter for use by recipient agencies with 
     nutritious and wholesome commodities that such entities or 
     persons donate for distribution, in all or part of the State, 
     in addition to the commodities otherwise made available under 
     this chapter.
       (b) States and eligible recipient agencies may use--
       (1) the funds appropriated for administrative cost under 
     section 9759(b);
       (2) equipment, structures, vehicles, and all other 
     facilities involved in the storage, handling, or distribution 
     of commodities made available under this chapter; and
       (3) the personnel, both paid or volunteer, involved in such 
     storage, handling, or distribution; to store, handle or 
     distribute commodities donated for use under subsection (a).
       (c) States and recipient agencies shall continue, to the 
     maximum extent practical, to use volunteer workers, and 
     commodities and other foodstuffs donated by charitable and 
     other organizations, in the distribution of commodities under 
     this chapter.

     SEC. 9754. STATE PLAN.

       (a) A State seeking to receive commodities under this 
     chapter shall submit a plan of operation and administration 
     every four years to the Secretary for approval. The plan may 
     be amended at any time, with the approval of the Secretary.
       (b) The State plan, at a minimum, shall--
       (1) designate the State agency responsible for distributing 
     the commodities received under this chapter;
       (2) set forth a plan of operation and administration to 
     expeditiously distribute commodities under this chapter in 
     quantities requested to eligible recipient agencies in 
     accordance with sections 9756 and 9760;
       (3) set forth the standards of eligibility for recipient 
     agencies; and
       (4) set forth the standards of eligibility for individual 
     or household recipients of commodities, which at minimum 
     shall require--
       (A) individuals or households to be comprised of needy 
     persons; and
       (B) individual or household members to be residing in the 
     geographic location served by the distributing agency at the 
     time of application for assistance.
       (c) The Secretary shall encourage each State receiving 
     commodities under this 

[[Page H10621]]

     chapter to establish a State advisory board consisting of 
     representatives of all interested entities, both public and 
     private, in the distribution of commodities received under 
     this chapter in the State.
       (d) A State agency receiving commodities under this chapter 
     may--
       (1)(A) enter into cooperative agreements with State 
     agencies of other States to jointly provide commodities 
     received under this chapter to eligible recipient agencies 
     that serve needy persons in a single geographical area which 
     includes such States; or
       (B) transfer commodities received under this chapter to any 
     such eligible recipient agency in the other State under such 
     agreement; and
       (2) advise the Secretary of an agreement entered into under 
     this subsection and the transfer of commodities made pursuant 
     to such agreement.

     SEC. 9755. ALLOCATION OF COMMODITIES TO STATES.

       (a) In each fiscal year, except for those commodities 
     purchased under section 9760, the Secretary shall allocate 
     the commodities distributed under this chapter as follows:
       (1) 60 percent of such total value of commodities shall be 
     allocated in a manner such that the value of commodities 
     allocated to each State bears the same ratio to 60 percent of 
     such total value as the number of persons in households 
     within the State having incomes below the poverty line bears 
     to the total number of persons in households within all 
     States having incomes below such poverty line. Each State 
     shall receive the value of commodities allocated under this 
     paragraph.
       (2) 40 percent of such total value of commodities shall be 
     allocated in a manner such that the value of commodities 
     allocated to each State bears the same ratio to 40 percent of 
     such total value as the average monthly number of unemployed 
     persons within the State bears to the average monthly number 
     of unemployed persons within all States during the same 
     fiscal year. Each State shall receive the value of 
     commodities allocated to the State under this paragraph.
       (b)(1) The Secretary shall notify each State of the amount 
     of commodities that such State is allotted to receive under 
     subsection (a) or this subsection, if applicable. Each State 
     shall promptly notify the Secretary if such State determines 
     that it will not accept any or all of the commodities made 
     available under such allocation. On such a notification by a 
     State, the Secretary shall reallocate and distribute such 
     commodities in a manner the Secretary deems appropriate and 
     equitable. The Secretary shall further establish procedures 
     to permit States to decline to receive portions of such 
     allocation during each fiscal year in a manner the State 
     determines is appropriate and the Secretary shall reallocate 
     and distribute such allocation as the Secretary deems 
     appropriate and equitable.
       (2) In the event of any drought, flood, hurricane, or other 
     natural disaster affecting substantial numbers of persons in 
     a State, county, or parish, the Secretary may request that 
     States unaffected by such a disaster consider assisting 
     affected States by allowing the Secretary to reallocate 
     commodities from such unaffected State to States containing 
     areas adversely affected by the disaster.
       (c) Purchases of commodities under this chapter shall be 
     made by the Secretary at such times and under such conditions 
     as the Secretary determines appropriate within each fiscal 
     year. All commodities so purchased for each such fiscal year 
     shall be delivered at reasonable intervals to States based on 
     the allocations and reallocations made under subsections (a) 
     and (b), and or carry out section 9760, not later than 
     December 31 of the following fiscal year.

     SEC. 9756. PRIORITY SYSTEM FOR STATE DISTRIBUTION OF 
                   COMMODITIES.

       (a) In distributing the commodities allocated under 
     subsections (a) and (b) of section 9755, the State agency, 
     under procedures determined by the State agency, shall offer, 
     or otherwise make available, its full allocation of 
     commodities for distribution to emergency feeding 
     organizations.
       (b) If the State agency determines that the State will not 
     exhaust the commodities allocated under subsections (a) and 
     (b) of section 9755 through distribution to organizations 
     referred to in subsection (a), its remaining allocation of 
     commodities shall be distributed to charitable institutions 
     described in section 9763(3) not receiving commodities under 
     subsection (a).
       (c) If the State agency determines that the State will not 
     exhaust the commodities allocated under subsections (a) and 
     (b) of section 9755 through distribution to organizations 
     referred to in subsections (a) and (b), its remaining 
     allocation of commodities shall be distributed to any 
     eligible recipient agency not receiving commodities under 
     subsections (a) and (b).

     SEC. 9757. INITIAL PROCESSING COSTS.

       The Secretary may use funds of the Commodity Credit 
     Corporation to pay the costs of initial processing and 
     packaging of commodities to be distributed under this chapter 
     into forms and in quantities suitable, as determined by the 
     Secretary, for use by the individual households or eligible 
     recipient agencies, as applicable. The Secretary may pay such 
     costs in the form of Corporation-owned commodities equal in 
     value to such costs. The Secretary shall ensure that any such 
     payments in kind will not displace commercial sales of such 
     commodities.

     SEC. 9758. ASSURANCES; ANTICIPATED USE.

       (a) The Secretary shall take such precautions as the 
     Secretary deems necessary to ensure that commodities made 
     available under this chapter will not displace commercial 
     sales of such commodities or the products thereof. The 
     Secretary shall submit to the Committee on Agriculture of the 
     House of Representatives and the Committee on Agriculture, 
     Nutrition, and Forestry of the Senate by December 31, 1997, 
     and not less than every two years thereafter, a report as to 
     whether and to what extent such displacements or 
     substitutions are occurring.
       (b) The Secretary shall determine that commodities provided 
     under this chapter shall be purchased and distributed only in 
     quantities that can be consumed without waste. No eligible 
     recipient agency may receive commodities under this chapter 
     in excess of anticipated use, based on inventory records and 
     controls, or in excess of its ability to accept and store 
     such commodities.

     SEC. 9759. AUTHORIZATION OF APPROPRIATIONS.

       (a) Purchase of Commodities.--To carry out this chapter, 
     there are authorized to be appropriated $260,000,000 for each 
     of the fiscal years 1996 through 2000 to purchase, process, 
     and distribute commodities to the States in accordance with 
     this chapter.
       (b) Administrative Funds.--
       (1) There are authorized to be appropriated $40,000,000 for 
     each of the fiscal years 1996 through 2000 for the Secretary 
     to make available to the States for State and local payments 
     for costs associated with the distribution of commodities by 
     eligible recipient agencies under this chapter, excluding 
     costs associated with the distribution of those commodities 
     distributed under section 9760. Funds appropriated under this 
     paragraph for any fiscal year shall be allocated to the 
     States on an advance basis dividing such funds among the 
     States in the same proportions as the commodities distributed 
     under this chapter for such fiscal year are allocated among 
     the States. If a State agency is unable to use all of the 
     funds so allocated to it, the Secretary shall reallocate such 
     unused funds among the other States in a manner the Secretary 
     deems appropriate and equitable.
       (2)(A) A State shall make available in each fiscal year to 
     eligible recipient agencies in the State not less than 40 
     percent of the funds received by the State under paragraph 
     (1) for such fiscal year, as necessary to pay for, or provide 
     advance payments to cover, the allowable expenses of eligible 
     recipient agencies for distributing commodities to needy 
     persons, but only to the extent such expenses are actually so 
     incurred by such recipient agencies.
       (B) As used in this paragraph, the term ``allowable 
     expenses'' includes--
       (i) costs of transporting, storing, handling, repackaging, 
     processing, and distributing commodities incurred after such 
     commodities are received by eligible recipient agencies;
       (ii) costs associated with determinations of eligibility, 
     verification, and documentation;
       (iii) costs of providing information to persons receiving 
     commodities under this chapter concerning the appropriate 
     storage and preparation of such commodities; and
       (iv) costs of recordkeeping, auditing, and other 
     administrative procedures required for participation in the 
     program under this chapter.
       (C) If a State makes a payment, using State funds, to cover 
     allowable expenses of eligible recipient agencies, the amount 
     of such payment shall be counted toward the amount a State 
     must make available for allowable expenses of recipient 
     agencies under this paragraph.
       (3) States to which funds are allocated for a fiscal year 
     under this subsection shall submit financial reports to the 
     Secretary, on a regular basis, as to the use of such funds. 
     No such funds may be used by States or eligible recipient 
     agencies for costs other than those involved in covering the 
     expenses related to the distribution of commodities by 
     eligible recipient agencies.
       (4)(A) Except as provided in subparagraph (B), to be 
     eligible to receive funds under this subsection, a State 
     shall provide in cash or in kind (according to procedures 
     approved by the Secretary for certifying these in-kind 
     contributions) from non-Federal sources a contribution equal 
     to the difference between--
       (i) the amount of such funds so received; and
       (ii) any part of the amount allocated to the State and paid 
     by the State--
       (I) to eligible recipient agencies; or
       (II) for the allowable expenses of such recipient 
     agencies;for use in carrying out this chapter.
       (B) Funds allocated to a State under this section may, upon 
     State request, be allocated before States satisfy the 
     matching requirement specified in subparagraph (A), based on 
     the estimated contribution required. The Secretary shall 
     periodically reconcile estimated and actual contributions and 
     adjust allocations to the State to correct for overpayments 
     and underpayments.
       (C) Any funds distributed for administrative costs under 
     section 9760(b) shall not be covered by this paragraph.
       (5) States may not charge for commodities made available to 
     eligible recipient agencies, and may not pass on to such 
     recipient agencies the cost of any matching requirements, 
     under this chapter.
       (c) Value of Commodities.--The value of the commodities 
     made available under subsections (c) and (d) of section 9752, 
     and the 

[[Page H10622]]

     funds of the Corporation used to pay the costs of initial 
     processing, packaging (including forms suitable for home 
     use), and delivering commodities to the States shall not be 
     charged against appropriations authorized by this section.

     SEC. 9760. COMMODITY SUPPLEMENTAL FOOD PROGRAM.

       (a) From the funds appropriated under section 9759(a), 
     $94,500,000 shall be used for each fiscal year to purchase 
     and distribute commodities to supplemental feeding programs 
     serving woman, infants, and children or elderly individuals 
     (hereinafter in this section referred to as the ``commodity 
     supplemental food program''), or serving both groups wherever 
     located.
       (b) Not more than 20 percent of the funds made available 
     under subsection (a) shall be made available to the States 
     for State and local payments of administrative costs 
     associated with the distribution of commodities by eligible 
     recipient agencies under this section. Administrative costs 
     for the purposes of the commodity supplemental food program 
     shall include, but not be limited to, expenses for 
     information and referral, operation, monitoring, nutrition 
     education, start-up costs, and general administration, 
     including staff, warehouse and transportation personnel, 
     insurance, and administration of the State or local office.
       (c)(1) During each fiscal year the commodity supplemental 
     food program is in operation, the types, varieties, and 
     amounts of commodities to be purchased under this section 
     shall be determined by the Secretary, but, if the Secretary 
     proposes to make any significant changes in the types, 
     varieties, or amounts from those that were available or were 
     planned at the beginning of the fiscal year the Secretary 
     shall report such changes before implementation to the 
     Committee on Agriculture of the House of Representatives and 
     the Committee on Agriculture, Nutrition, and Forestry of the 
     Senate.
       (2) Notwithstanding any other provision of law, the 
     Commodity Credit Corporation shall, to the extent that the 
     Commodity Credit Corporation inventory levels permit, provide 
     not less than 9,000,000 pounds of cheese and not less than 
     4,000,000 pounds of nonfat dry milk in each of the fiscal 
     years 1996 through 2000 to the Secretary. The Secretary shall 
     use such amounts of cheese and nonfat dry milk to carry out 
     the commodity supplemental food program before the end of 
     each fiscal year.
       (d) The Secretary shall, in each fiscal year, approve 
     applications of additional sites for the program, including 
     sites that serve only elderly persons, in areas in which the 
     program currently does not operate, to the full extent that 
     applications can be approved within the appropriations 
     available for the program for the fiscal year and without 
     reducing actual participation levels (including participation 
     of elderly persons under subsection (e)) in areas in which 
     the program is in effect.
       (e) If a local agency that administers the commodity 
     supplemental food program determines that the amount of funds 
     made available to the agency to carry out this section 
     exceeds the amount of funds necessary to provide assistance 
     under such program to women, infants, and children, the 
     agency, with the approval of the Secretary, may permit low-
     income elderly persons (as defined by the Secretary) to 
     participate in and be served by such program.
       (f)(1) If it is necessary for the Secretary to pay a 
     significantly higher than expected price for one or more 
     types of commodities purchased under this section, the 
     Secretary shall promptly determine whether the price is 
     likely to cause the number of persons that can be served in 
     the program in a fiscal year to decline.
       (2) If the Secretary determines that such a decline would 
     occur, the Secretary shall promptly notify the State agencies 
     charged with operating the program of the decline and shall 
     ensure that a State agency notify all local agencies 
     operating the program in the State of the decline.
       (g) Commodities distributed to States pursuant to this 
     section shall not be considered in determining the commodity 
     allocation to each State under section 9755 or priority of 
     distribution under section 9756.

     SEC. 9761. COMMODITIES NOT INCOME.

       Notwithstanding any other provision of law, commodities 
     distributed under this chapter shall not be considered income 
     or resources for purposes of determining recipient 
     eligibility under any Federal, State, or local means-tested 
     program.

     SEC. 9762. PROHIBITION AGAINST CERTAIN STATE CHARGES.

       Whenever a commodity is made available without charge or 
     credit under this chapter by the Secretary for distribution 
     within the States to eligible recipient agencies, the State 
     may not charge recipient agencies any amount that is in 
     excess of the State's direct costs of storing, and 
     transporting to recipient agencies the commodities minus any 
     amount the Secretary provides the State for the costs of 
     storing and transporting such commodities.

     SEC. 9763. DEFINITIONS.

       As used in this chapter:
       (1) The term ``average monthly number of unemployed 
     persons'' means the average monthly number of unemployed 
     persons within a State in the most recent fiscal year for 
     which such information is available as determined by the 
     Bureau of Labor Statistics of the Department of Labor.
       (2) The term ``elderly persons'' means individuals 60 years 
     of age or older.
       (3) The term ``eligible recipient agency'' means a public 
     or nonprofit organization that administers--
       (A) an institution providing commodities to supplemental 
     feeding programs serving women, infants, and children or 
     serving elderly persons, or serving both groups;
       (B) an emergency feeding organization;
       (C) a charitable institution (including hospitals and 
     retirement homes and excluding penal institutions) to the 
     extent that such institution serves needy persons;
       (D) a summer camp for children, or a child nutrition 
     program providing food service;
       (E) a nutrition project operating under the Older Americans 
     Act of 1965, including such projects that operate a 
     congregate nutrition site and a project that provides home-
     delivered meals; or
       (F) a disaster relief program; and that has been designated 
     by the appropriate State agency, or by the Secretary, and 
     approved by the Secretary for participation in the program 
     established under this chapter.
       (4) The term ``emergency feeding organization'' means a 
     public or nonprofit organization that administers activities 
     and projects (including the activities and projects of a 
     charitable institution, a food bank, a food pantry, a hunger 
     relief center, a soup kitchen, or a similar public or private 
     nonprofit eligible recipient agency) providing nutrition 
     assistance to relieve situations of emergency and distress 
     through the provision of food to needy persons, including 
     low-income and unemployed persons.
       (5) The term ``food bank'' means a public and charitable 
     institution that maintains an established operation involving 
     the provision of food or edible commodities, or the products 
     thereof, to food pantries, soup kitchens, hunger relief 
     centers, or other food or feeding centers that, as an 
     integral part of their normal activities, provide meals or 
     food to feed needy persons on a regular basis.
       (6) The term ``food pantry'' means a public or private 
     nonprofit organization that distributes food to low-income 
     and unemployed households, including food from sources other 
     than the Department of Agriculture, to relieve situations of 
     emergency and distress.
       (7) The term ``needy persons'' means--
       (A) individuals who have low incomes or who are unemployed, 
     as determined by the State (in no event shall the income of 
     such individual or household exceed 185 percent of the 
     poverty line);
       (B) households certified as eligible to participate in the 
     food stamp program under the Food Stamp Act of 1977 (7 U.S.C. 
     2011 et seq.); or
       (C) individuals or households participating in any other 
     Federal, or federally assisted, means-tested program.
       (8) The term ``poverty line'' has the same meaning given 
     such term in section 673(2) of the Community Services Block 
     Grant Act (42 U.S.C. 9902(2)).
       (9) The term ``soup kitchen'' means a public and charitable 
     institution that, as integral part of its normal activities, 
     maintains an established feeding operation to provide food to 
     needy homeless persons on a regular basis.

     SEC. 9764. REGULATIONS.

       (a) The Secretary shall issue regulations within 120 days 
     to implement this chapter.
       (b) In administering this chapter, the Secretary shall 
     minimize, to the maximum extent practicable, the regulatory, 
     recordkeeping, and paperwork requirements imposed on eligible 
     recipient agencies.
       (c) The Secretary shall as early as feasible but not later 
     than the beginning of each fiscal year, publish in the 
     Federal Register a nonbinding estimate of the types and 
     quantities of commodities that the Secretary anticipates are 
     likely to be made available under the commodity distribution 
     program under this chapter during the fiscal year.
       (d) The regulations issued by the Secretary under this 
     section shall include provisions that set standards with 
     respect to liability for commodity losses for the commodities 
     distributed under this chapter in situations in which there 
     is no evidence of negligence or fraud, and conditions for 
     payment to cover such losses. Such provisions shall take into 
     consideration the special needs and circumstances of eligible 
     recipient agencies.

     SEC. 9765. FINALITY OF DETERMINATIONS.

       Determinations made by the Secretary under this chapter and 
     the facts constituting the basis for any donation of 
     commodities under this chapter, or the amount thereof, when 
     officially determined in conformity with the applicable 
     regulations prescribed by the Secretary, shall be final and 
     conclusive and shall not be reviewable by any other officer 
     or agency of the Government.

     SEC. 9766. RELATIONSHIP TO OTHER PROGRAMS.

       (a) Section 4(b) of the Food Stamp Act of 1977 (7 U.S.C. 
     2013(b)) shall not apply with respect to the distribution of 
     commodities under this chapter.
       (b) Except as otherwise provided in section 9757, none of 
     the commodities distributed under this chapter shall be sold 
     or otherwise disposed of in commercial channels in any form.

     SEC. 9767. SETTLEMENT AND ADJUSTMENT OF CLAIMS.

       (a) The Secretary may--
       (1) determine the amount of, settle, and adjust any claim 
     arising under this chapter; and
       (2) waive such a claim if the Secretary determines that to 
     do so will serve the purposes of this chapter.

[[Page H10623]]

       (b) Nothing contained in this section shall be construed to 
     diminish the authority of the Attorney General of the United 
     States under section 516 of title 28, United States Code, to 
     conduct litigation on behalf of the United States.

     SEC. 9768. REPEALERS; AMENDMENTS.

       (a) Repealer.--The Emergency Food Assistance Act of 1983 (7 
     U.S.C. 612c note) is repealed.
       (b) Amendments.--
       (1) The Hunger Prevention Act of 1988 (7 U.S.C. 612c note) 
     is amended--
       (A) by striking section 110; and
       (B) by striking section 502.
       (2) The Commodity Distribution Reform Act and WIC 
     Amendments of 1987 (7 U.S.C. 612c note) is amended by 
     striking section 4.
       (3) The Charitable Assistance and Food Bank Act of 1987 (7 
     U.S.C. 612c note) is amended by striking section 3.
       (4) The Food Security Act of 1985 (7 U.S.C. 612c note) is 
     amended--
       (A) by striking section 1562(a) and section 1571; and
       (B) in section 1562(d), by striking ``section 4 of the 
     Agricultural and Consumer Protection Act of 1973'' and 
     inserting ``section 9752 of the Commodity Distribution Act of 
     1995''.
       (5) The Agricultural and Consumer Protection Act of 1973 (7 
     U.S.C. 612c note) is amended--
       (A) in section 4(a), by striking ``institutions (including 
     hospitals and facilities caring for needy infants and 
     children), supplemental feeding programs serving women, 
     infants and children or elderly persons, or both, wherever 
     located, disaster areas, summer camps for children,'';
       (B) in subsection 4(c), by striking ``the Emergency Food 
     Assistance Act of 1983'' and inserting ``the Commodity 
     Distribution Act of 1995''; and
       (C) by striking section 5.
       (6) The Food, Agriculture, Conservation, and Trade Act of 
     1990 (7 U.S.C. 612c note) is amended by striking section 
     1773(f).

                       CHAPTER 3--OTHER PROGRAMS

     SEC. 9781. CHILD AND ADULT CARE FOOD PROGRAM.

       (a) Payments to Sponsor Employees.--Paragraph (2) of the 
     last sentence of section 17(a) of the National School Lunch 
     Act (42 U.S.C. 1766(a)) is amended--
       (1) by striking ``and'' at the end of subparagraph (B);
       (2) by striking the period at the end of subparagraph (C) 
     and inserting ``; and''; and
       (3) by adding at the end the following:
       ``(D) in the case of a family or group day care home 
     sponsoring organization that employs more than 1 employee, 
     the organization does not base payments to an employee of the 
     organization on the number of family or group day care homes 
     recruited, managed, or monitored.''.
       (b) Improved Targeting of Day Care Home Reimbursements.--
       (1) Restructured day care home reimbursements.--Section 
     17(f)(3) of the National School Lunch Act is amended by 
     striking ``(3)(A) Institutions'' and all that follows through 
     the end of subparagraph (A) and inserting the following:
       ``(3) Reimbursement of family or group day care home 
     sponsoring organizations.--
       ``(A) Reimbursement factor.--
       ``(i) In general.--An institution that participates in the 
     program under this section as a family or group day care home 
     sponsoring organization shall be provided, for payment to a 
     home of the organization, reimbursement factors in accordance 
     with this subparagraph for the cost of obtaining and 
     preparing food and prescribed labor costs involved in 
     providing meals under this section.
       ``(ii) Tier i family or group day care homes.--

       ``(I) Definition.--In this paragraph, the term `tier I 
     family or group day care home' means--

       ``(aa) a family or group day care home that is located in a 
     geographic area, as defined by the Secretary based on census 
     data, in which at least 50 percent of the children residing 
     in the area are members of households whose incomes meet the 
     eligibility standards for free or reduced price meals under 
     section 9;
       ``(bb) a family or group day care home that is located in 
     an area served by a school enrolling elementary students in 
     which at least 50 percent of the total number of children 
     enrolled are certified eligible to receive free or reduced 
     price school meals under this Act or the Child Nutrition Act 
     of 1966 (42 U.S.C. 1771 et seq.); or
       ``(cc) a family or group day care home that is operated by 
     a provider whose household meets the eligibility standards 
     for free or reduced price meals under section 9 and whose 
     income is verified by a sponsoring organization under 
     regulations established by the Secretary.

       ``(II) Reimbursement.--Except as provided in subclause 
     (III), a tier I family or group day care home shall be 
     provided reimbursement factors under this clause without a 
     requirement for documentation of the costs described in 
     clause (i), except that reimbursement shall not be provided 
     under this subclause for meals or supplements served to the 
     children of a person acting as a family or group day care 
     home provider unless the children meet the eligibility 
     standards for free or reduced price meals under section 9.
       ``(III) Factors.--Except as provided in subclause (IV), the 
     reimbursement factors applied to a home referred to in 
     subclause (II) shall be the factors in effect on the date of 
     enactment of this subclause.
       ``(IV) Adjustments.--The reimbursement factors under this 
     subparagraph shall be adjusted on August 1, 1996, July 1, 
     1997, and each July 1 thereafter, to reflect changes in the 
     Consumer Price Index for food at home for the most recent 12-
     month period for which the data are available. The 
     reimbursement factors under this subparagraph shall be 
     rounded to the nearest lower cent increment and based on the 
     unrounded adjustment for the preceding 12-month period.

       ``(iii) Tier ii family or group day care homes.--

       ``(I) In general.--

       ``(aa) Factors.--Except as provided in subclause (II), with 
     respect to meals or supplements served under this clause by a 
     family or group day care home that does not meet the criteria 
     set forth in clause (ii)(I), the reimbursement factors shall 
     be $1 for lunches and suppers, 40 cents for breakfasts, and 
     20 cents for supplements.
       ``(bb) Adjustments.--The factors shall be adjusted on July 
     1, 1997, and each July 1 thereafter, to reflect changes in 
     the Consumer Price Index for food at home for the most recent 
     12-month period for which the data are available. The 
     reimbursement factors under this item shall be rounded down 
     to the nearest lower cent increment and based on the 
     unrounded adjustment for the preceding 12-month period.
       ``(cc) Reimbursement.--A family or group day care home 
     shall be provided reimbursement factors under this subclause 
     without a requirement for documentation of the costs 
     described in clause (i), except that reimbursement shall not 
     be provided under this subclause for meals or supplements 
     served to the children of a person acting as a family or 
     group day care home provider unless the children meet the 
     eligibility standards for free or reduced price meals under 
     section 9.

       ``(II) Other factors.--A family or group day care home that 
     does not meet the criteria set forth in clause (ii)(I) may 
     elect to be provided reimbursement factors determined in 
     accordance with the following requirements:

       ``(aa) Children eligible for free or reduced price meals.--
     In the case of meals or supplements served under this 
     subsection to children who are members of households whose 
     incomes meet the eligibility standards for free or reduced 
     price meals under section 9, the family or group day care 
     home shall be provided reimbursement factors set by the 
     Secretary in accordance with clause (ii)(III).
       ``(bb) Ineligible children.--In the case of meals or 
     supplements served under this subsection to children who are 
     members of households whose incomes do not meet the 
     eligibility standards, the family or group day care home 
     shall be provided reimbursement factors in accordance with 
     subclause (I).

       ``(III) Information and determinations.--

       ``(aa) In general.--If a family or group day care home 
     elects to claim the factors described in subclause (II), the 
     family or group day care home sponsoring organization serving 
     the home shall collect the necessary income information, as 
     determined by the Secretary, from any parent or other 
     caretaker to make the determinations specified in subclause 
     (II) and shall make the determinations in accordance with 
     rules prescribed by the Secretary.
       ``(bb) Categorical eligibility.--In making a determination 
     under item (aa), a family or group day care home sponsoring 
     organization may consider a child participating in or 
     subsidized under, or a child with a parent participating in 
     or subsidized under, a federally or State supported child 
     care or other benefit program with an income eligibility 
     limit that does not exceed the eligibility standard for free 
     or reduced price meals under section 9 to be a child who is a 
     member of a household whose income meets the eligibility 
     standards under section 9.
       ``(cc) Factors for children only.--A family or group day 
     care home may elect to receive the reimbursement factors 
     prescribed under clause (ii)(III) solely for the children 
     participating in a program referred to in item (bb) if the 
     home elects not to have income statements collected from 
     parents or other caretakers.

       ``(IV) Simplified meal counting and reporting procedures.--
     The Secretary shall prescribe simplified meal counting and 
     reporting procedures for use by a family or group day care 
     home that elects to claim the factors under subclause (II) 
     and by a family or group day care home sponsoring 
     organization that serves the home. The procedures the 
     Secretary prescribes may include 1 or more of the following:

       ``(aa) Setting an annual percentage for each home of the 
     number of meals served that are to be reimbursed in 
     accordance with the reimbursement factors prescribed under 
     clause (ii)(III) and an annual percentage of the number of 
     meals served that are to be reimbursed in accordance with the 
     reimbursement factors prescribed under subclause (I), based 
     on the family income of children enrolled in the home in a 
     specified month or other period.
       ``(bb) Placing a home into 1 of 2 or more reimbursement 
     categories annually based on the percentage of children in 
     the home whose households have incomes that meet the 
     eligibility standards under section 9, with each such 
     reimbursement category carrying a set of reimbursement 
     factors such as the factors prescribed under clause (ii)(III) 
     or subclause (I) or factors established within the range of 
     factors prescribed under clause (ii)(III) and subclause (I).
       ``(cc) Such other simplified procedures as the Secretary 
     may prescribe.

       ``(V) Minimum verification requirements.--The Secretary may 
     establish any 

[[Page H10624]]

     necessary minimum verification requirements.''.

       (2) Sponsor payments.--Section 17(f)(3)(B) of the National 
     School Lunch Act is amended--
       (A) by striking the period at the end of the second 
     sentence and all that follows through the end of the 
     subparagraph and inserting the following:``, except that the 
     adjustment that otherwise would occur on July 1, 1996, shall 
     be made on August 1, 1996. The maximum allowable levels for 
     administrative expense payments shall be rounded to the 
     nearest lower dollar increment and based on the unrounded 
     adjustment for the preceding 12-month period.'';
       (B) by striking ``(B)'' and inserting ``(B)(i)''; and
       (C) by adding at the end the following new clause:
       ``(ii) The maximum allowable level of administrative 
     expense payments shall be adjusted by the Secretary--
       ``(I) to increase by 7.5 percent the monthly payment to 
     family or group day care home sponsoring organizations both 
     for tier I family or group day care homes and for those tier 
     II family or group day care homes for which the sponsoring 
     organization administers a means test as provided under 
     subparagraph (A)(iii); and
       ``(II) to decrease by 7.5 percent the monthly payment to 
     family or group day care home sponsoring organizations for 
     family or group day care homes that do not meet the criteria 
     for tier I homes and for which a means test is not 
     administered.''.
       (3) Grants to states to provide assistance to family or 
     group day care homes.--Section 17(f)(3) of the Act is amended 
     by adding at the end the following:
       ``(D) Grants to states to provide assistance to family or 
     group day care homes.--
       ``(i) In general.--

       ``(I) Reservation.--From amounts made available to carry 
     out this section, the Secretary shall reserve $5,000,000 of 
     the amount made available for fiscal year 1996.
       ``(II) Purpose.--The Secretary shall use the funds made 
     available under subclause (I) to provide grants to States for 
     the purpose of providing--

       ``(aa) assistance, including grants, to family and day care 
     home sponsoring organizations and other appropriate 
     organizations, in securing and providing training, materials, 
     automated data processing assistance, and other assistance 
     for the staff of the sponsoring organizations; and
       ``(bb) training and other assistance to family and group 
     day care homes in the implementation of the amendments to 
     subparagraph (A) made by section 574(b)(1) of the Family 
     Self-Sufficiency Act of 1995.
       ``(ii) Allocation.--The Secretary shall allocate from the 
     funds reserved under clause (i)(II)--

       ``(I) $30,000 in base funding to each State; and
       ``(II) any remaining amount among the States, based on the 
     number of family day care homes participating in the program 
     in a State in 1994 as a percentage of the number of all 
     family day care homes participating in the program in 1994.

       ``(iii) Retention of funds.--Of the amount of funds made 
     available to a State for a fiscal year under clause (i), the 
     State may retain not to exceed 30 percent of the amount to 
     carry out this subparagraph.
       ``(iv) Additional payments.--Any payments received under 
     this subparagraph shall be in addition to payments that a 
     State receives under subparagraph (A) (as amended by section 
     134(b)(1) of the Family Self-Sufficiency Act of 1995).''.
       (4) Provision of data.--Section 17(f)(3) of the National 
     School Lunch Act (as amended by paragraph (3)) is further 
     amended by adding at the end the following:
       ``(E) Provision of data to family or group day care home 
     sponsoring organizations.--
       ``(i) Census data.--The Secretary shall provide to each 
     State agency administering a child and adult care food 
     program under this section data from the most recent 
     decennial census survey or other appropriate census survey 
     for which the data are available showing which areas in the 
     State meet the requirements of subparagraph (A)(ii)(I)(aa). 
     The State agency shall provide the data to family or group 
     day care home sponsoring organizations located in the State.
       ``(ii) School data.--

       ``(I) In general.--A State agency administering the program 
     under this section shall annually provide to a family or 
     group day care home sponsoring organizations that request the 
     data, a list of schools serving elementary school children in 
     the State in which at least 50 percent of the children 
     enrolled are certified to receive free or reduced price 
     meals. State agencies administering the school lunch program 
     under this Act or the school breakfast program under the 
     Child Nutrition Act of 1966 (42 U.S.C. 1771 et seq.) shall 
     collect such data annually and provide such data on a timely 
     basis to the State agency administering the program under 
     this section.
       ``(II) Use of data from preceding school year.--In 
     determining for a fiscal year or other annual period whether 
     a home qualifies as a tier I family or group day care home 
     under subparagraph (A)(ii)(I), the State agency administering 
     the program under this section, and a family or group day 
     care home sponsoring organization, shall use the most current 
     available data at the time of the determination.

       ``(iii) Duration of determination.--For purposes of this 
     section, a determination that a family or group day care home 
     is located in an area that qualifies the home as a tier I 
     family or group day care home (as the term is defined in 
     subparagraph (A)(ii)(I)), shall be in effect for 3 years 
     (unless the determination is made on the basis of census 
     data, in which case the determination shall remain in effect 
     until more recent census data are available) unless the State 
     agency determines that the area in which the home is located 
     no longer qualifies the home as a tier I family or group day 
     care home.''.
       (5) Conforming amendments.--Section 17(c) of the National 
     School Lunch Act is amended by inserting ``except as provided 
     in subsection (f)(3),'' after ``For purposes of this 
     section,'' each place it appears in paragraphs (1), (2), and 
     (3).
       (c) Disallowing Meal Claims.--The fourth sentence of 
     section 17(f)(4) of the National School Lunch Act is amended 
     by inserting ``(including institutions that are not family or 
     group day care home sponsoring organizations)'' after 
     ``institutions''.
       (d) Elimination of State Paperwork and Outreach Burden.--
     Section 17 of the National School Lunch Act is amended by 
     striking subsection (k) and inserting the following:
       ``(k) Training and Technical Assistance.--A State 
     participating in the program established under this section 
     shall provide sufficient training, technical assistance, and 
     monitoring to facilitate effective operation of the program. 
     The Secretary shall assist the State in developing plans to 
     fulfill the requirements of this subsection.''.
       (e) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall become effective on the 
     date of enactment of this Act.
       (2) Improved targeting of day care home reimbursements.--
     The amendments made by paragraphs (1), (3), and (4) of 
     subsection (b) shall become effective on August 1, 1996.
       (3) Implementation.--The Secretary of Agriculture shall 
     issue regulations to implement the amendments made by 
     paragraphs (1), (2), (3), and (4) of subsection (b) and the 
     provisions of section 17(f)(3)(C) of the National School 
     Lunch Act (42 U.S.C. 1766(f)(3)(C)) not later than February 
     1, 1996. If such regulations are issued in interim form, 
     final regulations shall be issued not later than August 1, 
     1996.

     SEC. 9782. RESUMPTION OF DISCRETIONARY FUNDING FOR NUTRITION 
                   EDUCATION AND TRAINING PROGRAM.

       Section 19(i)(2)(A) of the Child Nutrition Act of 1966 (42 
     U.S.C. 1788(i)(2)(A)) is amended--
       (1) by striking ``Out of'' and all that follows through 
     ``and $10,000,000'' and inserting ``To carry out the 
     provisions of this section, there is hereby authorized to be 
     appropriated not to exceed $10,000,000''; and
       (2) by striking the last sentence.
                    Subtitle H--Treatment of Aliens

     SEC. 9801. EXTENSION OF DEEMING OF INCOME AND RESOURCES UNDER 
                   TEA, SSI, AND FOOD STAMP PROGRAMS.

       (a) In General.--Except as provided in subsections (b) and 
     (c), in applying sections 407 and 1621 of the Social Security 
     Act and section 5(i) of the Food Stamp Act of 1977, the 
     period in which each respective section otherwise applies 
     with respect to an alien shall be extended through the date 
     (if any) on which the alien becomes a citizen of the United 
     States (under chapter 2 of title III of the Immigration and 
     Nationality Act).
       (b) Exception.--Subsection (a) shall not apply to an alien 
     if--
       (1) the alien has been lawfully admitted to the United 
     States for permanent residence, has attained 75 years of age, 
     and has resided in the United States for at least 5 years;
       (2) the alien--
       (A) is a veteran (as defined in section 101 of title 38, 
     United States Code) with a discharge characterized as an 
     honorable discharge,
       (B) is on active duty (other than active duty for training) 
     in the Armed Forces of the United States, or
       (C) is the spouse or unmarried dependent child of an 
     individual described in subparagraph (A) or (B);
       (3) the alien is the subject of domestic violence by the 
     alien's spouse and a divorce between the alien and the 
     alien's spouse has been initiated through the filing of an 
     appropriate action in an appropriate court; or
       (4) there has been paid with respect to the self-employment 
     income or employment of the alien, or of a parent or spouse 
     of the alien, taxes under chapter 2 or chapter 21 of the 
     Internal Revenue Code of 1986 in each of 20 different 
     calendar quarters.
       (c) Hold Harmless for Medicaid Eligibility.--Subsection (a) 
     shall not apply with respect to determinations of eligibility 
     for benefits under a State plan approved under part A of 
     title IV of the Social Security Act or under the supplemental 
     income security program under title XVI of such Act but only 
     insofar as such determinations provide for eligibility for 
     medical assistance under title XIX of such Act.
       (d) Rules Regarding Income and Resource Deeming Under TEA 
     Program.--Subpart 1 of part A of title IV of the Social 
     Security Act, as added by section 9101(a) of this Act, is 
     amended by adding at the end the following:

     ``SEC. 407. ATTRIBUTION OF SPONSOR'S INCOME AND RESOURCES TO 
                   ALIEN.

       ``(a) For purposes of determining eligibility for and the 
     amount of assistance under 

[[Page H10625]]

     a State plan approved under this part for an individual who 
     is an alien lawfully admitted for permanent residence or 
     otherwise permanently residing in the United States under 
     color of law (including any alien who is lawfully present in 
     the United States as a result of the application of the 
     provisions of section 207(c) of the Immigration and 
     Nationality Act (or of section 203(a)(7) of such Act prior to 
     April 1, 1980), or as a result of the application of the 
     provisions of section 208 or 212(d)(5) of such Act), the 
     income and resources of any person who (as a sponsor of such 
     individual's entry into the United States) executed an 
     affidavit of support or similar agreement with respect to 
     such individual, and the income and resources of the 
     sponsor's spouse, shall be deemed to be the unearned income 
     and resources of such individual (in accordance with 
     subsections (b) and (c)) for a period of three years after 
     the individual's entry into the United States, except that 
     this section is not applicable if such individual is a 
     dependent child and such sponsor (or such sponsor's spouse) 
     is the parent of such child.
       ``(b)(1) The amount of income of a sponsor (and his spouse) 
     which shall be deemed to be the unearned income of an alien 
     for any month shall be determined as follows:
       ``(A) the total amount of earned and unearned income of 
     such sponsor and such sponsor's spouse (if such spouse is 
     living with the sponsor) shall be determined for such month;
       ``(B) the amount determined under subparagraph (A) shall be 
     reduced by an amount equal to the sum of--
       ``(i) the lesser of (I) 20 percent of the total of any 
     amounts received by the sponsor and his spouse in such month 
     as wages or salary or as net earnings from self-employment, 
     plus the full amount of any costs incurred by them in 
     producing self-employment income in such month, or (II) $175;
       ``(ii) the cash needs standard established by the State 
     under its plan for a family of the same size and composition 
     as the sponsor and those other individuals living in the same 
     household as the sponsor who are claimed by him as dependents 
     for purposes of determining his Federal personal income tax 
     liability but whose needs are not taken into account in 
     making a determination under section 402(d);
       ``(iii) any amounts paid by the sponsor (or his spouse) to 
     individuals not living in such household who are claimed by 
     him as dependents for purposes of determining his Federal 
     personal income tax liability; and
       ``(iv) any payments of alimony or child support with 
     respect to individuals not living in such household.
       ``(2) The amount of resources of a sponsor (and his spouse) 
     which shall be deemed to be the resources of an alien for any 
     month shall be determined as follows:
       ``(A) the total amount of the resources (determined as if 
     the sponsor were applying for assistance under the State plan 
     approved under this part) of such sponsor and such sponsor's 
     spouse (if such spouse is living with the sponsor) shall be 
     determined; and
       ``(B) the amount determined under subparagraph (A) shall be 
     reduced by $1,500.
       ``(c)(1) Any individual who is an alien and whose sponsor 
     was a public or private agency shall be ineligible for 
     assistance under a State plan approved under this part during 
     the period of three years after his or her entry into the 
     United States, unless the State agency administering such 
     plan determines that such sponsor either no longer exists or 
     has become unable to meet such individual's needs; and such 
     determination shall be made by the State agency based upon 
     such criteria as it may specify in the State plan, and upon 
     such documentary evidence as it may therein require. Any such 
     individual, and any other individual who is an alien (as a 
     condition of his or her eligibility for assistance under a 
     State plan approved under this part during the period of 
     three years after his or her entry into the United States), 
     shall be required to provide to the State agency 
     administering such plan such information and documentation 
     with respect to his sponsor as may be necessary in order for 
     the State agency to make any determination required under 
     this section, and to obtain any cooperation from such sponsor 
     necessary for any such determination. Such alien shall also 
     be required to provide to the State agency such information 
     and documentation as it may request and which such alien or 
     his sponsor provided in support of such alien's immigration 
     application.
       ``(2) The Secretary shall enter into agreements with the 
     Secretary of State and the Attorney General whereby any 
     information available to them and required in order to make 
     any determination under this section will be provided by them 
     to the Secretary (who may, in turn, make such information 
     available, upon request, to a concerned State agency), and 
     whereby the Secretary of State and Attorney General will 
     inform any sponsor of an alien, at the time such sponsor 
     executes an affidavit of support or similar agreement, of the 
     requirements imposed by this section.
       ``(d) Any sponsor of an alien, and such alien, shall be 
     jointly and severally liable for an amount equal to any 
     overpayment of assistance under the State plan made to such 
     alien during the period of three years after such alien's 
     entry into the United States, on account of such sponsor's 
     failure to provide correct information under the provisions 
     of this section, except where such sponsor was without fault, 
     or where good cause of such failure existed. Any such 
     overpayment which is not repaid to the State or recovered in 
     accordance with the procedures generally applicable under the 
     State plan to the recoupment of overpayments shall be 
     withheld from any subsequent payment to which such alien or 
     such sponsor is entitled under any provision of this Act.
       ``(e)(1) In any case where a person is the sponsor of two 
     or more alien individuals who are living in the same home, 
     the income and resources of such sponsor (and his spouse), to 
     the extent they would be deemed the income and resources of 
     any one of such individuals under the preceding provisions of 
     this section, shall be divided into two or more equal shares 
     (the number of shares being the same as the number of such 
     alien individuals) and the income and resources of each such 
     individual shall be deemed to include one such share.
       ``(2) Income and resources of a sponsor (and his spouse) 
     which are deemed under this section to be the income and 
     resources of any alien individual in a family shall not be 
     considered in determining the need of other family members 
     except to the extent such income or resources are actually 
     available to such other members.
       ``(f) The provisions of this section shall not apply with 
     respect to any alien who is--
       ``(1) admitted to the United States as a result of the 
     application, prior to April 1, 1980, of the provisions of 
     section 203(a)(7) of the Immigration and Nationality Act;
       ``(2) admitted to the United States as a result of the 
     application, after March 31, 1980, of the provisions of 
     section 207(c) of such Act;
       ``(3) paroled into the United States as a refugee under 
     section 212(d)(5) of such Act;
       ``(4) granted political asylum by the Attorney General 
     under section 208 of such Act; or
       ``(5) a Cuban and Haitian entrant, as defined in section 
     501(e) of the Refugee Education Assistance Act of 1980 
     (Public Law 96-422).'.

     SEC. 9802. REQUIREMENTS FOR SPONSOR'S AFFIDAVITS OF SUPPORT.

       (a) In General.--Title II of the Immigration and 
     Nationality Act is amended by inserting after section 213 the 
     following new section:


           ``requirements for sponsor's affidavit of support

       ``Sec. 213A. (a) Enforceability.--
       ``(1) In general.--No affidavit of support may be accepted 
     by the Attorney General or by any consular officer to 
     establish that an alien is not excludable under section 
     212(a)(4) unless such affidavit is executed as a contract--
       ``(A) which is legally enforceable against the sponsor by 
     the Federal Government, by a State, or by any political 
     subdivision of a State, providing cash benefits under a 
     public cash assistance program (as defined in subsection 
     (f)(2)), but not later than 5 years after the date the alien 
     last receives any such cash benefit; and
       ``(B) in which the sponsor agrees to submit to the 
     jurisdiction of any Federal or State court for the purpose of 
     actions brought under subsection (e)(2).
       ``(2) Expiration of liability.--Such contract shall only 
     apply with respect to cash benefits described in paragraph 
     (1)(A) provided to an alien before the earliest of the 
     following:
       ``(A) Citizenship.--The date the alien becomes a citizen of 
     the United States under chapter 2 of title III.
       ``(B) Veteran.--The first date the alien is described in 
     section 9801(b)(2)(A) of the Omnibus Budget Reconciliation 
     Act of 1995.
       ``(C) Payment of social security taxes.--The first date as 
     of which the condition described in section 9801(b)(4) of the 
     Omnibus Budget Reconciliation Act of 1995 is met with respect 
     to the alien.
       ``(3) Nonapplication during certain periods.--Such contract 
     also shall not apply with respect to cash benefits described 
     in paragraph (1)(A) provided during any period in which the 
     alien is described in section 9801(b)(2)(B) or 9801(b)(2)(C) 
     of the Omnibus Budget Reconciliation Act of 1995.
       ``(b) Forms.--Not later than 90 days after the date of 
     enactment of this section, the Attorney General, in 
     consultation with the Secretary of State and the Secretary of 
     Health and Human Services, shall formulate an affidavit of 
     support consistent with the provisions of this section.
       ``(c) Notification of Change of Address.--
       ``(1) Requirement.--The sponsor shall notify the Federal 
     Government and the State in which the sponsored alien is 
     currently resident within 30 days of any change of address of 
     the sponsor during the period specified in subsection 
     (a)(1)(A).
       ``(2) Enforcement.--Any person subject to the requirement 
     of paragraph (1) who fails to satisfy such requirement shall 
     be subject to a civil penalty of--
       ``(A) not less than $250 or more than $2,000, or
       ``(B) if such failure occurs with knowledge that the 
     sponsored alien has received any benefit under any means-
     tested public benefits program, not less than $2,000 or more 
     than $5,000.
       ``(d) Reimbursement of Government Expenses.--
       ``(1) Request for reimbursement.--
       ``(A) In general.--Upon notification that a sponsored alien 
     has received any cash benefits described in subsection 
     (a)(1)(A), the appropriate Federal, State, or local official 
     shall request reimbursement by the sponsor in the amount of 
     such cash benefits.

[[Page H10626]]

       ``(B) Regulations.--The Attorney General, in consultation 
     with the Secretary of Health and Human Services, shall 
     prescribe such regulations as may be necessary to carry out 
     subparagraph (A).
       ``(2) Initiation of action.--If within 45 days after 
     requesting reimbursement, the appropriate Federal, State, or 
     local agency has not received a response from the sponsor 
     indicating a willingness to commence payments, an action may 
     be brought against the sponsor pursuant to the affidavit of 
     support.
       ``(3) Failure to abide by repayment terms.--If the sponsor 
     fails to abide by the repayment terms established by such 
     agency, the agency may, within 60 days of such failure, bring 
     an action against the sponsor pursuant to the affidavit of 
     support.
       ``(4) Limitation on actions.--No cause of action may be 
     brought under this subsection later than 5 years after the 
     date the alien last received any cash benefit described in 
     subsection (a)(1)(A).
       ``(f) Definitions.--For the purposes of this section:
       ``(1) Sponsor.--The term `sponsor' means an individual 
     who--
       ``(A) is a citizen or national of the United States or an 
     alien who is lawfully admitted to the United States for 
     permanent residence;
       ``(B) is 18 years of age or over; and
       ``(C) is domiciled in any State.
       ``(2) Public cash assistance program.--The term `public 
     cash assistance program' means a program of the Federal 
     Government or of a State or political subdivision of a State 
     that provides direct cash assistance for the purpose of 
     income maintenance and in which the eligibility of an 
     individual, household, or family eligibility unit for cash 
     benefits under the program, or the amount of such cash 
     benefits, or both are determined on the basis of income, 
     resources, or financial need of the individual, household, or 
     unit. Such term does not include any program insofar as it 
     provides medical, housing, education, job training, food, or 
     in-kind assistance or social services.''.
       (b) Clerical Amendment.--The table of contents of such Act 
     is amended by inserting after the item relating to section 
     213 the following:

``Sec. 213A. Requirements for sponsor's affidavit of support.''.

       (c) Effective Date.--Subsection (a) of section 213A of the 
     Immigration and Nationality Act, as inserted by subsection 
     (a) of this section, shall apply to affidavits of support 
     executed on or after a date specified by the Attorney 
     General, which date shall be not earlier than 60 days (and 
     not later than 90 days) after the date the Attorney General 
     formulates the form for such affidavits under subsection (b) 
     of such section 213A.

     SEC. 9803. EXTENDING REQUIREMENT FOR AFFIDAVITS OF SUPPORT TO 
                   FAMILY-RELATED AND DIVERSITY IMMIGRANTS.

       (a) In General.--Section 212(a)(4) of the Immigration and 
     Nationality Act (8 U.S.C. 1182(a)(4)) is amended to read as 
     follows:
       ``(4) Public charge and affidavits of support.--
       ``(A) Public charge.--Any alien who, in the opinion of the 
     consular officer at the time of application for a visa, or in 
     the opinion of the Attorney General at the time of 
     application for admission or adjustment of status, is likely 
     at any time to become a public charge is excludable.
       ``(B) Affidavits of support.--Any immigrant who seeks 
     admission or adjustment of status as any of the following is 
     excludable unless there has been executed with respect to the 
     immigrant an affidavit of support pursuant to section 213A:
       ``(i) As an immediate relative (under section 201(b)(2)).
       ``(ii) As a family-sponsored immigrant under section 203(a) 
     (or as the spouse or child under section 203(d) of such an 
     immigrant).
       ``(iii) As the spouse or child (under section 203(d)) of an 
     employment-based immigrant under section 203(b).
       ``(iv) As a diversity immigrant under section 203(c) (or as 
     the spouse or child under section 203(d) of such an 
     immigrant).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to aliens with respect to whom an immigrant visa 
     is issued (or adjustment of status is granted) after the date 
     specified by the Attorney General under section 9802(c).
                  Subtitle I--Earned Income Tax Credit

     SEC. 9901. EARNED INCOME TAX CREDIT DENIED TO INDIVIDUALS NOT 
                   AUTHORIZED TO BE EMPLOYED IN THE UNITED STATES.

       (a) In General.--Section 32(c)(1) of the Internal Revenue 
     Code of 1986 (relating to individuals eligible to claim the 
     earned income tax credit) is amended by adding at the end the 
     following new subparagraph:
       ``(F) Identification number requirement.--The term 
     `eligible individual' does not include any individual who 
     does not include on the return of tax for the taxable year--
       ``(i) such individual's taxpayer identification number, and
       ``(ii) if the individual is married (within the meaning of 
     section 7703), the taxpayer identification number of such 
     individual's spouse.''
       (b) Special Identification Number.--Section 32 of such Code 
     is amended by adding at the end the following new subsection:
       ``(l) Identification Numbers.--Solely for purposes of 
     subsections (c)(1)(F) and (c)(3)(D), a taxpayer 
     identification number means a social security number issued 
     to an individual by the Social Security Administration (other 
     than a social security number issued pursuant to clause (II) 
     (or that portion of clause (III) that relates to clause (II)) 
     of section 205(c)(2)(B)(i) of the Social Security Act).''
       (c) Extension of Procedures Applicable to Mathematical or 
     Clerical Errors.--Section 6213(g)(2) of such Code (relating 
     to the definition of mathematical or clerical errors) is 
     amended by striking ``and' at the end of subparagraph (D), by 
     striking the period at the end of subparagraph (E) and 
     inserting a comma, and by inserting after subparagraph (E) 
     the following new subparagraphs:
       ``(F) an omission of a correct taxpayer identification 
     number required under section 32 (relating to the earned 
     income tax credit) to be included on a return, and
       ``(G) an entry on a return claiming the credit under 
     section 32 with respect to net earnings from self-employment 
     described in section 32(c)(2)(A) to the extent the tax 
     imposed by section 1401 (relating to self-employment tax) on 
     such net earnings has not been paid.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.
    TITLE X--REDUCTIONS IN CORPORATE TAX SUBSIDIES AND OTHER REFORMS

     SEC. 10001. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Revenue 
     Reconciliation Act of 1995''.
       (b) Table of Contents.--

Sec. 10001. Short title; table of contents.

               Subtitle A--Tax Treatment of Expatriation

Sec. 10101. Revision of tax rules on expatriation.
Sec. 10102. Basis of assets of nonresident alien individuals becoming 
              citizens or residents.

            Subtitle B--Modification to Earned Income Credit

Sec. 10201. Earned income tax credit denied to individuals with 
              substantial capital gain net income.

Subtitle C--Alternative Minimum Tax on Corporations Importing Products 
         into the United States at Artificially Inflated Prices

Sec. 10301. Alternative minimum tax on corporations importing products 
              into the United States at artificially inflated prices.

      Subtitle D--Tax Treatment of Certain Extraordinary Dividends

Sec. 10401. Tax treatment of certain extraordinary dividends.

                Subtitle E--Foreign Trust Tax Compliance

Sec. 10501. Improved information reporting on foreign trusts.
Sec. 10502. Modifications of rules relating to foreign trusts having 
              one or more United States beneficiaries.
Sec. 10503. Foreign persons not to be treated as owners under grantor 
              trust rules.
Sec. 10504. Information reporting regarding foreign gifts.
Sec. 10505. Modification of rules relating to foreign trusts which are 
              not grantor trusts.
Sec. 10506. Residence of estates and trusts, etc.

              Subtitle F--Limitation on Section 936 Credit

Sec. 10601. Limitation on section 936 credit.
               Subtitle A--Tax Treatment of Expatriation

     SEC. 10101. REVISION OF TAX RULES ON EXPATRIATION.

       (a) In General.--Subpart A of part II of subchapter N of 
     chapter 1 of the Internal Revenue Code of 1986 is amended by 
     inserting after section 877 the following new section:

     ``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.

       ``(a) General Rules.--For purposes of this subtitle--
       ``(1) Mark to market.--Except as provided in subsection 
     (f)(2), all property held by an expatriate immediately before 
     the expatriation date shall be treated as sold at such time 
     for its fair market value.
       ``(2) Recognition of gain or loss.--In the case of any sale 
     under paragraph (1)--
       ``(A) notwithstanding any other provision of this title, 
     any gain arising from such sale shall be taken into account 
     for the taxable year of the sale unless such gain is excluded 
     from gross income under part III of subchapter B, and
       ``(B) any loss arising from such sale shall be taken into 
     account for the taxable year of the sale to the extent 
     otherwise provided by this title, except that section 1091 
     shall not apply (and section 1092 shall apply) to any such 
     loss.
       ``(3) Election to continue to be taxed as united states 
     citizen.--
       ``(A) In general.--If an expatriate elects the application 
     of this paragraph with respect to any property--
       ``(i) this section (other than this paragraph) shall not 
     apply to such property, but
       ``(ii) such property shall be subject to tax under this 
     title in the same manner as if the individual were a United 
     States citizen.
       ``(B) Limitation on amount of estate, gift, and generation-
     skipping transfer taxes.--The aggregate amount of taxes 
     imposed under subtitle B with respect to any transfer of 
     property by reason of an election under subparagraph (A) 
     shall not exceed the amount of income tax which would be due 
     if the property were sold for its fair market value 
     immediately before the time of the 

[[Page H10627]]

     transfer or death (taking into account the rules of 
     subsection (a)(2)).
       ``(C) Requirements.--Subparagraph (A) shall not apply to an 
     individual unless the individual--
       ``(i) provides security for payment of tax in such form and 
     manner, and in such amount, as the Secretary may require,
       ``(ii) consents to the waiver of any right of the 
     individual under any treaty of the United States which would 
     preclude assessment or collection of any tax which may be 
     imposed by reason of this paragraph, and
       ``(iii) complies with such other requirements as the 
     Secretary may prescribe.
       ``(D) Election.--An election under subparagraph (A) shall 
     apply only to the property described in the election and, 
     once made, shall be irrevocable.
       ``(b) Exclusion for Certain Gain.--The amount which would 
     (but for this subsection) be includible in the gross income 
     of any individual by reason of subsection (a) shall be 
     reduced (but not below zero) by $600,000.
       ``(c) Property Treated as Held.--For purposes of this 
     section, except as otherwise provided by the Secretary, an 
     individual shall be treated as holding--
       ``(1) all property which would be includible in his gross 
     estate under chapter 11 if such individual were a citizen or 
     resident of the United States (within the meaning of chapter 
     11) who died at the time the property is treated as sold,
       ``(2) any other interest in a trust which the individual is 
     treated as holding under the rules of subsection (f)(1), and
       ``(3) any other interest in property specified by the 
     Secretary as necessary or appropriate to carry out the 
     purposes of this section.
       ``(d) Exceptions.--The following property shall not be 
     treated as sold for purposes of this section:
       ``(1) United states real property interests.--Any United 
     States real property interest (as defined in section 
     897(c)(1)), other than stock of a United States real property 
     holding corporation which does not, on the expatriation date, 
     meet the requirements of section 897(c)(2).
       ``(2) Interest in certain retirement plans.--
       ``(A) In general.--Any interest in a qualified retirement 
     plan (as defined in section 4974(c)), other than any interest 
     attributable to contributions which are in excess of any 
     limitation or which violate any condition for tax- favored 
     treatment.
       ``(B) Foreign pension plans.--
       ``(i) In general.--Under regulations prescribed by the 
     Secretary, interests in foreign pension plans or similar 
     retirement arrangements or programs.
       ``(ii) Limitation.--The value of property which is treated 
     as not sold by reason of this subparagraph shall not exceed 
     $500,000.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Expatriate.--The term `expatriate' means--
       ``(A) any United States citizen who relinquishes his 
     citizenship, or
       ``(B) any long-term resident of the United States who--
       ``(i) ceases to be a lawful permanent resident of the 
     United States (within the meaning of section 7701(b)(6)), or
       ``(ii) commences to be treated as a resident of a foreign 
     country under the provisions of a tax treaty between the 
     United States and the foreign country and who does not waive 
     the benefits of such treaty applicable to residents of the 
     foreign country.

     An individual shall not be treated as an expatriate for 
     purposes of this section by reason of the individual 
     relinquishing United States citizenship before attaining the 
     age of 18\1/2\ if the individual has been a resident of the 
     United States (as defined in section 7701(b)(1)(A)(ii)) for 
     less than 5 taxable years before the date of relinquishment.
       ``(2) Expatriation date.--The term `expatriation date' 
     means--
       ``(A) the date an individual relinquishes United States 
     citizenship, or
       ``(B) in the case of a long-term resident of the United 
     States, the date of the event described in clause (i) or (ii) 
     of paragraph (1)(B).
       ``(3) Relinquishment of citizenship.--A citizen shall be 
     treated as relinquishing his United States citizenship on the 
     earliest of--
       ``(A) the date the individual renounces his United States 
     nationality before a diplomatic or consular officer of the 
     United States pursuant to paragraph (5) of section 349(a) of 
     the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),
       ``(B) the date the individual furnishes to the United 
     States Department of State a signed statement of voluntary 
     relinquishment of United States nationality confirming the 
     performance of an act of expatriation specified in paragraph 
     (1), (2), (3), or (4) of section 349(a) of the Immigration 
     and Nationality Act (8 U.S.C. 1481(a) (1)-(4)),
       ``(C) the date the United States Department of State issues 
     to the individual a certificate of loss of nationality, or
       ``(D) the date a court of the United States cancels a 
     naturalized citizen's certificate of naturalization.

     Subparagraph (A) or (B) shall not apply to any individual 
     unless the renunciation or voluntary relinquishment is 
     subsequently approved by the issuance to the individual of a 
     certificate of loss of nationality by the United States 
     Department of State.
       ``(4) Long-term resident.--
       ``(A) In general.--The term `long-term resident' means any 
     individual (other than a citizen of the United States) who is 
     a lawful permanent resident of the United States in at least 
     8 taxable years during the period of 15 taxable years ending 
     with the taxable year during which the sale under subsection 
     (a)(1) is treated as occurring. For purposes of the preceding 
     sentence, an individual shall not be treated as a lawful 
     permanent resident for any taxable year if such individual is 
     treated as a resident of a foreign country for the taxable 
     year under the provisions of a tax treaty between the United 
     States and the foreign country and does not waive the 
     benefits of such treaty applicable to residents of the 
     foreign country.
       ``(B) Special rule.--For purposes of subparagraph (A), 
     there shall not be taken into account--
       ``(i) any taxable year during which any prior sale is 
     treated under subsection (a)(1) as occurring, or
       ``(ii) any taxable year prior to the taxable year referred 
     to in clause (i).
       ``(f) Special Rules Applicable to Beneficiaries' Interests 
     in Trust.--
       ``(1) Determination of beneficiaries' interest in trust.--
     For purposes of this section--
       ``(A) General rule.--A beneficiary's interest in a trust 
     shall be based upon all relevant facts and circumstances, 
     including the terms of the trust instrument and any letter of 
     wishes or similar document, historical patterns of trust 
     distributions, and the existence of and functions performed 
     by a trust protector or any similar advisor.
       ``(B) Special rule.--The remaining interests in the trust 
     not determined under subparagraph (A) to be held by any 
     beneficiary shall be allocated first to the grantor, if a 
     beneficiary, and then to other beneficiaries under rules 
     prescribed by the Secretary similar to the rules of intestate 
     succession.
       ``(C) Constructive ownership.--If a beneficiary of a trust 
     is a corporation, partnership, trust, or estate, the 
     shareholders, partners, or beneficiaries shall be deemed to 
     be the trust beneficiaries for purposes of this section.
       ``(D) Taxpayer return position.--A taxpayer shall clearly 
     indicate on its income tax return--
       ``(i) the methodology used to determine that taxpayer's 
     trust interest under this section, and
       ``(ii) if the taxpayer knows (or has reason to know) that 
     any other beneficiary of such trust is using a different 
     methodology to determine such beneficiary's trust interest 
     under this section.
       ``(2) Deemed sale in case of trust interest.--If an 
     individual who is an expatriate is treated under paragraph 
     (1) as holding an interest in a trust for purposes of this 
     section--
       ``(A) the individual shall not be treated as having sold 
     such interest,
       ``(B) such interest shall be treated as a separate share in 
     the trust, and
       ``(C)(i) such separate share shall be treated as a separate 
     trust consisting of the assets allocable to such share,
       ``(ii) the separate trust shall be treated as having sold 
     its assets immediately before the expatriation date for their 
     fair market value and as having distributed all of its assets 
     to the individual as of such time, and
       ``(iii) the individual shall be treated as having 
     recontributed the assets to the separate trust.

     Subsection (a)(2) shall apply to any income, gain, or loss of 
     the individual arising from a distribution described in 
     subparagraph (C)(ii).
       ``(g) Termination of Deferrals, Etc.--On the date any 
     property held by an individual is treated as sold under 
     subsection (a), notwithstanding any other provision of this 
     title--
       ``(1) any period during which recognition of income or gain 
     is deferred shall terminate, and
       ``(2) any extension of time for payment of tax shall cease 
     to apply and the unpaid portion of such tax shall be due and 
     payable at the time and in the manner prescribed by the 
     Secretary.
       ``(h) Rules Relating to Payment of Tax.--
       ``(1) Imposition of tentative tax.--
       ``(A) In general.--If an individual is required to include 
     any amount in gross income under subsection (a) for any 
     taxable year, there is hereby imposed, immediately before the 
     expatriation date, a tax in an amount equal to the amount of 
     tax which would be imposed if the taxable year were a short 
     taxable year ending on the expatriation date.
       ``(B) Due date.--The due date for any tax imposed by 
     subparagraph (A) shall be the 90th day after the expatriation 
     date.
       ``(C) Treatment of tax.--Any tax paid under subparagraph 
     (A) shall be treated as a payment of the tax imposed by this 
     chapter for the taxable year to which subsection (a) applies.
       ``(2) Deferral of tax.--The payment of any tax attributable 
     to amounts included in gross income under subsection (a) may 
     be deferred to the same extent, and in the same manner, as 
     any tax imposed by chapter 11, except that the Secretary may 
     extend the period for extension of time for paying tax under 
     section 6161 to such number of years as the Secretary 
     determines appropriate.
       ``(3) Rules relating to security interests.--

[[Page H10628]]

       ``(A) Adequacy of security interests.--In determining the 
     adequacy of any security to be provided under this section, 
     the Secretary may take into account the principles of section 
     2056A.
       ``(B) Special rule for trust.--If a taxpayer is required by 
     this section to provide security in connection with any tax 
     imposed by reason of this section with respect to the holding 
     of an interest in a trust and any trustee of such trust is an 
     individual citizen of the United States or a domestic 
     corporation, such trustee shall be required to provide such 
     security upon notification by the taxpayer of such 
     requirement.
       ``(i) Coordination With Estate and Gift Taxes.--If 
     subsection (a) applies to property held by an individual for 
     any taxable year and--
       ``(1) such property is includible in the gross estate of 
     such individual solely by reason of section 2107, or
       ``(2) section 2501 applies to a transfer of such property 
     by such individual solely by reason of section 2501(a)(3),

     then there shall be allowed as a credit against the 
     additional tax imposed by section 2101 or 2501, whichever is 
     applicable, solely by reason of section 2107 or 2501(a)(3) an 
     amount equal to the increase in the tax imposed by this 
     chapter for such taxable year by reason of this section.
       ``(j) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section, including regulations to 
     prevent double taxation by ensuring that--
       ``(1) appropriate adjustments are made to basis to reflect 
     gain recognized by reason of subsection (a) and the exclusion 
     provided by subsection (b),
       ``(2) no interest in property is treated as held for 
     purposes of this section by more than one taxpayer, and
       ``(3) any gain by reason of a deemed sale under subsection 
     (a) of an interest in a corporation, partnership, trust, or 
     estate is reduced to reflect that portion of such gain which 
     is attributable to an interest in a trust which a 
     shareholder, partner, or beneficiary is treated as holding 
     directly under subsection (f)(1)(C).
       ``(k) Cross Reference.--

  ``For income tax treatment of individuals who terminate United States 
citizenship, see section 7701(a)(47).''

       (b) Definition of Termination of United States 
     Citizenship.--Section 7701(a) of the Internal Revenue Code of 
     1986 is amended by adding at the end the following new 
     paragraph:
       ``(47) Termination of united states citizenship.--An 
     individual shall not cease to be treated as a United States 
     citizen before the date on which the individual's citizenship 
     is treated as relinquished under section 877A(e)(3).''
       (c) Conforming Amendments.--
       (1) Section 877 of the Internal Revenue Code of 1986 is 
     amended by adding at the end the following new subsection:
       ``(f) Application.--This section shall not apply to any 
     individual who relinquishes (within the meaning of section 
     877A(e)(3)) United States citizenship on or after February 6, 
     1995.''
       (2) Section 2107(c) of such Code is amended by adding at 
     the end the following new paragraph:
       ``(3) Cross reference.--For credit against the tax imposed 
     by subsection (a) for expatriation tax, see section 
     877A(i).''
       (3) Section 2501(a)(3) of such Code is amended by adding at 
     the end the following new flush sentence:
     ``For credit against the tax imposed under this section by 
     reason of this paragraph, see section 877A(i).''
       (4) Section 6851 of such Code is amended by striking 
     subsection (d) and by redesignating subsection (e) as 
     subsection (d).
       (5) Paragraph (10) of section 7701(b) of such Code is 
     amended by adding at the end the following new sentence: 
     ``This paragraph shall not apply to any long-term resident of 
     the United States who is an expatriate (as defined in section 
     877A(e)(1)).''
       (d) Clerical Amendment.--The table of sections for subpart 
     A of part II of subchapter N of chapter 1 of the Internal 
     Revenue Code of 1986 is amended by inserting after the item 
     relating to section 877 the following new item:

``Sec. 877A. Tax responsibilities of expatriation.''

       (e) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to expatriates (within the meaning of section 877A(e) 
     of the Internal Revenue Code of 1986, as added by this 
     section) whose expatriation date (as so defined) occurs on or 
     after February 6, 1995.
       (2) Due date for tentative tax.--The due date under section 
     877A(h)(1)(B) of such Code shall in no event occur before the 
     90th day after the date of the enactment of this Act.

     SEC. 10102. BASIS OF ASSETS OF NONRESIDENT ALIEN INDIVIDUALS 
                   BECOMING CITIZENS OR RESIDENTS.

       (a) In General.--Part IV of subchapter O of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to special rules 
     for gain or loss on disposition of property) is amended by 
     redesignating section 1061 as section 1062 and by inserting 
     after section 1060 the following new section:

     ``SEC. 1061. BASIS OF ASSETS OF NONRESIDENT ALIEN INDIVIDUALS 
                   BECOMING CITIZENS OR RESIDENTS.

       ``(a) General Rule.--If a nonresident alien individual 
     becomes a citizen or resident of the United States, gain or 
     loss on the disposition of any property held on the date the 
     individual becomes such a citizen or resident shall be 
     determined by substituting, as of the applicable date, the 
     fair market value of such property (on the applicable date) 
     for its cost basis.
       ``(b) Exception for Depreciation.--Any deduction under this 
     chapter for depreciation, depletion, or amortization shall be 
     determined without regard to the application of this section.
       ``(c) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Applicable date.--The term `applicable date' means, 
     with respect to any property to which subsection (a) applies, 
     the earlier of--
       ``(A) the date the individual becomes a citizen or resident 
     of the United States, or
       ``(B) the date the property first becomes subject to tax 
     under this subtitle by reason of being used in a United 
     States trade or business or by reason of becoming a United 
     States real property interest (within the meaning of section 
     897(c)(1)).
       ``(2) Resident.--The term `resident' does not include an 
     individual who is treated as a resident of a foreign country 
     under the provisions of a tax treaty between the United 
     States and a foreign country and who does not waive the 
     benefits of such treaty applicable to residents of the 
     foreign country.
       ``(3) Trusts.--A trust shall not be treated as an 
     individual.
       ``(4) Election not to have section apply.--An individual 
     may elect not to have this section apply solely for purposes 
     of determining gain with respect to any property. Such 
     election shall apply only to property specified in the 
     election and, once made, shall be irrevocable.
       ``(5) Section only to apply once.--This section shall apply 
     only with respect to the first time the individual becomes 
     either a citizen or resident of the United States.
       ``(d) Regulations.--The Secretary shall prescribe 
     regulations for purposes of this section, including 
     regulations--
       ``(1) for application of this section in the case of 
     property which consists of a direct or indirect interest in a 
     trust, and
       ``(2) providing look-thru rules in the case of any indirect 
     interest in any United States real property interest (within 
     the meaning of section 897(c)(1)) or property used in a 
     United States trade or business.''
       (b) Conforming Amendment.--The table of sections for part 
     IV of subchapter O of chapter 1 of the Internal Revenue Code 
     of 1986 is amended by striking the item relating to section 
     1061 and inserting the following new items:

``Sec. 1061. Basis of assets of nonresident alien individuals becoming 
              citizens or residents.
``Sec. 1062. Cross references.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to dispositions after the date of the enactment 
     of this Act, and to any disposition occurring on or before 
     such date to which section 877A of the Internal Revenue Code 
     of 1986 (as added by section 611) applies.
            Subtitle B--Modification to Earned Income Credit

     SEC. 10201. EARNED INCOME TAX CREDIT DENIED TO INDIVIDUALS 
                   WITH SUBSTANTIAL CAPITAL GAIN NET INCOME.

       (a) In General.--Paragraph (2) of section 32(i) of the 
     Internal Revenue Code of 1986 (relating to denial of credit 
     for individuals having excessive investment income) is 
     amended--
       (1) by striking ``and'' at the end of subparagraph (B),
       (2) by striking the period at the end of subparagraph (C) 
     and inserting ``, and'', and
       (3) by adding at the end the following new subparagraph:
       ``(D) capital gain net income for the taxable year.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.
Subtitle C--Alternative Minimum Tax on Corporations Importing Products 
         into the United States at Artificially Inflated Prices

     SEC. 10301. ALTERNATIVE MINIMUM TAX ON CORPORATIONS IMPORTING 
                   PRODUCTS INTO THE UNITED STATES AT ARTIFICIALLY 
                   INFLATED PRICES.

       (a) In General.--Subchapter A of chapter 1 of the Internal 
     Revenue Code of 1986 (relating to determination of tax 
     liability) is amended by adding at the end the following new 
     part:

``PART VIII--ALTERNATIVE MINIMUM TAX ON CORPORATIONS IMPORTING PRODUCTS 
         INTO THE UNITED STATES AT ARTIFICIALLY INFLATED PRICES

``Sec. 59B. Alternative minimum tax on corporations importing products 
              into the United States at artificially inflated prices.

     ``SEC. 59B. ALTERNATIVE MINIMUM TAX ON CORPORATIONS IMPORTING 
                   PRODUCTS INTO THE UNITED STATES AT ARTIFICIALLY 
                   INFLATED PRICES.

       ``(a) Imposition of Tax.--In the case of a corporation to 
     which this section applies, there is hereby imposed an 
     alternative minimum tax equal to 5 percent of net business 
     receipts of the corporation for the taxable year.
       ``(b) Taxpayers to Which Section Applies.--This section 
     shall apply to any corporation, foreign or domestic, if--

[[Page H10629]]

       ``(1) gross sales in the United States during the tax year 
     of parts or products manufactured by the corporation, or any 
     subsidiary or affiliate controlled by the corporation, 
     exceeded $10,000,000,
       ``(2) during that same tax year parts or products 
     manufactured by the corporation, or any subsidiary or 
     affiliate controlled by the corporation, with a customs value 
     in excess of $10,000,000 were imported into the United 
     States, and
       ``(3) its tax obligation under this section exceeds its 
     total tax obligation under all other sections of the Internal 
     Revenue Code of 1986.
       ``(c) Credit For Taxes Paid.--There shall be a 
     nonrefundable credit against the taxes owed under this 
     section equal to the total of all other taxes paid by the 
     corporation under the Internal Revenue Code of 1986.
       ``(d) Definitions.--For purposes of this section:
       ``(1) Net business receipts.--The term `net business 
     receipts' means the value of all parts or products sold in 
     the United States, excluding--
       ``(A) the value of parts or products sold for export,
       ``(B) expenses paid for parts or products produced in the 
     United States,
       ``(C) expenses paid for services performed in the United 
     States, and
       ``(D) amounts paid for income, sales or use taxes imposed 
     by any State, or political subdivision thereof, or by the 
     District of Columbia, Puerto Rico, Guam or the Virgin 
     Islands.
       ``(2) Subsidiary or affiliate controlled by the 
     corporation.--An entity shall be considered to be a 
     `subsidiary or affiliate controlled by the corporation' if 
     the corporation owns 5 percent or more of any class of stock 
     of the entity or if the corporation exercises control over a 
     majority of the board of directors of the entity.''
       (b) Clerical Amendment.--The table of parts for such 
     subchapter A is amended by adding at the end thereof the 
     following new item:

``Part VIII. Alternative minimum tax on corporations importing products 
              into the United States at artificially inflated prices.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.
      Subtitle D--Tax Treatment of Certain Extraordinary Dividends

     SEC. 10401. TAX TREATMENT OF CERTAIN EXTRAORDINARY DIVIDENDS.

       (a) Treatment of Extraordinary Dividends in Excess of 
     Basis.--Paragraph (2) of section 1059(a) of the Internal 
     Revenue Code of 1986 (relating to corporate shareholder's 
     basis in stock reduced by nontaxed portion of extraordinary 
     dividends) is amended to read as follows:
       ``(2) Amounts in excess of basis.--If the nontaxed portion 
     of such dividends exceeds such basis, such excess shall be 
     treated as gain from the sale or exchange of such stock for 
     the taxable year in which the extraordinary dividend is 
     received.''
       (b) Treatment of Redemptions Where Options Involved.--
     Paragraph (1) of section 1059(e) of such Code (relating to 
     treatment of partial liquidations and non-pro rata 
     redemptions) is amended to read as follows:
       ``(1) Treatment of partial liquidations and certain 
     redemptions.--Except as otherwise provided in regulations--
       ``(A) Redemptions.--In the case of any redemption of 
     stock--
       ``(i) which is part of a partial liquidation (within the 
     meaning of section 302(e)) of the redeeming corporation,
       ``(ii) which is not pro rata as to all shareholders, or
       ``(iii) which would not have been treated (in whole or in 
     part) as a dividend if any options had not been taken into 
     account under section 318(a)(4),

     any amount treated as a dividend with respect to such 
     redemption shall be treated as an extraordinary dividend to 
     which paragraphs (1) and (2) of subsection (a) apply without 
     regard to the period the taxpayer held such stock. In the 
     case of a redemption described in clause (iii), only the 
     basis in the stock redeemed shall be taken into account under 
     subsection (a).
       ``(B) Reorganizations, etc.--An exchange described in 
     section 356(a)(1) which is treated as a dividend under 
     section 356(a)(2) shall be treated as a redemption of stock 
     for purposes of applying subparagraph (A).''
       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to distributions after May 3, 1995.
       (2) Transition rule.--The amendments made by this section 
     shall not apply to any distribution made pursuant to the 
     terms of--
       (A) a written binding contract in effect on May 3, 1995, 
     and at all times thereafter before such distribution, or
       (B) a tender offer outstanding on May 3, 1995.
       (3) Certain dividends not pursuant to certain 
     redemptions.--In determining whether the amendment made by 
     subsection (a) applies to any extraordinary dividend other 
     than a dividend treated as an extraordinary dividend under 
     section 1059(e)(1) of the Internal Revenue Code of 1986 (as 
     amended by this Act), paragraphs (1) and (2) shall be applied 
     by substituting ``September 13, 1995'' for ``May 3, 1995''.

                Subtitle E--Foreign Trust Tax Compliance

     SEC. 10501. IMPROVED INFORMATION REPORTING ON FOREIGN TRUSTS.

       (a) In General.--Section 6048 of the Internal Revenue Code 
     of 1986 (relating to returns as to certain foreign trusts) is 
     amended to read as follows:

     ``SEC. 6048. INFORMATION WITH RESPECT TO CERTAIN FOREIGN 
                   TRUSTS.

       ``(a) Notice of Certain Events.--
       ``(1) General rule.--On or before the 90th day (or such 
     later day as the Secretary may prescribe) after any 
     reportable event, the responsible party shall provide written 
     notice of such event to the Secretary in accordance with 
     paragraph (2).
       ``(2) Contents of notice.--The notice required by paragraph 
     (1) shall contain such information as the Secretary may 
     prescribe, including--
       ``(A) the amount of money or other property (if any) 
     transferred to the trust in connection with the reportable 
     event, and
       ``(B) the identity of the trust and of each trustee and 
     beneficiary (or class of beneficiaries) of the trust.
       ``(3) Reportable event.--For purposes of this subsection--
       ``(A) In general.--The term `reportable event' means--
       ``(i) the creation of any foreign trust by a United States 
     person,
       ``(ii) the transfer of any money or property (directly or 
     indirectly) to a foreign trust by a United States person, 
     including a transfer by reason of death, and
       ``(iii) the death of a citizen or resident of the United 
     States if--

       ``(I) the decedent was treated as the owner of any portion 
     of a foreign trust under the rules of subpart E of part I of 
     subchapter J of chapter 1, or
       ``(II) any portion of a foreign trust was included in the 
     gross estate of the decedent.

       ``(B) Exceptions.--
       ``(i) Fair market value sales.--Subparagraph (A)(ii) shall 
     not apply to any transfer of property to a trust in exchange 
     for consideration of at least the fair market value of the 
     transferred property. For purposes of the preceding sentence, 
     consideration other than cash shall be taken into account at 
     its fair market value and the rules of section 679(a)(3) 
     shall apply.
       ``(ii) Pension and charitable trusts.--Subparagraph (A) 
     shall not apply with respect to a trust which is--

       ``(I) described in section 404(a)(4) or 404A, or
       ``(II) determined by the Secretary to be described in 
     section 501(c)(3).

       ``(4) Responsible party.--For purposes of this subsection, 
     the term `responsible party' means--
       ``(A) the grantor in the case of the creation of an inter 
     vivos trust,
       ``(B) the transferor in the case of a reportable event 
     described in paragraph (3)(A)(ii) other than a transfer by 
     reason of death, and
       ``(C) the executor of the decedent's estate in any other 
     case.
       ``(b) United States Grantor of Foreign Trust.--
       ``(1) In general.--If, at any time during any taxable year 
     of a United States person, such person is treated as the 
     owner of any portion of a foreign trust under the rules of 
     subpart E of part I of subchapter J of chapter 1, such person 
     shall be responsible to ensure that--
       ``(A) such trust makes a return for such year which sets 
     forth a full and complete accounting of all trust activities 
     and operations for the year, the name of the United States 
     agent for such trust, and such other information as the 
     Secretary may prescribe, and
       ``(B) such trust furnishes such information as the 
     Secretary may prescribe to each United States person (i) who 
     is treated as the owner of any portion of such trust or (ii) 
     who receives (directly or indirectly) any distribution from 
     the trust.
       ``(2) Trusts not having united states agent.--
       ``(A) In general.--If the rules of this subsection apply to 
     any foreign trust, the determination of amounts required to 
     be taken into account with respect to such trust by a United 
     States person under the rules of subpart E of part I of 
     subchapter J of chapter 1 shall be determined by the 
     Secretary in the Secretary's sole discretion from the 
     Secretary's own knowledge or from such information as the 
     Secretary may obtain through testimony or otherwise.
       ``(B) United states agent required.--The rules of this 
     subsection shall apply to any foreign trust to which 
     paragraph (1) applies unless such trust agrees (in such 
     manner, subject to such conditions, and at such time as the 
     Secretary shall prescribe) to authorize a United States 
     person to act as such trust's limited agent solely for 
     purposes of applying sections 7602, 7603, and 7604 with 
     respect to--
       ``(i) any request by the Secretary to examine records or 
     produce testimony related to the proper treatment of amounts 
     required to be taken into account under the rules referred to 
     in subparagraph (A), or
       ``(ii) any summons by the Secretary for such records or 
     testimony.

     The appearance of persons or production of records by reason 
     of a United States person being such an agent shall not 
     subject such persons or records to legal process for any 
     purpose other than determining the correct treatment under 
     this title of the amounts required to be taken into account 
     under the rules referred to in subparagraph (A). A foreign 
     trust which appoints an agent described in this subparagraph 
     shall not be considered 

[[Page H10630]]

     to have an office or a permanent establishment in the United 
     States, or to be engaged in a trade or business in the United 
     States, solely because of the activities of such agent 
     pursuant to this subsection.
       ``(C) Other rules to apply.--Rules similar to the rules of 
     paragraphs (2) and (4) of section 6038A(e) shall apply for 
     purposes of this paragraph.
       ``(c) Reporting by United States Beneficiaries of Foreign 
     Trusts.--
       ``(1) In general.--If any United States person receives 
     (directly or indirectly) during any taxable year of such 
     person any distribution from a foreign trust, such person 
     shall make a return with respect to such trust for such year 
     which includes--
       ``(A) the name of such trust,
       ``(B) the aggregate amount of the distributions so received 
     from such trust during such taxable year, and
       ``(C) such other information as the Secretary may 
     prescribe.
       ``(2) Inclusion in income if records not provided.--If 
     adequate records are not provided to the Secretary to 
     determine the proper treatment of any distribution from a 
     foreign trust, such distribution shall be treated as an 
     accumulation distribution includible in the gross income of 
     the distributee under chapter 1. To the extent provided in 
     regulations, the preceding sentence shall not apply if the 
     foreign trust elects to be subject to rules similar to the 
     rules of subsection (b)(2)(B).
       ``(d) Special Rules.--
       ``(1) Determination of whether united states person 
     receives distribution.--For purposes of this section, in 
     determining whether a United States person receives a 
     distribution from a foreign trust, the fact that a portion of 
     such trust is treated as owned by another person under the 
     rules of subpart E of part I of subchapter J of chapter 1 
     shall be disregarded.
       ``(2) Domestic trusts with foreign activities.--To the 
     extent provided in regulations, a trust which is a United 
     States person shall be treated as a foreign trust for 
     purposes of this section and section 6677 if such trust has 
     substantial activities, or holds substantial property, 
     outside the United States.
       ``(3) Time and manner of filing information.--Any notice or 
     return required under this section shall be made at such time 
     and in such manner as the Secretary shall prescribe.
       ``(4) Modification of return requirements.--The Secretary 
     is authorized to suspend or modify any requirement of this 
     section if the Secretary determines that the United States 
     has no significant tax interest in obtaining the required 
     information.''
       (b) Increased Penalties.--Section 6677 of such Code 
     (relating to failure to file information returns with respect 
     to certain foreign trusts) is amended to read as follows:

     ``SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT TO 
                   CERTAIN FOREIGN TRUSTS.

       ``(a) Civil Penalty.--In addition to any criminal penalty 
     provided by law, if any notice or return required to be filed 
     by section 6048--
       ``(1) is not filed on or before the time provided in such 
     section, or
       ``(2) does not include all the information required 
     pursuant to such section or includes incorrect information,

     the person required to file such notice or return shall pay a 
     penalty equal to 35 percent of the gross reportable amount. 
     If any failure described in the preceding sentence continues 
     for more than 90 days after the day on which the Secretary 
     mails notice of such failure to the person required to pay 
     such penalty, such person shall pay a penalty (in addition to 
     the amount determined under the preceding sentence) of 
     $10,000 for each 30-day period (or fraction thereof) during 
     which such failure continues after the expiration of such 90-
     day period.
       ``(b) Special Rules for Returns Under Section 6048(b).--In 
     the case of a return required under section 6048(b)--
       ``(1) the United States person referred to in such section 
     shall be liable for the penalty imposed by subsection (a), 
     and
       ``(2) subsection (a) shall be applied by substituting `5 
     percent' for `35 percent'.
       ``(c) Gross Reportable Amount.--For purposes of subsection 
     (a), the term `gross reportable amount' means--
       ``(1) the gross value of the property involved in the event 
     (determined as of the date of the event) in the case of a 
     failure relating to section 6048(a),
       ``(2) the gross value of the portion of the trust's assets 
     at the close of the year treated as owned by the United 
     States person in the case of a failure relating to section 
     6048(b)(1), and
       ``(3) the gross amount of the distributions in the case of 
     a failure relating to section 6048(c).
       ``(d) Reasonable Cause Exception.--No penalty shall be 
     imposed by this section on any failure which is shown to be 
     due to reasonable cause and not due to willful neglect. The 
     fact that a foreign jurisdiction would impose a civil or 
     criminal penalty on the taxpayer (or any other person) for 
     disclosing the required information is not reasonable cause.
       ``(e) Deficiency Procedures Not To Apply.--Subchapter B of 
     chapter 63 (relating to deficiency procedures for income, 
     estate, gift, and certain excise taxes) shall not apply in 
     respect of the assessment or collection of any penalty 
     imposed by subsection (a).''
       (c) Conforming Amendments.--
       (1) Paragraph (2) of section 6724(d) of such Code is 
     amended by striking ``or'' at the end of subparagraph (S), by 
     striking the period at the end of subparagraph (T) and 
     inserting ``, or'', and by inserting after subparagraph (T) 
     the following new subparagraph:
       ``(U) section 6048(b)(1)(B) (relating to foreign trust 
     reporting requirements).''
       (2) The table of sections for subpart B of part III of 
     subchapter A of chapter 61 is of such Code amended by 
     striking the item relating to section 6048 and inserting the 
     following new item:

``Sec. 6048. Information with respect to certain foreign trusts.''
       (3) The table of sections for part I of subchapter B of 
     chapter 68 of such Code is amended by striking the item 
     relating to section 6677 and inserting the following new 
     item:

``Sec. 6677. Failure to file information with respect to certain 
              foreign trusts.''Q02
       (d) Effective Dates.--
       (1) Reportable events.--To the extent related to subsection 
     (a) of section 6048 of the Internal Revenue Code of 1986, as 
     amended by this section, the amendments made by this section 
     shall apply to reportable events (as defined in such section 
     6048) occurring after the date of the enactment of this Act.
       (2) Grantor trust reporting.--To the extent related to 
     subsection (b) of such section 6048, the amendments made by 
     this section shall apply to taxable years of United States 
     persons beginning after the date of the enactment of this 
     Act.
       (3) Reporting by united states beneficiaries.--To the 
     extent related to subsection (c) of such section 6048, the 
     amendments made by this section shall apply to distributions 
     received after the date of the enactment of this Act.

     SEC. 10502. MODIFICATIONS OF RULES RELATING TO FOREIGN TRUSTS 
                   HAVING ONE OR MORE UNITED STATES BENEFICIARIES.

       (a) Treatment of Trust Obligations, Etc.--
       (1) Paragraph (2) of section 679(a) of the Internal Revenue 
     Code of 1986 is amended by striking subparagraph (B) and 
     inserting the following:
       ``(B) Transfers at fair market value.--To any transfer of 
     property to a trust in exchange for consideration of at least 
     the fair market value of the transferred property. For 
     purposes of the preceding sentence, consideration other than 
     cash shall be taken into account at its fair market value.''
       (2) Subsection (a) of section 679 of such Code (relating to 
     foreign trusts having one or more United States 
     beneficiaries) is amended by adding at the end the following 
     new paragraph:
       ``(3) Certain obligations not taken into account under fair 
     market value exception.--
       ``(A) In general.--In determining whether paragraph (2)(B) 
     applies to any transfer by a person described in clause (ii) 
     or (iii) of subparagraph (C), there shall not be taken into 
     account--
       ``(i) any obligation of a person described in subparagraph 
     (C), and
       ``(ii) to the extent provided in regulations, any 
     obligation which is guaranteed by a person described in 
     subparagraph (C).
       ``(B) Treatment of principal payments on obligation.--
     Principal payments by the trust on any obligation referred to 
     in subparagraph (A) shall be taken into account on and after 
     the date of the payment in determining the portion of the 
     trust attributable to the property transferred.
       ``(C) Persons described.--The persons described in this 
     subparagraph are--
       ``(i) the trust,
       ``(ii) any grantor or beneficiary of the trust, and
       ``(iii) any person who is related (within the meaning of 
     section 643(i)(3)) to any grantor or beneficiary of the 
     trust.''
       (b) Exemption of Transfers to Charitable Trusts.--
     Subsection (a) of section 679 of such Code is amended by 
     striking ``section 404(a)(4) or 404A'' and inserting 
     ``section 6048(a)(3)(B)(ii)''.
       (c) Other Modifications.--Subsection (a) of section 679 of 
     such Code is amended by adding at the end the following new 
     paragraphs:
       ``(4) Special rules applicable to foreign grantor who later 
     becomes a united states person.--
       ``(A) In general.--If a nonresident alien individual has a 
     residency starting date within 5 years after directly or 
     indirectly transferring property to a foreign trust, this 
     section and section 6048 shall be applied as if such 
     individual transferred to such trust on the residency 
     starting date an amount equal to the portion of such trust 
     attributable to the property transferred by such individual 
     to such trust in such transfer.
       ``(B) Treatment of undistributed income.--For purposes of 
     this section, undistributed net income for periods before 
     such individual's residency starting date shall be taken into 
     account in determining the portion of the trust which is 
     attributable to property transferred by such individual to 
     such trust but shall not otherwise be taken into account.
       ``(C) Residency starting date.--For purposes of this 
     paragraph, an individual's residency starting date is the 
     residency starting date determined under section 
     7701(b)(2)(A).
       ``(5) Outbound trust migrations.--If--

[[Page H10631]]

       ``(A) an individual who is a citizen or resident of the 
     United States transferred property to a trust which was not a 
     foreign trust, and
       ``(B) such trust becomes a foreign trust while such 
     individual is alive,

     then this section and section 6048 shall be applied as if 
     such individual transferred to such trust on the date such 
     trust becomes a foreign trust an amount equal to the portion 
     of such trust attributable to the property previously 
     transferred by such individual to such trust. A rule similar 
     to the rule of paragraph (4)(B) shall apply for purposes of 
     this paragraph.''
       (d) Modifications Relating to Whether Trust Has United 
     States Beneficiaries.--Subsection (c) of section 679 of such 
     Code is amended by adding at the end the following new 
     paragraphs:
       ``(3) Certain united states beneficiaries disregarded.--A 
     beneficiary shall not be treated as a United States person in 
     applying this section with respect to any transfer of 
     property to foreign trust if such beneficiary first became a 
     United States person more than 5 years after the date of such 
     transfer.
       ``(4) Treatment of former united states persons.--To the 
     extent provided by the Secretary, for purposes of this 
     subsection, the term `United States person' includes any 
     person who was a United States person at any time during the 
     existence of the trust.''
       (e) Technical Amendment.--Subparagraph (A) of section 
     679(c)(2) of such Code is amended to read as follows:
       ``(A) in the case of a foreign corporation, such 
     corporation is a controlled foreign corporation (as defined 
     in section 957(a)),''.
       (f) Regulations.--Section 679 of such Code is amended by 
     adding at the end the following new subsection:
       ``(d) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''
       (g) Effective Date.--The amendments made by this section 
     shall apply to transfers of property after February 6, 1995.

     SEC. 10503. FOREIGN PERSONS NOT TO BE TREATED AS OWNERS UNDER 
                   GRANTOR TRUST RULES.

       (a) General Rule.--
       (1) Subsection (f) of section 672 of the Internal Revenue 
     Code of 1986 (relating to special rule where grantor is 
     foreign person) is amended to read as follows:
       ``(f) Subpart Not To Result in Foreign Ownership.--
       ``(1) In general.--Notwithstanding any other provision of 
     this subpart, this subpart shall apply only to the extent 
     such application results in an amount being currently taken 
     into account (directly or through 1 or more entities) under 
     this chapter in computing the income of a citizen or resident 
     of the United States or a domestic corporation.
       ``(2) Exceptions.--
       ``(A) Certain revocable and irrevocable trusts.--
       ``(i) In general.--Except as provided in clause (ii), 
     paragraph (1) shall not apply to any trust if--

       ``(I) the power to revest absolutely in the grantor title 
     to the trust property is exercisable solely by the grantor 
     without the approval or consent of any other person or with 
     the consent of a related or subordinate party who is 
     subservient to the grantor, or
       ``(II) the only amounts distributable from such trust 
     (whether income or corpus) during the lifetime of the grantor 
     are amounts distributable to the grantor or the spouse of the 
     grantor.

       ``(ii) Exception.--Clause (i) shall not apply to any trust 
     which has a beneficiary who is a United States person to the 
     extent such beneficiary has made transfers of property by 
     gift (directly or indirectly) to a foreign person who is the 
     grantor of such trust. For purposes of the preceding 
     sentence, any gift shall not be taken into account to the 
     extent such gift is excluded from taxable gifts under section 
     2503(b).
       ``(B) Compensatory trusts.--Except as provided in 
     regulations, paragraph (1) shall not apply to any portion of 
     a trust distributions from which are taxable as compensation 
     for services rendered.
       ``(3) Special rules.--Except as otherwise provided in 
     regulations prescribed by the Secretary--
       ``(A) a controlled foreign corporation (as defined in 
     section 957) shall be treated as a domestic corporation for 
     purposes of paragraph (1), and
       ``(B) paragraph (1) shall not apply for purposes of 
     applying part III of subchapter G (relating to foreign 
     personal holding companies) and part VI of subchapter P 
     (relating to treatment of certain passive foreign investment 
     companies).
       ``(4) Recharacterization of purported gifts.--In the case 
     of any transfer directly or indirectly from a partnership or 
     foreign corporation which the transferee treats as a gift or 
     bequest, the Secretary may recharacterize such transfer in 
     such circumstances as the Secretary determines to be 
     appropriate to prevent the avoidance of the purposes of this 
     subsection.
       ``(5) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection, including regulations 
     providing that paragraph (1) shall not apply in appropriate 
     cases.''
       (2) The last sentence of subsection (c) of section 672 of 
     such Code is amended by inserting ``subsection (f) and'' 
     before ``sections 674''.
       (b) Credit for Certain Taxes.--Paragraph (2) of section 
     665(d) of such Code is amended by adding at the end the 
     following new sentence: ``Under rules or regulations 
     prescribed by the Secretary, in the case of any foreign trust 
     of which the settlor or another person would be treated as 
     owner of any portion of the trust under subpart E but for 
     section 672(f), the term `taxes imposed on the trust' 
     includes the allocable amount of any income, war profits, and 
     excess profits taxes imposed by any foreign country or 
     possession of the United States on the settlor or such other 
     person in respect of trust gross income.''
       (c) Distributions by Certain Foreign Trusts Through 
     Nominees.--
       (1) Section 643 of such Code is amended by adding at the 
     end the following new subsection:
       ``(h) Distributions by Certain Foreign Trusts Through 
     Nominees.--For purposes of this part, any amount paid to a 
     United States person which is derived directly or indirectly 
     from a foreign trust of which the payor is not the grantor 
     shall be deemed in the year of payment to have been directly 
     paid by the foreign trust to such United States person.''
       (2) Section 665 of such Code is amended by striking 
     subsection (c).
       (d) Effective Date.--
       (1) In general.--Except as provided by paragraph (2), the 
     amendments made by this section shall take effect on the date 
     of the enactment of this Act.
       (2) Exception for certain trusts.--The amendments made by 
     this section shall not apply to any trust--
       (A) which is treated as owned by the grantor or another 
     person under section 676 or 677 (other than subsection (a)(3) 
     thereof) of the Internal Revenue Code of 1986, and
       (B) which is in existence on September 19, 1995.

     The preceding sentence shall not apply to the portion of any 
     such trust attributable to any transfer to such trust after 
     September 19, 1995.
       (e) Transitional Rule.--If--
       (1) by reason of the amendments made by this section, any 
     person other than a United States person ceases to be treated 
     as the owner of a portion of a domestic trust, and
       (2) before January 1, 1997, such trust becomes a foreign 
     trust, or the assets of such trust are transferred to a 
     foreign trust,

     no tax shall be imposed by section 1491 of the Internal 
     Revenue Code of 1986 by reason of such trust becoming a 
     foreign trust or the assets of such trust being transferred 
     to a foreign trust.

     SEC. 10504. INFORMATION REPORTING REGARDING FOREIGN GIFTS.

       (a) In General.--Subpart A of part III of subchapter A of 
     chapter 61 of the Internal Revenue Code of 1986 is amended by 
     inserting after section 6039E the following new section:

     ``SEC. 6039F. NOTICE OF GIFTS RECEIVED FROM FOREIGN PERSONS.

       ``(a) In General.--If the value of the aggregate foreign 
     gifts received by a United States person (other than an 
     organization described in section 501(c) and exempt from tax 
     under section 501(a)) during any taxable year exceeds 
     $10,000, such United States person shall furnish (at such 
     time and in such manner as the Secretary shall prescribe) 
     such information as the Secretary may prescribe regarding 
     each foreign gift received during such year.
       ``(b) Foreign Gift.--For purposes of this section, the term 
     `foreign gift' means any amount received from a person other 
     than a United States person which the recipient treats as a 
     gift or bequest. Such term shall not include any qualified 
     transfer (within the meaning of section 2503(e)(2)).
       ``(c) Penalty for Failure To File Information.--
       ``(1) In general.--If a United States person fails to 
     furnish the information required by subsection (a) with 
     respect to any foreign gift within the time prescribed 
     therefor (including extensions)--
       ``(A) the tax consequences of the receipt of such gift 
     shall be determined by the Secretary in the Secretary's sole 
     discretion from the Secretary's own knowledge or from such 
     information as the Secretary may obtain through testimony or 
     otherwise, and
       ``(B) such United States person shall pay (upon notice and 
     demand by the Secretary and in the same manner as tax) an 
     amount equal to 5 percent of the amount of such foreign gift 
     for each month for which the failure continues (not to exceed 
     25 percent of such amount in the aggregate).
       ``(2) Reasonable cause exception.-- Paragraph (1) shall not 
     apply to any failure to report a foreign gift if the United 
     States person shows that the failure is due to reasonable 
     cause and not due to willful neglect.
       ``(d) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''
       (b) Clerical Amendment.--The table of sections for such 
     subpart is amended by inserting after the item relating to 
     section 6039E the following new item:

``Sec. 6039F. Notice of large gifts received from foreign persons.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts received after the date of the 
     enactment of this Act in taxable years ending after such 
     date.

[[Page H10632]]


     SEC. 10505. MODIFICATION OF RULES RELATING TO FOREIGN TRUSTS 
                   WHICH ARE NOT GRANTOR TRUSTS.

       (a) Modification of Interest Charge on Accumulation 
     Distributions.--Subsection (a) of section 668 of the Internal 
     Revenue Code of 1986 (relating to interest charge on 
     accumulation distributions from foreign trusts) is amended to 
     read as follows:
       ``(a) General Rule.--For purposes of the tax determined 
     under section 667(a)--
       ``(1) Interest determined using underpayment rates.--The 
     interest charge determined under this section with respect to 
     any distribution is the amount of interest which would be 
     determined on the partial tax computed under section 667(b) 
     for the period described in paragraph (2) using the rates and 
     the method under section 6621 applicable to underpayments of 
     tax.
       ``(2) Period.--For purposes of paragraph (1), the period 
     described in this paragraph is the period which begins on the 
     date which is the applicable number of years before the date 
     of the distribution and which ends on the date of the 
     distribution.
       ``(3) Applicable number of years.--For purposes of 
     paragraph (2)--
       ``(A) In general.--The applicable number of years with 
     respect to a distribution is the number determined by 
     dividing--
       ``(i) the sum of the products described in subparagraph (B) 
     with respect to each undistributed income year, by
       ``(ii) the aggregate undistributed net income.

     The quotient determined under the preceding sentence shall be 
     rounded under procedures prescribed by the Secretary.
       ``(B) Product described.--For purposes of subparagraph (A), 
     the product described in this subparagraph with respect to 
     any undistributed income year is the product of--
       ``(i) the undistributed net income for such year, and
       ``(ii) the sum of the number of taxable years between such 
     year and the taxable year of the distribution (counting in 
     each case the undistributed income year but not counting the 
     taxable year of the distribution).
       ``(4) Undistributed income year.--For purposes of this 
     subsection, the term `undistributed income year' means any 
     prior taxable year of the trust for which there is 
     undistributed net income, other than a taxable year during 
     all of which the beneficiary receiving the distribution was 
     not a citizen or resident of the United States.
       ``(5) Determination of undistributed net income.--
     Notwithstanding section 666, for purposes of this subsection, 
     an accumulation distribution from the trust shall be treated 
     as reducing proportionately the undistributed net income for 
     prior taxable years.
       ``(6) Periods before 1996.--Interest for the portion of the 
     period described in paragraph (2) which occurs before January 
     1, 1996, shall be determined--
       ``(A) by using an interest rate of 6 percent, and
       ``(B) without compounding until January 1, 1996.''
       (b) Abusive Transactions.--Section 643(a) of such Code is 
     amended by inserting after paragraph (6) the following new 
     paragraph:
       ``(7) Abusive transactions.--The Secretary shall prescribe 
     such regulations as may be necessary or appropriate to carry 
     out the purposes of this part, including regulations to 
     prevent avoidance of such purposes.''
       (c) Treatment of Use of Trust Property.--
       (1) In general.--Section 643 of such Code (relating to 
     definitions applicable to subparts A, B, C, and D) is amended 
     by adding at the end the following new subsection:
       ``(i) Use of Foreign Trust Property.--For purposes of 
     subparts B, C, and D--
       ``(1) General rule.--If a foreign trust makes a loan of 
     cash or marketable securities directly or indirectly to--
       ``(A) any grantor or beneficiary of such trust who is a 
     United States person, or
       ``(B) any United States person not described in 
     subparagraph (A) who is related to such grantor or 
     beneficiary,

     the amount of such loan shall be treated as a distribution by 
     such trust to such grantor or beneficiary (as the case may 
     be).
       ``(2) Use of other property.--Except as provided in 
     regulations prescribed by the Secretary, any direct or 
     indirect use of trust property (other than cash or marketable 
     securities) by a person referred to in subparagraph (A) or 
     (B) of paragraph (1) shall be treated as a distribution to 
     the grantor or beneficiary (as the case may be) equal to the 
     fair market value of the use of such property. The Secretary 
     may prescribe regulations treating a loan guarantee by the 
     trust as a use of trust property equal to the value of the 
     guarantee.
       ``(3) Definitions and special rules.--For purposes of this 
     subsection--
       ``(A) Cash.--The term `cash' includes foreign currencies 
     and cash equivalents.
       ``(B) Related person.--
       ``(i) In general.--A person is related to another person if 
     the relationship between such persons would result in a 
     disallowance of losses under section 267 or 707(b). In 
     applying section 267 for purposes of the preceding sentence, 
     section 267(c)(4) shall be applied as if the family of an 
     individual includes the spouses of the members of the family.
       ``(ii) Allocation of use.--If any person described in 
     paragraph (1)(B) is related to more than one person, the 
     grantor or beneficiary to whom the treatment under this 
     subsection applies shall be determined under regulations 
     prescribed by the Secretary.
       ``(C) Exclusion of tax-exempts.--The term `United States 
     person' does not include any entity exempt from tax under 
     this chapter.
       ``(D) Trust not treated as simple trust.--Any trust which 
     is treated under this subsection as making a distribution 
     shall be treated as not described in section 651.
       ``(4) Subsequent transactions regarding loan principal.--If 
     any loan is taken into account under paragraph (1), any 
     subsequent transaction between the trust and the original 
     borrower regarding the principal of the loan (by way of 
     complete or partial repayment, satisfaction, cancellation, 
     discharge, or otherwise) shall be disregarded for purposes of 
     this title.''
       (2) Technical amendment.--Paragraph (8) of section 7872(f) 
     of such Code is amended by inserting ``, 643(i),'' before 
     ``or 1274'' each place it appears.
       (d) Effective Dates.--
       (1) Interest charge.--The amendment made by subsection (a) 
     shall apply to distributions after the date of the enactment 
     of this Act.
       (2) Abusive transactions.--The amendment made by subsection 
     (b) shall take effect on the date of the enactment of this 
     Act.
       (3) Use of trust property.--The amendment made by 
     subsection (c) shall apply to--
       (A) loans of cash or marketable securities after September 
     19, 1995, and
       (B) uses of other trust property after December 31, 1995.

     SEC. 10506. RESIDENCE OF ESTATES AND TRUSTS, ETC.

       (a) Treatment as United States Person.--
       (1) In general.--Paragraph (30) of section 7701(a) of the 
     Internal Revenue Code of 1986 is amended by striking 
     subparagraph (D) and by inserting after subparagraph (C) the 
     following:
       ``(D) any estate or trust if--
       ``(i) a court within the United States is able to exercise 
     primary supervision over the administration of the estate or 
     trust, and
       ``(ii) in the case of a trust, one or more United States 
     fiduciaries have the authority to control all substantial 
     decisions of the trust.''
       (2) Conforming amendment.--Paragraph (31) of section 
     7701(a) of such Code is amended to read as follows:
       ``(31) Foreign estate or trust.--The term `foreign estate' 
     or `foreign trust' means any estate or trust other than an 
     estate or trust described in section 7701(a)(30)(D).''
       (3) Effective date.--The amendments made by this subsection 
     shall apply--
       (A) to taxable years beginning after December 31, 1996, or
       (B) at the election of the trustee of a trust, to taxable 
     years ending after the date of the enactment of this Act.

     Such an election, once made, shall be irrevocable.
       (b) Domestic Trusts Which Become Foreign Trusts.--
       (1) In general.--Section 1491 of such Code (relating to 
     imposition of tax on transfers to avoid income tax) is 
     amended by adding at the end the following new flush 
     sentence:

     ``If a trust which is not a foreign trust becomes a foreign 
     trust, such trust shall be treated for purposes of this 
     section as having transferred, immediately before becoming a 
     foreign trust, all of its assets to a foreign trust.''
       (2) Penalty.--Section 1494 of such Code is amended by 
     adding at the end the following new subsection:
       ``(c) Penalty.--In the case of any failure to file a return 
     required by the Secretary with respect to any transfer 
     described in section 1491, the person required to file such 
     return shall be liable for the penalties provided in section 
     6677 in the same manner as if such failure were a failure to 
     file a return under section 6048(a).''
       (3) Effective date.--The amendments made by this subsection 
     shall take effect on the date of the enactment of this Act.
              Subtitle F--Limitation on Section 936 Credit

     SEC. 10601. LIMITATION ON SECTION 936 CREDIT.

       (a) General Rule.--Paragraph (4) of section 936(a) of the 
     Internal Revenue Code of 1986 (relating to Puerto Rico and 
     possession tax credit) is amended by redesignating 
     subparagraphs (B) and (C) as subparagraphs (C) and (D), 
     respectively, and by striking subparagraph (A) and inserting 
     the following new subsections:
       ``(A) Credit for active business income.--The amount of the 
     credit determined under paragraph (1)(A) for any taxable year 
     shall not exceed 60 percent of the aggregate amount of the 
     possession corporation's qualified possession wages for such 
     taxable year.
       ``(B) Credit for investment income.--
       ``(i) In general.--If--

       ``(I) the QPSII assets of the possession corporation for 
     any taxable year, exceed

       ``(II) 80 percent of such possession corporation's 
     qualified tangible business investment for such taxable year,

     the credit determined under paragraph (1)(B) for such taxable 
     year shall be reduced by the amount determined under clause 
     (ii).
       ``(ii) Amount of reduction.--The reduction determined under 
     this clause for any taxable year is an amount which bears the 
     same ratio to the credit determined under paragraph (1)(B) 
     for such taxable year (determined without regard to this 
     subparagraph) as--

[[Page H10633]]


       ``(I) the excess determined under clause (i), bears to
       ``(II) the QPSII assets of the possession corporation for 
     such taxable year.''

       (b) Phasedown of Credit.--The table contained in clause 
     (ii) of section 936(a)(4)(C) of such Code, as redesigated by 
     subsection (a), is amended to read as follows:
   ``In the case of taxable years beginning in:                     The
                                                         percentage is:
       1994.......................................................60   
       1995.......................................................55   
       1996.......................................................40   
       1997.......................................................20   
       1998 and thereafter.......................................0.''  

       (c) Definitions and Special Rules.--Subsection (i) of 
     section 936 of such Code is amended to read as follows:
       ``(i) Definitions and Special Rules Relating to Limitations 
     of Subsection (a)(4).--
       ``(1) Qualified possession wages.--For purposes of this 
     section--
       ``(A) In general.--The term `qualified possession wages' 
     means wages paid or incurred by the possession corporation 
     during the taxable year to any employee for services 
     performed in a possession of the United States, but only if 
     such services are performed while the principal place of 
     employment of such employee is within such possession.
       ``(B) Limitation on amount of wages taken into account.--
       ``(i) In general.--The amount of wages which may be taken 
     into account under subparagraph (A) with respect to any 
     employee for any taxable year shall not exceed the 
     contribution and benefit base determined under section 230 of 
     the Social Security Act for the calendar year in which such 
     taxable year begins.
       ``(ii) Treatment of part-time employees, etc.--If--

       ``(I) any employee is not employed by the possession 
     corporation on a substantially full-time basis at all times 
     during the taxable year, or
       ``(II) the principal place of employment of any employee 
     with the possession corporation is not within a possession at 
     all times during the taxable year,

     the limitation applicable under clause (i) with respect to 
     such employee shall be the appropriate portion (as determined 
     by the Secretary) of the limitation which would otherwise be 
     in effect under clause (i).
       ``(C) Treatment of certain employees.--The term `qualified 
     possession wages' shall not include any wages paid to 
     employees who are assigned by the employer to perform 
     services for another person, unless the principal trade or 
     business of the employer is to make employees available for 
     temporary periods to other persons in return for 
     compensation. All possession corporations treated as 1 
     corporation under paragraph (4) shall be treated as 1 
     employer for purposes of the preceding sentence.
       ``(D) Wages.--
       ``(i) In general.--Except as provided in clause (ii), the 
     term `wages' has the meaning given to such term by subsection 
     (b) of section 3306 (determined without regard to any dollar 
     limitation contained in such section). For purposes of the 
     preceding sentence, such subsection (b) shall be applied as 
     if the term `United States' included all possessions of the 
     United States.
       ``(ii) Special rule for agricultural labor and railway 
     labor.--In any case to which subparagraph (A) or (B) of 
     paragraph (1) of section 51(h) applies, the term `wages' has 
     the meaning given to such term by section 51(h)(2).
       ``(2) QPSII assets.--For purposes of this section--
       ``(A) In general.--The QPSII assets of a possession 
     corporation for any taxable year is the average of the 
     amounts of the possession corporation's qualified investment 
     assets as of the close of each quarter of such taxable year.
       ``(B) Qualified investment assets.--The term `qualified 
     investment assets' means the aggregate adjusted bases of the 
     assets which are held by the possession corporation and the 
     income from which qualifies as qualified possession source 
     investment income. For purposes of the preceding sentence, 
     the adjusted basis of any asset shall be its adjusted basis 
     as determined for purposes of computing earnings and profits.
       ``(3) Qualified tangible business investment.--For purposes 
     of this section--
       ``(A) In general.--The qualified tangible business 
     investment of any possession corporation for any taxable year 
     is the average of the amounts of the possession corporation's 
     qualified possession investments as of the close of each 
     quarter of such taxable year.
       ``(B) Qualified possession investments.--The term 
     `qualified possession investments' means the aggregate 
     adjusted bases of tangible property used by the possession 
     corporation in a possession of the United States in the 
     active conduct of a trade or business within such possession. 
     For purposes of the preceding sentence, the adjusted basis of 
     any property shall be its adjusted basis as determined for 
     purposes of computing earnings and profits.
       ``(4) Relocated businesses.--
       ``(A) In general.--In determining--
       ``(i) the possession corporation's qualified possession 
     wages for any taxable year, and
       ``(ii) the possession corporation's qualified tangible 
     business investment for such taxable year,

     there shall be excluded all wages and all qualified 
     possession investments which are allocable to a disqualified 
     relocated business.
       ``(B) Disqualified relocated business.--For purposes of 
     subparagraph (A), the term `disqualified relocated business' 
     means any trade or business commenced by the possession 
     corporation after October 12, 1995, or any addition after 
     such date to an existing trade or business of such possession 
     corporation unless--
       ``(i) the possession corporation certifies that the 
     commencement of such trade or business or such addition will 
     not result in a decrease in employment at an existing 
     business operation located in the United States, and
       ``(ii) there is no reason to believe that such commencement 
     or addition was done with the intention of closing down 
     operations of an existing business located in the United 
     States.
       ``(5) Election to compute credit on consolidated basis.--
       ``(A) In general.--Any affiliated group may elect to treat 
     all possession corporations which would be members of such 
     group but for section 1504(b)(4) as 1 corporation for 
     purposes of this section. The credit determined under this 
     section with respect to such 1 corporation shall be allocated 
     among such possession corporations in such manner as the 
     Secretary may prescribe.
       ``(B) Election.--An election under subparagraph (A) shall 
     apply to the taxable year for which made and all succeeding 
     taxable years unless revoked with the consent of the 
     Secretary.
       ``(6) Treatment of certain taxes.--Notwithstanding 
     subsection (c), if--
       ``(A) the credit determined under subsection (a)(1) for any 
     taxable year is limited under subsection (a)(4), and
       ``(B) the possession corporation has paid or accrued any 
     taxes of a possession of the United States for such taxable 
     year which are treated as not being income, war profits, or 
     excess profits taxes paid or accrued to a possession of the 
     United States by reason of subsection (c), such possession 
     corporation shall be allowed a deduction for such taxable 
     year equal to the portion of such taxes which are allocable 
     (on a pro rata basis) to taxable income of the possession 
     corporation the tax on which is not offset by reason of the 
     limitations of subsection (a)(4). In determining the credit 
     under subsection (a) and in applying the preceding sentence, 
     taxable income shall be determined without regard to the 
     preceding sentence.
       ``(7) Possession corporation.--The term `possession 
     corporation' means a domestic corporation for which the 
     election provided in subsection (a) is in effect.''
       (d) Minimum Tax Treatment.--Clause (iii) of section 
     56(g)(4)(C) of such Code is amended by adding at the end 
     thereof the following subclauses:

       ``(III) Separate application of foreign tax credit 
     limitations.--In determining the alternative minimum foreign 
     tax credit, section 904(d) shall be applied as if dividends 
     from a corporation eligible for the credit provided by 
     section 936 were a separate category of income referred to in 
     a subparagraph of section 904(d)(1).
       ``(IV) Coordination with limitation on 936 credit.--Any 
     reference in this clause to a dividend received from a 
     corporation eligible for the credit provided by section 936 
     shall be treated as a reference to the portion of any such 
     dividend for which the dividends received deduction is 
     disallowed under clause (i) after the application of clause 
     (ii)(I).''

       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

                TITLE XI--COMMITTEE ON VETERANS' AFFAIRS

     SEC. 11001. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This title may be cited as the ``Veterans 
     Reconciliation Act of 1995''.
       (b) Table of Contents.--The contents of this title are as 
     follows:

                      TITLE XI--VETERANS' AFFAIRS

Sec. 11001. Short title; table of contents.

        Subtitle A--Permanent Extension of Temporary Authorities

Sec. 11011. Authority to require that certain veterans agree to make 
              copayments in exchange for receiving health-care 
              benefits.
Sec. 11012. Medical care cost recovery authority.
Sec. 11013. Income verification authority.
Sec. 11014. Limitation on pension for certain recipients of medicaid-
              covered nursing home care.
Sec. 11015. Home loan fees.
Sec. 11016. Procedures applicable to liquidation sales on defaulted 
              home loans guaranteed by the Department of Veterans 
              Affairs.

                       Subtitle B--Other Matters

Sec. 11021. Revised standard for liability for injuries resulting from 
              Department of Veterans Affairs treatment.
Sec. 11022. Enhanced loan asset sale authority.
Sec. 11023. Withholding of payments and benefits.

               Subtitle C--Health Care Eligibility Reform

Sec. 11031. Hospital care and medical services.
Sec. 11032. Extension of authority to priority health care for Persian 
              Gulf veterans.
Sec. 11033. Prosthetics.
Sec. 11034. Management of health care.

[[Page H10634]]

Sec. 11035. Improved efficiency in health care resource management.
Sec. 11036. Sharing agreements for specialized medical resources.
Sec. 11037. Personnel furnishing shared resources.
        Subtitle A--Permanent Extension of Temporary Authorities

     SEC. 11011. AUTHORITY TO REQUIRE THAT CERTAIN VETERANS AGREE 
                   TO MAKE COPAYMENTS IN EXCHANGE FOR RECEIVING 
                   HEALTH-CARE BENEFITS.

       *Section 8013 of the Omnibus Budget Reconciliation Act of 
     1990 (38 U.S.C. 1710 note) is amended by striking out 
     subsection (e).

     SEC. 11012. MEDICAL CARE COST RECOVERY AUTHORITY.

       Section 1729(a)(2)(E) of title 38, United States Code, is 
     amended by striking out ``before October 1, 1998,''.

     SEC. 11013. INCOME VERIFICATION AUTHORITY.

       Section 5317 of title 38, United States Code, is amended by 
     striking out subsection (g).

     SEC. 11014. LIMITATION ON PENSION FOR CERTAIN RECIPIENTS OF 
                   MEDICAID-COVERED NURSING HOME CARE.

       Section 5503(f) of title 38, United States Code, is amended 
     by striking out paragraph (7).

     SEC. 11015. HOME LOAN FEES.

       Section 3729(a) of title 38, United States Code, is 
     amended--
       (1) in paragraph (4), by striking out ``and before October 
     1, 1998''; and
       (2) in paragraph (5)(C), by striking out ``, and before 
     October 1, 1998''.

     SEC. 11016. PROCEDURES APPLICABLE TO LIQUIDATION SALES ON 
                   DEFAULTED HOME LOANS GUARANTEED BY THE 
                   DEPARTMENT OF VETERANS AFFAIRS.

       Section 3732(c)(11) of title 38, United States Code, is 
     amended by striking out paragraph (11).
                       Subtitle B--Other Matters

     SEC. 11021. REVISED STANDARD FOR LIABILITY FOR INJURIES 
                   RESULTING FROM DEPARTMENT OF VETERANS AFFAIRS 
                   TREATMENT.

       (a) Revised Standard.--Section 1151 of title 38, United 
     States Code, is amended--
       (1) by designating the second sentence as subsection (c);
       (2) by striking out the first sentence and inserting in 
     lieu thereof the following:
       ``(a) Compensation under this chapter and dependency and 
     indemnity compensation under chapter 13 of this title shall 
     be awarded for a qualifying additional disability of a 
     veteran or the qualifying death of a veteran in the same 
     manner as if such disability or death were service-connected.
       ``(b)(1) For purposes of this section, a disability or 
     death is a qualifying additional disability or a qualifying 
     death only if the disability or death--
       ``(A) was caused by Department health care and was a 
     proximate result of--
       ``(i) negligence on the part of the Department in 
     furnishing the Department health care; or
       ``(ii) an event not reasonably foreseeable; or
       ``(B) was incurred as a proximate result of the provision 
     of training and rehabilitation services by the Secretary 
     (including by a service-provider used by the Secretary for 
     such purpose under section 3115 of this title) as part of an 
     approved rehabilitation program under chapter 31 of this 
     title.
       ``(2) For purposes of this section, the term `Department 
     health care' means hospital care, medical or surgical 
     treatment, or an examination that is furnished under any law 
     administered by the Secretary to a veteran by a Department 
     employee or in a Department facility (as defined in section 
     1701(3)(A) of this title).
       ``(3) A disability or death of a veteran which is the 
     result of the veteran's willful misconduct is not a 
     qualifying disability or death for purposes of this 
     section.''; and
       (3) by adding at the end the following:
       ``(d) Effective with respect to injuries, aggravations of 
     injuries, and deaths occurring after September 30, 2002, a 
     disability or death is a qualifying additional disability or 
     a qualifying death for purposes of this section 
     (notwithstanding the provisions of subsection (b)(1)) if the 
     disability or death--
       ``(1) was the result of Department health care; or
       ``(2) was the result of the pursuit of a course of 
     vocational rehabilitation under chapter 31 of this title.''.
       (b) Conforming Amendments.--Subsection (c) of such section, 
     as designated by subsection (a)(1), is amended--
       (1) by striking out ``, aggravation,'' both places it 
     appears; and
       (2) by striking out ``sentence'' and inserting in lieu 
     thereof ``subsection''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to any administrative or judicial determination 
     of eligibility for benefits under section 1151 of title 38, 
     United States Code, based on a claim that is received by the 
     Secretary on or after October 1, 1995, including any such 
     determination based on an original application or an 
     application seeking to reopen, revise, reconsider, or 
     otherwise readjudicate any claim for benefits under section 
     1151 of that title or any predecessor provision of law.

     SEC. 11022. ENHANCED LOAN ASSET SALE AUTHORITY.

       Section 3720(h)(2) of title 38, United States Code, is 
     amended by striking out ``December 31, 1995'' and inserting 
     in lieu thereof ``September 30, 1996''.

     SEC. 11023. WITHHOLDING OF PAYMENTS AND BENEFITS.

       (a) Notice Required in Lieu of Consent or Court Order.--
     Section 3726 of title 38, United States Code, is amended by 
     striking out ``unless'' and all that follows and inserting in 
     lieu thereof the following: ``unless the Secretary provides 
     such veteran or surviving spouse with notice by certified 
     mail with return receipt requested of the authority of the 
     Secretary to waive the payment of indebtedness under section 
     5302(b) of this title. If the Secretary does not waive the 
     entire amount of the liability, the Secretary shall then 
     determine whether the veteran or surviving spouse should be 
     released from liability under section 3713(b) of this title. 
     If the Secretary determines that the veteran or surviving 
     spouse should not be released from liability, the Secretary 
     shall notify the veteran or surviving spouse of that 
     determination and provide a notice of the procedure for 
     appealing that determination, unless the Secretary has 
     previously made such determination and notified the veteran 
     or surviving spouse of the procedure for appealing the 
     determination.''.
       (b) Conforming Amendment.--Section 5302(b) of such title is 
     amended by inserting ``with return receipt requested'' after 
     ``certified mail''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to any indebtedness to the United 
     States arising pursuant to chapter 37 of title 38, United 
     States Code, before, on, or after the date of the enactment 
     of this Act.
               Subtitle C--Health Care Eligibility Reform

     SEC. 11031. HOSPITAL CARE AND MEDICAL SERVICES.

       (a) Eligibility for Care.--Section 1710(a) of title 38, 
     United States Code, is amended by striking out paragraphs (1) 
     and (2) and inserting the following:
       ``(a)(1) The Secretary shall, to the extent and in the 
     amount provided in advance in appropriations Acts for these 
     purposes, provide hospital care and medical services, and may 
     provide nursing home care, which the Secretary determines is 
     needed to any veteran--
       ``(A) with a compensable service-connected disability;
       ``(B) whose discharge or release from active military, 
     naval, or air service was for a compensable disability that 
     was incurred or aggravated in the line of duty;
       ``(C) who is in receipt of, or who, but for a suspension 
     pursuant to section 1151 of this title (or both a suspension 
     and the receipt of retired pay), would be entitled to 
     disability compensation, but only to the extent that such 
     veteran's continuing eligibility for such care is provided 
     for in the judgment or settlement provided for in such 
     section;
       ``(D) who is a former prisoner of war;
       ``(E) of the Mexican border period or of World War I;
       ``(F) who was exposed to a toxic substance, radiation, or 
     environmental hazard, as provided in subsection (e); and
       ``(G) who is unable to defray the expenses of necessary 
     care as determined under section 1722(a) of this title.
       ``(2) In the case of a veteran who is not described in 
     paragraph (1), the Secretary may, to the extent resources and 
     facilities are available and subject to the provisions of 
     subsection (f), furnish hospital care, medical services, and 
     nursing home care which the Secretary determines is 
     needed.''.
       (b) Conforming Amendments.--(1) Section 1710(e) of such 
     title is amended--
       (A) in paragraph (1), by striking out ``hospital care and 
     nursing home care'' in subparagraphs (A), (B), and (C) and 
     inserting in lieu thereof ``hospital care, medical services, 
     and nursing home care'';
       (B) in paragraph (2), by inserting ``and medical services'' 
     after ``Hospital and nursing home care''; and
       (C) by striking out ``subsection (a)(1)(G) of this 
     section'' each place it appears and inserting in lieu thereof 
     ``subsection (a)(1)(F)''.
       (2) Chapter 17 of such title is amended--
       (A) by redesignating subsection (g) of section 1710 as 
     subsection (h); and
       (B) by transferring subsection (f) of section 1712 of such 
     title to section 1710 so as to appear after subsection (f), 
     redesignating such subsection as subsection (g), and amending 
     such subsection by striking out ``section 1710(a)(2) of this 
     title'' in paragraph (1) and inserting in lieu thereof 
     ``subsection (a)(2) of this section''.
       (3) Section 1712 of such title is amended--
       (A) by striking out subsections (a) and (i); and
       (B) by redesignating subsections (b), (c), (d), (h) and 
     (j), as subsections (a), (b), (c), (d), and (e), 
     respectively.

     SEC. 11032. EXTENSION OF AUTHORITY TO PRIORITY HEALTH CARE 
                   FOR PERSIAN GULF VETERANS.

       Section 1710(e)(3) of title 38, United States Code, is 
     amended by striking out ``December 31, 1995'' and inserting 
     in lieu thereof ``December 31, 1998''.

     SEC. 11033. PROSTHETICS.

       (a) Eligibility for Prosthetics.--Section 1701(6)(A)(i) of 
     title 38, United States Code, is amended--
       (1) by striking out ``(in the case of a person otherwise 
     receiving care or services under this chapter)'' and 
     ``(except under the conditions described in section 
     1712(a)(5)(A) of this title),'';
       (2) by inserting ``(in the case of a person otherwise 
     receiving care or services under this chapter)'' before 
     ``wheelchairs,''; and
       (3) by inserting ``except that the Secretary may not 
     furnish sensori-neural aids other than in accordance with 
     guidelines which the Secretary shall prescribe,'' after 
     ``reasonable and necessary,''.

[[Page H10635]]

       (b) Regulations.--Not later than 30 days after the date of 
     the enactment of this Act, the Secretary of Veterans Affairs 
     shall prescribe the guidelines required by the amendments 
     made by subsection (a) and shall furnish a copy of those 
     guidelines to the Committees on Veterans' Affairs of the 
     Senate and House of Representatives.

     SEC. 11034. MANAGEMENT OF HEALTH CARE.

       (a) In General.--(1) Chapter 17 of title 38, United States 
     Code, is amended by inserting after section 1704 the 
     following new sections:

     ``Sec. 1705. Management of health care: patient enrollment 
       system

       ``(a) In managing the provision of hospital care and 
     medical services under section 1710(a)(1) of this title, the 
     Secretary, in accordance with regulations the Secretary shall 
     prescribe, shall establish and operate a system of annual 
     patient enrollment. The Secretary shall manage the enrollment 
     of veterans in accordance with the following priorities, in 
     the order listed:
       ``(1) Veterans with service-connected disabilities rated 30 
     percent or greater.
       ``(2) Veterans who are former prisoners of war and veterans 
     with service connected disabilities rated 10 percent or 20 
     percent.
       ``(3) Veterans who are in receipt of increased pension 
     based on a need of regular aid and attendance or by reason of 
     being permanently housebound and other veterans who are 
     catastrophically disabled.
       ``(4) Veterans not covered by paragraphs (1) through (3) 
     who are unable to defray the expenses of necessary care as 
     determined under section 1722(a) of this title.
       ``(5) All other veterans eligible for hospital care, 
     medical services, and nursing home care under section 
     1710(a)(1) of this title.
       ``(b) In the design of an enrollment system under 
     subsection (a), the Secretary--
       ``(1) shall ensure that the system will be managed in a 
     manner to ensure that the provision of care to enrollees is 
     timely and acceptable in quality;
       ``(2) may establish additional priorities within each 
     priority group specified in subsection (a), as the Secretary 
     determines necessary; and
       ``(3) may provide for exceptions to the specified 
     priorities where dictated by compelling medical reasons.

     ``Sec. 1706. Management of health care: other requirements

       ``(a) In managing the provision of hospital care and 
     medical services under section 1710(a) of this title, the 
     Secretary shall, to the extent feasible, design, establish 
     and manage health care programs in such a manner as to 
     promote cost-effective delivery of health care services in 
     the most clinically appropriate setting.
       ``(b) In managing the provision of hospital care and 
     medical services under section 1710(a) of this title, the 
     Secretary--
       ``(1) may contract for hospital care and medical services 
     when Department facilities are not capable of furnishing such 
     care and services economically, and
       ``(2) shall make such rules and regulations regarding 
     acquisition procedures or policies as the Secretary considers 
     appropriate to provide such needed care and services.
       ``(c) In managing the provision of hospital care and 
     medical services under section 1710(a) of this title, the 
     Secretary shall ensure that the Department maintains its 
     capacity to provide for the specialized treatment and 
     rehabilitative needs of disabled veterans described in 
     section 1710(a) of this title (including veterans with spinal 
     cord dysfunction, blindness, amputations, and mental illness) 
     within distinct programs or facilities of the Department that 
     are dedicated to the specialized needs of those veterans in a 
     manner that (1) affords those veterans reasonable access to 
     care and services for those specialized needs, and (2) 
     ensures that overall capacity of the Department to provide 
     such services is not reduced below the capacity of the 
     Department, nationwide, to provide those services, as of the 
     date of the enactment of this section.
       ``(d) In managing the provision of hospital care and 
     medical services under section 1710(a) of this title, the 
     Secretary shall ensure that any veteran with a service-
     connected disability is provided all benefits under this 
     chapter for which that veteran was eligible before the date 
     of the enactment of this section.''.
       (2) The table of sections at the beginning of chapter 17 of 
     such title is amended by inserting after the item relating to 
     section 1704 the following new items:

``1705. Management of health care: patient enrollment system.
``1706. Management of health care: other requirements.''

     .    (b) Conforming Amendments to Section 1703.--(1) Section 
     1703 of such title is amended--
       (A) by striking out subsections (a) and (b); and
       (B) in subsection (c) by--
       (i) striking out ``(c)'', and
       (ii) striking out ``this section, sections'' and inserting 
     in lieu thereof ``sections 1710,''.
       (2)(A) The heading of such section is amended to read as 
     follows:

     ``Sec. 1703. Annual report on furnishing of care and services 
       by contract''.

         (B) The item relating to such section in the table of 
     sections at the beginning of chapter 17 of such title is 
     amended to read as follows:

``1703. Annual report on furnishing of care and services by 
              contract.''.

     SEC. 11035. IMPROVED EFFICIENCY IN HEALTH CARE RESOURCE 
                   MANAGEMENT.

       (a) Repeal of Sunset Provision.--Section 204 of the 
     Veterans Health Care Act of 1992 (Public Law 102-585; 106 
     Stat. 4950) is repealed.
       (b) Cost Recovery.--Title II of such Act is further amended 
     by adding at the end the following new section:

     ``SEC. 207. AUTHORITY TO BILL HEALTH-PLAN CONTRACTS.

       ``(a) Right To Recover.--In the case of a primary 
     beneficiary (as described in section 201(2)(B)) who has 
     coverage under a health-plan contract, as defined in section 
     1729(i)(1)(A) of title 38, United States Code, and who is 
     furnished care or services by a Department medical facility 
     pursuant to this title, the United States shall have the 
     right to recover or collect charges for such care or services 
     from such health-plan contract to the extent that the 
     beneficiary (or the provider of the care or services) would 
     be eligible to receive payment for such care or services from 
     such health-plan contract if the care or services had not 
     been furnished by a department or agency of the United 
     States. Any funds received from such health-plan contract 
     shall be credited to funds that have been allotted to the 
     facility that furnished the care or services.
       ``(b) Enforcement.--The right of the United States to 
     recover under such a beneficiary's health-plan contract shall 
     be enforceable in the same manner as that provided by 
     subsections (a)(3), (b), (c)(1), (d), (f), (h), and (i) of 
     section 1729 of title 38, United States Code.''.

     SEC. 11036. SHARING AGREEMENTS FOR SPECIALIZED MEDICAL 
                   RESOURCES.

       (a) Repeal of Section 8151.--(1) Subchapter IV of chapter 
     81 of title 38, United States Code, is amended--
       (A) by striking out section 8151; and
       (B) by redesignating sections 8152, 8153, 8154, 8155, 8156, 
     8157, and 8158 as sections 8151, 8152, 8153, 8154, 8155, 
     8156, and 8157, respectively.
       (2) The table of sections at the beginning of chapter 81 is 
     amended--
       (A) by striking out the item relating to section 8151; and
       (B) by revising the items relating to sections 8152, 8153, 
     8154, 8155, 8156, 8157, and 8158 to reflect the 
     redesignations by paragraph (1)(B).
       (b) Revised Authority for Sharing Agreements.--Section 8152 
     of such title, as redesignated by subsection (a)(1)(B), is 
     amended--
       (1) in subsection (a)(1)(A)--
       (A) by striking out ``specialized medical resources'' and 
     inserting in lieu thereof ``health-care resources''; and
       (B) by striking out ``other'' and all that follows through 
     ``medical schools'' and inserting in lieu thereof ``any 
     medical school, health-care provider, health-care plan, 
     insurer, or other entity or individual'';
       (2) in subsection (a)(2) by striking out ``only'' and all 
     that follows through ``are not'' and inserting in lieu 
     thereof ``if such resources are not, or would not be,'';
       (3) in subsection (b), by striking out ``reciprocal 
     reimbursement'' in the first sentence and all that follows 
     through the period at the end of that sentence and inserting 
     in lieu thereof ``payment to the Department in accordance 
     with procedures that provide appropriate flexibility to 
     negotiate payment which is in the best interest of the 
     Government.'';
       (4) in subsection (d), by striking out ``preclude such 
     payment, in accordance with--'' and all that follows through 
     ``to such facility therefor'' and inserting in lieu thereof 
     ``preclude such payment to such facility for such care or 
     services'';
       (5) by redesignating subsection (e) as subsection (f); and
       (6) by inserting after subsection (d) the following new 
     subsection (e):
       ``(e) The Secretary may make an arrangement that authorizes 
     the furnishing of services by the Secretary under this 
     section to individuals who are not veterans only if the 
     Secretary determines--
       ``(1) that such an arrangement will not result in the 
     denial of, or a delay in providing access to, care to any 
     veteran at that facility; and
       ``(2) that such an arrangement--
       ``(A) is necessary to maintain an acceptable level and 
     quality of service to veterans at that facility; or
       ``(B) will result in the improvement of services to 
     eligible veterans at that facility.''.
       (c) Cross-Reference Amendments.--(1) Section 8110(c)(3)(A) 
     of such title is amended by striking out ``8153'' and 
     inserting in lieu thereof ``8152''.
       (2) Subsection (b) of section 8154 of such title (as 
     redesignated by subsection (a)(1)(B)) is amended by striking 
     out ``section 8154'' and inserting in lieu thereof ``section 
     8153''.
       (3) Section 8156 of such title (as redesignated by 
     subsection (a)(1)(B)) is amended--
       (A) in subsection (a), by striking out ``section 8153(a)'' 
     and inserting in lieu thereof ``section 8152(a)''; and
       (B) in subsection (b)(3), by striking out ``section 8153'' 
     and inserting in lieu thereof ``section 8152''.
       (4) Subsection (a) of section 8157 of such title (as 
     redesignated by subsection (a)(1)(B)) is amended--
       (A) in the matter preceding paragraph (1), by striking out 
     ``section 8157'' and ``section 

[[Page H10636]]

     8153(a)'' and inserting in lieu thereof ``section 8156'' and 
     ``section 8152(a)'', respectively; and
       (B) in paragraph (1), by striking out ``section 
     8157(b)(4)'' and inserting in lieu thereof ``section 
     8156(b)(4)''.

     SEC. 11037. PERSONNEL FURNISHING SHARED RESOURCES.

       Section 712(b)(2) of title 38, United States Code, is 
     amended--
       (1) by striking out ``the sum of--'' and inserting in lieu 
     thereof ``the sum of the following:'';
       (2) by capitalizing the first letter of the first word of 
     each of subparagraphs (A) and (B);
       (3) by striking out ``; and'' at the end of subparagraph 
     (A) and inserting in lieu thereof a period; and
       (4) by adding at the end the following:
       ``(C) The number of such positions in the Department during 
     that fiscal year held by persons involved in providing 
     health-care resources under section 8111 or 8152 of this 
     title.''.

                     TITLE XII--LEGISLATIVE BRANCH

     SEC. 12101. REQUIREMENT THAT EXCESS FUNDS PROVIDED FOR 
                   OFFICIAL ALLOWANCES OF MEMBERS OF THE HOUSE OF 
                   REPRESENTATIVES BE DEDICATED TO DEFICIT 
                   REDUCTION.

       Of the funds made available in any appropriation Act for 
     fiscal year 1996 or any succeeding fiscal year for the 
     official expenses allowance, the clerk hire allowance, or the 
     official mail allowance of a Member of the House of 
     Representatives, any amount that remains unobligated at the 
     end of such fiscal year shall be transferred to the Deficit 
     Reduction Fund established by Executive Order 12858 (58 Fed. 
     Reg. 42185). Any amount so transferred shall be in addition 
     to the amounts specified in section 2(b) of such order, but 
     shall be subject to the requirements and limitations set 
     forth in sections 2(c) and 3 of such order.

                  TITLE XIII--MISCELLANEOUS PROVISIONS

     SEC. 13101. ELIMINATION OF DISPARITY BETWEEN EFFECTIVE DATES 
                   FOR MILITARY AND CIVILIAN RETIREE COST-OF-
                   LIVING ADJUSTMENTS FOR FISCAL YEARS 1996, 1997, 
                   AND 1998.

       (a) Conformance With Schedule for Civil Service COLAs.--
     Subparargraph (B) of section 1401a(b)(2) of title 10, United 
     States code, is amended--
       (1) by striking out ``through 1998'' the first place it 
     appears and all that follows through. ``In the case of'' the 
     second place it appears and inserting in lieu thereof 
     ``through 1996.--In the case of'';
       (2) by striking ``of 1994, 1995, 1996, or 1997'' and 
     inserting in lieu thereof ``of 1993, 1994, or 1995''; and
       (3) by striking out ``September'' and inserting in lieu 
     thereof ``March''.
       (b) Repeal of Prior Conditional Enactment.--Section 
     8114A(b) of Public Law 103-335 (108 Stat. 2648) is repealed.

     SEC. 13102. DISPOSAL OF CERTAIN MATERIALS IN NATIONAL DEFENSE 
                   STOCKPILE FOR DEFICIT REDUCTION.

       (a) Disposals Required.--(1) During fiscal year 1996, the 
     President shall dispose of all cobalt contained in the 
     National Defense Stockpile that, as the date of the enactment 
     of this Act, is authorized for disposal under any law (other 
     than this Act).
       (2) In addition to the disposal of cobalt under paragraph 
     (1), the President shall dispose of additional quantities of 
     cobalt and quantities of aluminum, ferro columbium, 
     germanium, palladium, platinum, and rubber contained in the 
     National Defense Stockpile so as to result in receipts to the 
     United States in amounts equal to--
       (A) $21,000,000 during the fiscal year ending September 30, 
     1996;
       (B) $338,000,000 during the five-fiscal year period ending 
     on September 30, 2000; and
       (C) $649,000,000 during the seven-fiscal year period ending 
     on September 30, 2002.
       (3) The President is not required to include the disposal 
     of the materials identified in paragraph (2) in an annual 
     materials plan for the National Defense Stockpile. Disposals 
     made under this section may be made without consideration of 
     the requirements of an annual materials plan.
       (b) Limitation on Disposal Quantity.--The total quantities 
     of materials authorized for disposal by the President under 
     subsection (a)(2) may not exceed the amounts set forth in the 
     following table:


                     AUTHORIZED STOCKPILE DISPOSALS                     
------------------------------------------------------------------------
           Material for disposal                      Quantity          
------------------------------------------------------------------------
Aluminum..................................  62,881 short tons           
Cobalt....................................  42,482,323 pounds contained 
Ferro Columbium...........................  930,911 pounds contained    
Germanium.................................  68,207 kilograms            
Palladium.................................  1,264,601 troy ounces       
Platinum..................................  452,641 troy ounces         
Rubber....................................  125,138 long tons           
------------------------------------------------------------------------

       (c) Deposit of Receipts.--Notwithstanding section 9 of the 
     Strategic and Critical Materials Stock Piling Act (50 U.S.C. 
     98h), funds received as a result of the disposal of materials 
     under subsection (a)(2) shall be deposited into the general 
     fund of the Treasury for the purpose of deficit reduction.
       (d) Relationship to Other Disposal Authority.--The disposal 
     authority provided in subsection (a)(2) is new disposal 
     authority and is in addition to, and shall not affect, any 
     other disposal authority provided by law regarding the 
     materials specified in such subsection.
       (e) Termination of Disposal Authority.--The President may 
     not use the disposal authority provided in subsection (a)(2) 
     after the date on which the total amount of receipts 
     specified in subparagraph (C) of such subsection is achieved.
       (f) Definition.--The term ``National Defense Stockpile'' 
     means the National Defense Stockpile provided for in section 
     4 of the Strategic and Critical Materials Stock Piling Act 
     (50 U.S.C. 98c).

     SEC. 13103. REQUIREMENT THAT CERTAIN AGENCIES PREFUND 
                   GOVERNMENT HEALTH BENEFITS CONTRIBUTIONS FOR 
                   THEIR ANNUITANTS.

       (a) Definitions.--For the purpose of this section--
       (1) the term ``agency'' means any agency or other 
     instrumentality within the executive branch of the 
     Government, the receipts and disbursements of which are not 
     generally included in the totals of the budget of the United 
     States Government submitted by the President;
       (2) the term ``health benefits plan'' means, with respect 
     to an agency, a health benefits plan, established by or under 
     Federal law, in which employees or annuitants of such agency 
     may participate;
       (3) the term ``health-benefits coverage'' means coverage 
     under a health benefits plan;
       (4) an individual shall be considered to be an ``annuitant 
     of an agency'' if such individual is entitled to an annuity, 
     under a retirement system established by or under Federal 
     law, by virtue of--
       (A) such individual's service with, and separation from, 
     such agency; or
       (B) being the survivor of an annuitant under subparagraph 
     (A) or of an individual who died while employed by such 
     agency; and
       (5) the term ``Office'' means the Office of Personnel 
     Management.
       (b) Prefunding Requirement.--
       (1) In general.--Effective as of October 1, 1996, each 
     agency shall be required to prepay the Government 
     contributions which are or will be required in connection 
     with providing health-benefits coverage for annuitants of 
     such agency.
       (2) Regulations.--The Office shall prescribe such 
     regulations as may be necessary to carry out this section. 
     The regulations shall be designed to ensure at least the 
     following:
       (A) Amounts paid by each agency shall be sufficient to 
     cover the amounts which would otherwise be payable by such 
     agency (on a ``pay-as-you-go'' basis), on or after the 
     applicable effective date under paragraph (1), on behalf of--
       (i) individuals who are annuitants of the agency as of such 
     effective date; and
       (ii) individuals who are employed by the agency as of such 
     effective date, or who become employed by the agency after 
     such effective date, after such individuals have become 
     annuitants of the agency (including their survivors).
       (B)(i) For purposes of determining any amounts payable by 
     an agency--
       (I) this section shall be treated as if it had taken effect 
     at the beginning of the 20-year period which ends on the 
     effective date applicable under paragraph (1) with respect to 
     such agency; and
       (II) in addition to any amounts payable under subparagraph 
     (A), each agency shall also be responsible for paying any 
     amounts for which it would have been responsible, with 
     respect to the 20-year period described in subclause (I), in 
     connection with any individuals who are annuitants or 
     employees of the agency as of the applicable effective date 
     under paragraph (1).
       (ii) Any amounts payable under this subparagraph for 
     periods preceding the applicable effective date under 
     paragraph (1) shall be payable in equal installments over the 
     20-year period beginning on such effective date.
       (c) FASB Standards.--Regulations under subsection (b) shall 
     be in conformance with the provisions of standard 106 of the 
     Financial Accounting Standards Board, issued in December 
     1990.
       (d) Clarification.--Nothing in this section shall be 
     considered to permit or require duplicative payments on 
     behalf of any individuals.
       (e) Draft Legislation.--The Office shall prepare and submit 
     to Congress any draft legislation which may be necessary in 
     order to carry out this section.

     SEC. 13104. APPLICATION OF OMB CIRCULAR A-129.

       The provisions of Office of Management and Budget Circular 
     No. A-129, relating to policies for Federal credit programs 
     and non-tax receivables, as in effect on the date of 
     enactment of this Act, shall apply as provided in that 
     circular.

     SEC. 13105. 7-YEAR EXTENSION OF HAZARDOUS SUBSTANCE SUPERFUND 
                   EXCISE TAXES.

       (a) Extension of Taxes.--
       (1) Extension of hazardous substance superfund financing 
     rate.--Subsection (e) of section 4611 of the Internal Revenue 
     Code of 1986 is amended to read as follows:
       ``(e) Application of hazardous substance superfund 
     financing rate.--The Hazardous Substance Superfund financing 
     rate under this section shall apply after December 31, 1986, 
     and before January 1, 2003.''
       (2) Application of tax.--Subsection (e) of section 59A 
     (relating to application of environmental tax) is amended to 
     read as follows:
       ``(e) Application of Tax.--The tax imposed by this section 
     shall apply to taxable years beginning after December 31, 
     1986, and before January 1, 2003.''
       (b) Extension of Repayment Deadline for Superfund 
     Borrowing.--Subparagraph (B) of section 9507(d)(3) of such 
     Code is amended by striking ``December 31, 1995'' and 
     inserting ``December 31, 2002''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1996.